32898 Federal Register / Vol. 87, No. 104 / Tuesday, May 31, 2022 / Proposed Rules 

1 Dodd-Frank Wall Street Reform and Consumer 

Protection Act, Public Law 111–203, 124 Stat. 1376 

(2010). 

2Section 2(h)(1)(A) of the CEA, 7 U.S.C. 

2(h)(1)(A). 

3Section 2(h)(2)(A) of the CEA, 7 U.S.C. 

2(h)(2)(A). Section 2(h)(2)(A) provides for a 

Commission-initiated review process whereby the 

Commission, on an ongoing basis, must review 

swaps, or a group, category, type, or class of swaps, 

to determine whether a swap, or a group, category, 

type, or class of swaps, should be required to be 

cleared. 

4Section 2(h)(2)(B) of the CEA, 7 U.S.C. 

2(h)(2)(B). Section 2(h)(2)(B)(i) requires that each 

DCO submit to the Commission each swap, or 

group, category, type, or class of swaps, that it plans 

to accept for clearing. The swaps subject to this 

proposed determination were submitted by DCOs 

pursuant to CEA section 2(h)(2)(B)(i) and regulation 

39.5(b), 17 CFR 39.5(b). Pursuant to section 

2(h)(2)(B)–(C) of the CEA, the Commission must 

review swap submissions from DCOs to determine 

whether the swaps should be subject to required 

clearing. Regulation § 39.5(b) implements the 

procedural elements of section 2(h)(2)(B)–(C) by 

establishing the process by which a DCO must 

submit the swaps it offers for clearing to the 

Commission for purposes of considering a clearing 

requirement determination. 

COMMODITY FUTURES TRADING 

COMMISSION 

17 CFR Part 50 

RIN 3038–AF18 

Clearing Requirement Determination 

Under Section 2(h) of the Commodity 

Exchange Act for Interest Rate Swaps 

To Account for the Transition From 

LIBOR and Other IBORs to Alternative 

Reference Rates 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Commodity Futures 

Trading Commission (Commission or 

CFTC) is proposing to amend its interest 

rate swap clearing requirement 

regulations adopted under applicable 

provisions of the Commodity Exchange 

Act (CEA) in light of the global 

transition from reliance on certain 

interbank offered rates (IBORs) (e.g., the 

London Interbank Offered Rate (LIBOR)) 

that have been, or will be, discontinued 

as benchmark reference rates to 

alternative reference rates, which are 

predominantly overnight, nearly riskfree reference rates (RFRs). The 

proposed amendments would revise the 

set of interest rate swaps that are 

required to be submitted for clearing 

pursuant to the CEA and the 

Commission’s regulations to a 

derivatives clearing organization (DCO) 

that is registered under the CEA 

(registered DCO) or a DCO that has been 

exempted from registration under the 

CEA (exempt DCO). Among other 

things, the proposed amendments 

would modify the Commission’s interest 

rate swap clearing requirement to reflect 

the market shift away from swaps that 

reference IBORs to swaps that reference 

RFRs. 

DATES: Comments must be received on 

or before June 30, 2022. 

ADDRESSES: You may submit comments, 

identified by RIN 3038–AF18, by any of 

the following methods: 

• CFTC Comments Portal: https://

comments.cftc.gov. Select the ‘‘Submit 

Comments’’ link for this rulemaking and 

follow the instructions on the Public 

Comment Form. 

• Mail: Send to Christopher 

Kirkpatrick, Secretary of the 

Commission, Commodity Futures 

Trading Commission, Three Lafayette 

Centre, 1155 21st Street NW, 

Washington, DC 20581. 

• Hand Delivery/Courier: Follow the 

same instructions as for Mail, above. 

Please submit your comments using 

only one of these methods. Submissions 

through the CFTC Comments Portal are 

encouraged. 

All comments must be submitted in 

English, or if not, accompanied by an 

English translation. Comments will be 

posted as received to https://

comments.cftc.gov. You should submit 

only information that you wish to make 

available publicly. If you wish the 

Commission to consider information 

that you believe is exempt from 

disclosure under the Freedom of 

Information Act (FOIA), a petition for 

confidential treatment of the exempt 

information may be submitted according 

to the procedures established in § 145.9 

of the Commission’s regulations, 17 CFR 

145.9. 

