LCH’s plan for a one-step switch to SOFR discounting in February 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 H2 2020 that it will switch from Fed funds to SOFR for valuing cleared swaps and calculating variation margin on collateral on swaps.
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.