Moore & Van Allen (MVA) Financial Services Counsel Ed Ivey’s article, “The Future Dominant Reference Rate of the Loan Market: Will There Be One Rate to Rule Them All?”, was recently published by Thomson Reuter’s Futures & Derivatives Law Report.
In this article Ed provides his thoughts on (i) the developing loan and derivatives markets’ use of non-LIBOR interest rates, specifically Daily Simple SOFR, Term SOFR, BSBY and Ameribor and (ii) analysis and issues that Lenders and Borrowers may wish consider today when looking at entering into a loan referencing any of these ...
This is an update to a previous post. This update highlights the formal endorsement of Term SOFR by the ARRC, expands the discussion to include Ameribor and dives more deeply into the issues associated with Term SOFR swaps resulting in a mismatch with any related hedge by the Lender.
The ARRC has endorsed (HERE) CME’s Term SOFR. One of the bigger pieces to this announcement and earlier related announcements (Scope of Use Cases), is that U.S. regulators will also permit Term SOFR Swaps, when one of the parties is an “end-user”. When looking only at the loan market, what new reference ...
Wednesday, the ARRC announced (HERE) the expectation to endorse CME’s Term SOFR in late July or early August. One of the bigger pieces to this announcement is the announcement that U.S. regulators will also permit Term SOFR Swaps, when one of the parties is an “end-user”. When looking only at the loan market, what new reference rate will be the most common? Term SOFR, BSBY or one of the other SOFR rates? A few thoughts below, but at this point I think Lenders need to begin considering how rate options will be discussed with Borrowers. We have worked with clients to develop guidance on ...
In a recent speech, the new SEC Chairman, Gary Gensler, came out questioning the use of BSBY as a replacement to LIBOR, by highlighting a number of “concerns” he has with BSBY and why SOFR is preferable.
HERE is the speech. The last half focuses on BSBY.
Gensler focused largely on the transaction data which underpins BSBY versus the transaction data which underpins SOFR. Here, SOFR has not only a clear advantage, but Gensler also notes weakness in BSBY in the 6- and 12-month tenors. However, there is an important difference between SOFR and BSBY that should have been noted by Gensler ...
About MVA White Collar Defense, Investigations, and Regulatory Advice Blog
As government authorities around the world conduct overlapping investigations and bring parallel proceedings in evolving regulatory environments, companies face challenging regulatory and criminal enforcement dynamics. We help keep our clients up to date in these fast-moving areas and to serve as a thought leader.
MVA White Collar Defense, Investigations, and Regulatory Advice Blog Updates
- Coinbase: Regulation by Enforcement? CFTC & Market Implications
- NYDFS Releases Stablecoin Guidance for NYDFS-regulated Institutions
- The Devil Really is in the Details: The SEC Proposed Rule on Cybersecurity Risk Management for Investment Advisors, Registered Investment Companies and BDCs
- Forgery and Falsification in the Digital World - FINRA Issues Reminder on Supervisory Obligations