The Commission reserves the right, 

but shall have no obligation, to review, 

pre-screen, filter, redact, refuse or 

remove any or all of your submission 

from https://comments.cftc.gov that it 

may deem to be inappropriate for 

publication, such as obscene language. 

All submissions that have been redacted 

or removed that contain comments on 

the merits of the rulemaking will be 

retained in the public comment file and 

will be considered as required under the 

Administrative Procedure Act and other 

applicable laws, and may be accessible 

under FOIA. 

FOR FURTHER INFORMATION CONTACT: 

Sarah E. Josephson, Deputy Director, at 

202–418–5684 or sjosephson@cftc.gov; 

Melissa D’Arcy, Special Counsel, at 

202–418–5086 or mdarcy@cftc.gov; or 

Daniel O’Connell, Special Counsel, at 

202–418–5583 or doconnell@cftc.gov; 

each in the Division of Clearing and 

Risk at the Commodity Futures Trading 

Commission, Three Lafayette Centre, 

1155 21st Street NW, Washington, DC 

20581. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. Background 

A. Commission’s Swap Clearing 

Requirement 

B. End of LIBOR 

C. Global Progress on Benchmark Reform 

II. Overview of the Request for Information 

A. Work by DCOs To Support the 

Transition to RFRs 

B. Work by Market Participants To Support 

the Transition to RFRs 

III. Domestic and International Coordination 

and Outreach 

A. Domestic Coordination Efforts 

B. International Coordination Efforts 

C. Clearing Requirements in Other 

Jurisdictions 

IV. Proposed Amendments to Regulation 

§ 50.4(a) 

A. Overview of the Proposed Regulation 

B. Modifications to the Existing Clearing 

Requirements 

V. Proposed Determination Analysis for RFR 

OIS 

A. General Description of Information 

Considered 

B. Consistency With DCO Core Principles 

C. Consideration of the Five Statutory 

Factors 

VI. Proposed Implementation Schedule and 

Compliance Dates 

VII. Cost Benefit Considerations 

A. Statutory and Regulatory Background 

B. Overview of Swap Clearing 

C. Consideration of the Costs and Benefits 

of the Commission’s Actions 

D. Costs and Benefits of the Proposed 

Amendments as Compared to 

Alternatives 

E. Section 15(a) Factors 

VIII. Related Matters 

A. Regulatory Flexibility Act 

B. Paperwork Reduction Act 

C. Antitrust Laws 

I. Background 

A. Commission’s Swap Clearing 

Requirement 

The Dodd-Frank Wall Street Reform 

and Consumer Protection Act (DoddFrank Act) established a comprehensive 

new regulatory framework for swaps.1

Title VII of the Dodd-Frank Act (Title 

VII) amended the CEA to require, among 

other things, that a swap be cleared 

through a registered DCO or an exempt 

DCO if the Commission has determined 

that the swap, or group, category, type, 

or class of swaps, is required to be 

cleared, unless an exception to the 

clearing requirement applies.2 The CEA, 

as amended by Title VII, provides that 

the Commission may issue a clearing 

requirement determination based either 

on a Commission-initiated review of a 

swap,3 or a swap submission from a 

DCO.4

Section 2(h)(2)(D)(ii) of the CEA 

requires the Commission to consider the 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
Federal Register / Vol. 87, No. 104 / Tuesday, May 31, 2022 / Proposed Rules 32899 

5 7 U.S.C. 2(h)(2)(D)(ii). 

6Clearing Requirement Determination Under 

Section 2(h) of the CEA, 77 FR 74284 (Dec. 13, 

2012) (First Determination). 

7 17 CFR 50.25; First Determination, 77 FR at 

74319–74321. 

8See generally First Determination. By way of 

background, an interest rate swap is generally an 

agreement by counterparties to exchange payments 

based on a series of cash flows over a specified 

period of time, typically calculated using two 

different rates. Fixed-to-floating swaps are interest 

rate swaps in which the payment(s) owed on one 

leg of the swap is calculated using a fixed rate, and 

the payment(s) owed on the other leg is calculated 

using a floating rate. Basis swaps are interest rate 

swaps for which the payments for both legs are 

calculated using floating rates. FRAs are interest 

rate swaps in which payments are exchanged on a 

predetermined date for a single period and one leg 

of the swap is calculated using a fixed rate while 

the other leg is calculated using a floating rate set 

on a predetermined date. OIS are interest rate swaps 

for which one leg of the swap is calculated using 

a fixed rate and the other leg is calculated using a 

floating rate based on a daily overnight rate. 

