Read all our Isda AGM coverage here. LCH’s plan to adopt the US secured overnight financing rate (SOFR) as the benchmark to value cleared swaps and pay interest on cash collateral will boost SOFR swap use, but clarity on fallback language is needed for the market to prosper, market participants say. The UK-based clearing house announced in February that it would begin using SOFR as the interest rate to calculate price alignment interest (PAI) – the interest rate paid on posted cash variation Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content. To access these options, along with all other subscription benefits, please contact [email protected] or view our subscription options here: http://subscriptions.risk.net/subscribe You are currently unable to print this content. Please contact [email protected] to find out more. You are currently unable to copy this content. Please contact [email protected] to find out more.
LCH’s plan for a one-step switch to SOFR discounting in H2 2020 is expected to help build liquidity in the SOFR swap market, but clarity on fallback language is needed for the market to thrive, according to Risk.net. The London-based clearing house said in February that it will switch from Fed funds to SOFR for valuing cleared swaps and calculating variation margin on collateral on swaps.