9 Id. at 74287, 74307. To this day, significant 

amounts of notional in interest rate swaps are 

traded in markets around the world, and these 

swaps comprise an outsized portion of notional 

among all swaps. According to the Bank for 

International Settlements (BIS), as of June 2021, 

there was an estimated $488 trillion in outstanding 

notional of interest rate swaps, which represents 

approximately 80% of the total outstanding 

notional of all over-the-counter (OTC) derivatives. 

See BIS, OTC Derivatives Outstanding, Table D7 

(OTC, Interest Rate Derivatives, H1 2021), updated 

Nov. 15, 2021, available at https://stats.bis.org/ 

statx/srs/table/d7?f=pdf; BIS, Global OTC 

Derivatives Markets, June 2021, available at https:// 

www.bis.org/publ/otc_hy2111/intgraphs/ 

graphA1.htm. 

10 17 CFR 50.4(a). 

11First Determination, 77 FR at 74308. 

12 Id. at 74309. 

13Clearing Requirement Determination Under 

Section 2(h) of the Commodity Exchange Act for 

Interest Rate Swaps, 81 FR 71202 (Oct. 14, 2016) 

(Second Determination). 

14 17 CFR 50.26; Second Determination, 81 FR at 

71202. 

15Second Determination, 81 FR at 71203–71205. 

The Commission explained that such 

harmonization serves an important anti-evasion 

goal: If a non-U.S. jurisdiction issued a clearing 

requirement, and a swap dealer (SD) located in the 

United States were not subject to an analogous a 

clearing requirement under U.S. law, then market 

participants potentially could avoid the non-U.S. 

jurisdiction’s clearing requirement by entering into 

a swap with an SD located in the United States. Id. 

at 71203. 

16 Id. at 71205. 

17See generally ICE Benchmark Administration 

(IBA), LIBOR, available at https://www.theice.com/ 

iba/libor. 

18See, e.g., International Organization of 

Securities Commissions (IOSCO), Principles for 

Financial Benchmarks, July 2013, at 1, available at 

https://www.iosco.org/library/pubdocs/pdf/ 

Continued 

following five factors when making a 

clearing requirement determination: (I) 

The existence of significant outstanding 

notional exposures, trading liquidity, 

and adequate pricing data; (II) the 

availability of rule framework, capacity, 

operational expertise and resources, and 

credit support infrastructure to clear the 

contract on terms that are consistent 

with the material terms and trading 

conventions on which the contract is 

traded; (III) the effect on the mitigation 

of systemic risk, taking into account the 

size of the market for such contract and 

the resources of the DCOs available to 

clear the contract; (IV) the effect on 

competition, including appropriate fees 

and charges applied to clearing; and (V) 

the existence of reasonable legal 

certainty in the event of the insolvency 

of the relevant DCO or one or more of 

its clearing members with regard to the 

treatment of customer and swap 

counterparty positions, funds, and 

property.5

The Commission adopted its first 

clearing requirement determination 

(First Determination) in 2012.6 The First 

Determination was implemented 

between March 2013 and October 2013 

based on the schedule described in 

regulation § 50.25 and the preamble to 

the First Determination.7 The First 

Determination applied to interest rate 

swaps in four classes: Fixed-to-floating 

swaps, basis swaps, forward rate 

agreements (FRAs), and overnight index 

swaps (OIS).8

In making its initial interest rate swap 

clearing determination, the Commission 

focused on the size of the interest rate 

swap market relative to the swap market 

overall, as well as the fact that these 

swaps were already widely being 

cleared.9 As set forth in regulation 

§ 50.4(a), the Commission identified 

four classes of interest rate swaps 

having certain specifications related to 

(i) the currency in which the notional 

and payment amounts are specified; (ii) 

the floating rate index referenced in the 

swap; (iii) the stated termination date; 

(iv) optionality; (v) dual currencies; and 

(vi) conditional notional amounts.10 The 

Commission limited the interest rate 

swaps required to be cleared to those 

denominated in four currencies (U.S. 

dollar (USD), Euro (EUR), British pound 

(GBP), and Japanese yen (JPY)). The 

Commission noted that interest rate 

swaps denominated in these currencies 

comprised an outsized portion of the 

interest rate swap market in terms of 

notional amounts outstanding and 

trading volumes compared to interest 

rate swaps denominated in other 

currencies.11

The First Determination covered a 

number of interest rate swaps that 

reference IBORs, including fixed-tofloating swaps, basis swaps, and FRAs 

denominated in USD, GBP, and JPY, 

referencing USD, GBP, and JPY LIBOR, 

respectively, and OIS denominated in 

EUR referencing the Euro Overnight 

Index Average (EONIA). The 

Commission observed that interest rate 

swaps referencing those indexes had 

significant outstanding notional 

amounts and trading liquidity.12

The Commission adopted its second 

clearing requirement determination 

(Second Determination) in 2016.13 The 

Second Determination was 

implemented between December 2016 

and October 2018,14 and covered 

interest rate swaps in nine additional 

currencies: Australian dollar (AUD), 

Canadian dollar (CAD), Hong Kong 

dollar (HKD), Mexican peso (MXN), 

Norwegian krone (NOK), Polish zloty 

(PLN), Singapore dollar (SGD), Swedish 

krona (SEK), and Swiss franc (CHF). The 

Commission adopted the Second 

Determination largely in order to further 

harmonize its interest rate swap clearing 

requirement with those of other 

jurisdictions that had already issued, or 

were in the process of issuing, clearing 

mandates on similar interest rate 

swaps.15 The Second Determination 

also covered swaps that reference other 

IBORs, including fixed-to-floating swaps 

denominated in SGD referencing the 

Singapore Swap Offer Rate (SOR– 

VWAP) and fixed-to-floating swaps 

denominated in CHF referencing CHF 

LIBOR.16 These rates will be discussed 

further below. 

B. End of LIBOR 

LIBOR is an interest rate benchmark 

that was intended to measure the 

average rate at which a bank can obtain 

unsecured funding in the London 

interbank market for a given tenor and 

currency. It had been one of the world’s 

most frequently referenced interest rate 

benchmarks, serving as a reference rate 

for a wide variety of swaps and other 

financial products. Over the years, 

LIBOR was calculated based on 

submissions from a panel of contributor 

banks and published every London 

business day. Immediately prior to 

January 1, 2022, LIBOR was published 

for five currencies (USD, GBP, EUR, 

CHF, and JPY) and seven tenors 

(overnight or spot next depending on 

currency, 1-week, 1-month, 2-month, 3- 

month, 6-month, and 12-month), 

resulting in 35 individual LIBOR rates.17

Beginning this year, these LIBOR rates 

have almost entirely ceased publication 

or become nonrepresentative of the 

underlying market they are intended to 

measure. 

Nearly a decade ago, government 

investigations concerning LIBOR, as 

well as a decline in the volume of 

interbank lending transactions that 

LIBOR is intended to measure, gave rise 

to concerns regarding the integrity and 

reliability of LIBOR and other IBORs.18


khammond on DSKJM1Z7X2PROD with PROPOSALS2
32900 Federal Register / Vol. 87, No. 104 / Tuesday, May 31, 2022 / Proposed Rules 

IOSCOPD415.pdf. See also David Bowman, et al., 

‘‘How Correlated Is LIBOR With Bank Funding 

Costs?,’’ FEDS Notes, June 29, 2020, available at 

https://www.federalreserve.gov/econres/notes/fedsnotes/how-correlated-is-libor-with-bank-fundingcosts-20200629.htm; and Alternative Reference 

Rates Committee, Second Report, Mar. 2018, at 1– 

3, available at https://www.newyorkfed.org/ 

medialibrary/Microsites/arrc/files/2018/ARRCSecond-report. 

19See generally IBA, Methodology, available at 

https://www.theice.com/publicdocs/ICE_LIBOR_

Methodology.pdf; H.M. Treasury, The Wheatley 

Review of LIBOR: Final Report, Sept. 2012, 

available at https://assets.publishing.service.gov.uk/ 

government/uploads/system/uploads/attachment_

data/file/191762/wheatley_review_libor_

finalreport_280912.pdf; Intercontinental Exchange 

(ICE), ICE LIBOR Evolution, Apr. 25, 2018, at 4, 

available at https://www.theice.com/publicdocs/ 

ICE_LIBOR_Evolution_Report_25_April_2018.pdf. 

20Andrew Bailey, ‘‘The future of Libor,’’ July 27, 

2017, available at https://www.fca.org.uk/news/ 

speeches/the-future-of-libor. 

21FCA, FCA Announcement on Future Cessation 

and Loss of Representativeness of the LIBOR 

Benchmarks, Mar. 5, 2021 (FCA Announcement on 

LIBOR Cessation), available at https://

www.fca.org.uk/publication/documents/futurecessation-loss-representativeness-liborbenchmarks.pdf. 

22See section IV below (discussing the continued 

publication of USD LIBOR for certain tenors 

through June 30, 2023). 

23FCA Announcement on LIBOR Cessation. The 

FCA stated that once a LIBOR rate becomes 

nonrepresentative, its representativeness will not be 

restored. 

24 Id. 

25While not all benchmark rates considered to be 

alternative reference rates for IBORs may be RFRs, 

efforts to transition markets away from IBORs have 

focused on RFRs as alternatives. For purposes of 

brevity, the Commission uses the term ‘‘RFR’’ in 

this notice of proposed rulemaking to refer to 

alternative reference rates. 

26For additional background information, see 

Swap Clearing Requirement To Account for the 

Transition from LIBOR and Other IBORs to 

Alternative Reference Rates, 86 FR 66476, 66480 

(Nov. 23, 2021) (RFI). 

27USD SOFR is an RFR that measures the cost of 

overnight repurchase agreement transactions 

collateralized by U.S. Treasury securities. FRBNY, 

Statement Introducing the Treasury Repo Reference 

Rates, Apr. 3, 2018, available at https://

www.newyorkfed.org/markets/opolicy/operating_

policy_180403. See also FRBNY, Secured Overnight 

Financing Rate Data, available at https://apps.

newyorkfed.org/markets/autorates/SOFR#:

∼:text=The%20SOFR%20is%20

calculated%20as,LLC%2C%20an%20affiliate

%20of%20the; and FRBNY, Additional Information 

about the Treasury Repo Reference Rates, available 

at https://www.newyorkfed.org/markets/treasuryrepo-reference-rates-information. USD SOFR has 

been published each New York business day at 8 

a.m. ET since April 3, 2018, by the FRBNY in 

cooperation with the U.S. Office of Financial 

Research. 

28ARRC, ‘‘The ARRC Selects a Broad Repo Rate 

as its Preferred Alternative Reference Rate,’’ June 

22, 2017, available at https://www.newyorkfed.org/ 

medialibrary/microsites/arrc/files/2017/ARRCpress-release-Jun-22-2017.pdf. 

29ARRC, Paced Transition Plan, available at 

https://www.newyorkfed.org/arrc/sofr-transition#

pacedtransition. The Paced Transition Plan called 

for (i) the establishment of infrastructure for futures 

and/or OIS trading in USD SOFR by the second half 

of 2018; (ii) the start of trading in futures and/or 

bilateral, uncleared OIS that reference USD SOFR 

by the end of 2018; (iii) the start of trading in 

cleared OIS that reference USD SOFR in the 

effective Federal funds rate (EFFR) price alignment 

interest (PAI) and discounting environment by the 

end of the first quarter of 2019; (iv) Chicago 

Mercantile Exchange, Inc. (CME)’s and LCH Limited 

(LCH)’s conversion of discounting, and PAI and 

price alignment amount, from EFFR to USD SOFR 

with respect to all outstanding cleared USDdenominated swaps by October 16, 2020; and (v) 

the ARRC’s endorsement of a term reference rate 

based on USD SOFR derivatives markets by the end 

of the first half of 2021. The final step was 

completed on July 29, 2021, when the ARRC 

formally endorsed forward-looking term USD SOFR 

rates developed by CME. 

30ESMA, Working Group on Euro Risk-Free 

Rates, available at https://www.esma.europa.eu/ 

policy-activities/benchmarks/working-group-eurorisk-free-rates; European Money Markets Institute, 

EONIA, available at https://www.emmibenchmarks.eu/benchmarks/eonia/. 

31Association of Banks in Singapore, About SC– 

STS, available at https://www.abs.org.sg/ 

benchmark-rates/about-sc-sts. 

32Steering Committee for SOR & SIBOR 

Transition to SORA, Timelines to Cease Issuance of 

SOR and SIBOR-Linked Financial Products, Mar. 

31, 2021 (Timelines to Cease SOR), at 4, available 

at https://www.abs.org.sg/docs/library/timelines-tocease-issuance-of-sor-derivatives-and-sibor-linkedfinancial-products.pdf. 

Although LIBOR was subject to a 

number of significant reform efforts,19

regulators and global standard-setting 

bodies did not view these reforms as a 

long-term solution. On July 27, 2017, 

Andrew Bailey, then-Chief Executive of 

the United Kingdom (UK) Financial 

Conduct Authority (FCA), LIBOR’s 

primary regulator, announced that the 

FCA would not use its authority to 

compel LIBOR panel banks to contribute 

to the benchmark after 2021.20 On 

March 5, 2021, the FCA announced that 

publication of LIBOR would cease on 

December 31, 2021, for the following: 21

(i) EUR LIBOR in all tenors; 

(ii) CHF LIBOR in all tenors; 

(iii) JPY LIBOR in the spot next, 1- 

week, 2-month, and 12-month tenors; 

(iv) GBP LIBOR in the overnight, 1- 

week, 2-month, and 12-month tenors; 

and 

(v) USD LIBOR in the 1-week and 2- 

month tenors.22

The FCA further determined that GBP 

and JPY LIBOR in 1-month, 3-month, 

and 6-month tenors would become 

nonrepresentative after December 31, 

2021.23 Additionally, the FCA 

determined that USD LIBOR in the 

overnight and 12-month tenors would 

cease after June 30, 2023, and that USD 

LIBOR in the 1-month, 3-month, and 6- 

month tenors would not be 

representative after that date.24 At this 

time, EUR, CHF, JPY, and GBP LIBOR 

in all tenors, and USD LIBOR in the 1- 

week and 2-month tenors, have ceased 

publication or become 

nonrepresentative of the underlying 

market they are intended to measure. 

The historic circumstances 

surrounding the transition from IBORs 

to RFRs are the result of significant 

private and public sector coordinated 

efforts.25 As plans to retire LIBOR 

proceeded, regulators in the United 

States and other jurisdictions worked to 

identify, develop, and implement 

reference rates to serve as alternatives to 

LIBOR and other IBORs.26 In the United 

States, the Alternative Reference Rates 

Committee (ARRC), convened in 2014 

by the Federal Reserve Board (FRB) and 

the Federal Reserve Bank of New York 

(FRBNY) and comprised of private 

market participants and ex officio 

banking and financial sector regulators, 

selected the Secured Overnight 

Financing Rate (SOFR) 27 as its preferred 

alternative to USD LIBOR.28 The ARRC 

developed a Paced Transition Plan, 

which has now been completed, to 

facilitate an orderly transition from USD 

LIBOR to USD SOFR.29

C. Global Progress on Benchmark 

Reform 

Regulators and public-private working 

groups in other IBOR currency 

jurisdictions have been working to 

identify, develop, and encourage market 

uptake of RFRs to replace LIBOR in 

currencies other than USD, as well as 

IBORs other than LIBOR. As relevant to 

this proposal, RFRs identified as 

alternatives for IBORs in currencies 

other than USD include: (i) The Sterling 

Overnight Index Average (SONIA) for 

GBP; (ii) the Swiss Average Rate 

Overnight (SARON) for CHF; (iii) the 

Tokyo Overnight Average (TONA) for 

JPY; and (iv) the Euro Short-Term Rate 

(ÖSTR) for EUR. 

In the European Union (EU), the 

Working Group on Euro Risk-Free Rates, 

convened in 2018 by the European 

Central Bank in connection with the 

Belgian Financial Services, the 

European Securities and Markets 

Authority (ESMA), and the European 

Commission (EC), also identified ÖSTR 

as its preferred alternative to EUR 

EONIA, which ceased publication on 

January 3, 2022.30 Additionally, with 

regard to SGD, the Steering Committee 

for SOR & SIBOR Transition to SORA, 

established by the Monetary Authority 

of Singapore (MAS), has been working 

to oversee a transition from SGD SOR– 

VWAP to the Singapore Overnight Rate 

Average (SORA).31 SGD SOR–VWAP 

relies on USD LIBOR as an input and is 

expected to be discontinued across all 

tenors after June 30, 2023.32


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33See generally Financial Stability Board (FSB), 

Reforming Major Interest Rate Benchmarks, Nov. 

20, 2020, at 29–43, 54–55, available at https:// 

www.fsb.org/2020/11/reforming-major-interest-ratebenchmarks-2020-progress-report/. See also 

Andreas Schrimpf and Vladislav Sushko, ‘‘Beyond 

Libor: a primer on the new reference rates,’’ BIS 

Quarterly Review, Mar. 2019, at 35, available at 

https://www.bis.org/publ/qtrpdf/r_qt1903e.pdf; 

Bank of England, Preparing for 2022: What You 

Need to Know about LIBOR Transition, Nov. 2018, 

at 10, https://www.bankofengland.co.uk/-/media/ 

boe/files/markets/benchmarks/what-you-need-toknow-about-libor-transition.pdf; ISDA, et al., IBOR 

Global Benchmark Survey 2018 Transition 

Roadmap, Feb. 2018, at 32, https://www.isda.org/a/ 

g2hEE/IBOR-Global-Transition-Roadmap-2018.pdf; 

European Central Bank, Euro Short-Term Rate 

(ÖSTR), available at https://www.ecb.europa.eu/ 

stats/financial_markets_and_interest_rates/euro_

short-term_rate/html/index.en.html#:∼:text=

The%20euro%20short%2Dterm%20rate,

activity%20on%201%20October%202019; 

Timelines to Cease SOR. 

34See, e.g., FRB, Federal Deposit Insurance 

Corporation (FDIC), and Office of the Comptroller 

of the Currency (OCC), Statement on LIBOR 

Transition, Nov. 30, 2020, available at https://

www.federalreserve.gov/newsevents/pressreleases/ 

files/bcreg20201130a1.pdf; and IOSCO, Statement 

on Benchmarks Transition, June 2, 2021, available 

at https://www.iosco.org/library/pubdocs/pdf/ 

IOSCOPD676.pdf. 

35CFTC, ‘‘CFTC Market Risk Advisory Committee 

Adopts SOFR First Recommendation at Public 

Meeting,’’ July 13, 2021, available at https://

www.cftc.gov/PressRoom/PressReleases/8409-21. 

36CFTC, CFTC’s Interest Rate Benchmark Reform 

Subcommittee Issues User Guide for the Transition 

of Exchange-Traded Derivatives Activity to SOFR, 

Dec. 16, 2021, available at https://www.cftc.gov/ 

PressRoom/PressReleases/8469-21. 

37See, e.g., Bank of England, ‘‘The FCA and the 

Bank of England encourage market participants in 

further switch to SONIA in interest rate swap 

markets,’’ Sept. 28, 2020, available at https://

www.bankofengland.co.uk/news/2020/september/ 

fca-and-boe-joint-statement-on-sonia-interest-rateswap; Cross-Industry Committee on Japanese Yen 

Interest Rate Benchmarks, ‘‘Transition of Quoting 

Conventions in the JPY interest rate swaps market 

(‘TONA First’),’’ July 26, 2021, available at https:// 

www.boj.or.jp/en/paym/market/jpy_cmte/data/ 

cmt210726b.pdf. 

38RFI, 86 FR at 66486—66488. 

39Responses were submitted by: American 

Council of Life Insurers (ACLI), CCP12, London 

Stock Exchange Group (LSEG), Japan Securities 

Clearing Corporation (JSCC), Tradeweb Markets 

LLC (Tradeweb), Investment Company Institute 

(ICI), Managed Funds Association (MFA), TorontoDominion Bank (TD Bank), Eurex Clearing AG 

(Eurex), the International Swaps and Derivatives 

Association (ISDA), Alternative Investment 

Management Association (AIMA), Citadel, 

Bloomberg L.P., and CME Group Inc. (CMEG). The 

response letters are available on the CFTC 

Comments Portal: https://comments.cftc.gov/ 

PublicComments/ReleasesWithComments.aspx. 

Table 1 that follows this paragraph 

contains a non-exhaustive list of RFRs 

that have been identified to replace 

IBORs around the world: 33

TABLE 1—RFRS IDENTIFIED FOR IBORS

Currency Index Identified alternative rate Alternative rate 

administrator Secured Published 

AUD ................ Bank Bill Swap Rate 

(BBSW).

Reserve Bank of Australia Interbank 

Overnight Cash Rate (AONIA).

Reserve Bank of Australia.No Yes. 

CAD ................ Canadian Dollar Offered 

Rate (CDOR).

Canadian Overnight Repo Rate Average (CORRA).Bank of Canada .............. Yes Yes. 

CHF ................ LIBOR ............................. SARON ................................................ SIX Swiss Exchange ...... Yes Yes. 

EUR ................ LIBOR ............................. ÖSTR ................................................... European Central Bank .. No Yes. 

Euro Overnight Index Average (EONIA).ÖSTR ................................................... European Central Bank .. No Yes. 

Euro Interbank Offered 

Rate (EURIBOR).

ÖSTR ................................................... European Central Bank .. No Yes. 

GBP ................ LIBOR ............................. SONIA ................................................. Bank of England ............. No Yes. 

HKD ................ Hong Kong Interbank Offered Rate (HIBOR).Hong Kong Dollar Overnight Index Average (HONIA).Treasury Market Association.No Yes. 

JPY ................. LIBOR ............................. TONA ................................................... Bank of Japan ................ No Yes. 

MXN ............... Term Interbank Equilibrium Interest Rate 

(TIIE).

Overnight TIIE ..................................... Banco de Mexico ............ Yes Yes. 

SGD ................ SOR ................................ SORA .................................................. Association of Banks in 

Singapore.

No Yes. 

Singapore Interbank Offered Rate (SIBOR).SORA .................................................. Association of Banks in 

Singapore.

No Yes. 

Regulators and global standard-setting 

bodies have urged market participants 

to accelerate their adoption of USD 

SOFR and other RFRs and cease 

entering new swaps referencing LIBOR 

and other IBORs,34 and have issued 

guidance and regulatory relief to 

facilitate the transition. In the United 

States, on July 13, 2021, the 

Commission’s Market Risk Advisory 

Committee adopted SOFR First, a 

phased initiative to switch interdealer 

trading conventions from reliance on 

USD LIBOR to USD SOFR as a reference 

rate for swaps.35 SOFR First was 

implemented in four phases between 

July 26, 2021, and December 16, 2021.36

SOFR First mirrors similar best 

practices adopted in other jurisdictions 

to increase activity in swaps referencing 

RFRs.37

II. Overview of the Request for 

Information 

In light of ongoing efforts by the 

international regulatory community, 

market participants, and others to 

transition financial markets from IBORs 

to RFRs, on November 23, 2021, the 

Commission published an RFI seeking 

public input regarding how it should 

amend the interest rate swap clearing 

requirement to address the cessation of 

IBORs that have been used as 

benchmark reference rates and the 

market adoption of swaps that reference 

RFRs.38 The RFI sought input on all 

aspects of the swap clearing 

requirement that may be affected by the 

transition from IBORs to RFRs, 

including enumerated requests for data 

and other information related to IBOR 

and RFR swaps. The Commission 

received 14 responses to the RFI from a 

variety of market infrastructure 

providers, market participants, and 

industry organizations.39 In addition to 

addressing the Commission’s specific 

requests for information, many 

respondents to the RFI shared 

information regarding their own 

contributions to the transition from 

IBORs to RFRs. 


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40CMEG is the parent company of CME. CMEG 

Letter. 

41LSEG has majority ownership of LCH Group, 

which operates LCH. LSEG Letter. 

42OTC Clearing Hong Kong Limited (HKEX), 

another exempt DCO, also clears certain of the RFR 

swaps subject to this proposal. Specifically, HKEX 

offers swaps referencing USD SOFR and EUR ÖSTR 

for clearing. See Hong Kong Exchanges and 

Clearing, Interest Rate Swaps, available at https:// 

www.hkex.com.hk/Products/OTC-Derivatives/ 

Interest-Rate-Swaps?sc_lang=en. 

43As the Commission explained in the RFI, these 

conversion events were intended to address market 

participant concerns related to potential bifurcation 

of liquidity between trading in legacy IBOR swaps 

that had fallen back to RFRs (i.e., as a result of the 

operation of DCO rules implementing ISDA’s 

fallbacks) and new RFR OIS, as well as certain 

operational costs. RFI, 86 FR at 66484. 

44CMEG, LSEG, Eurex, and JSCC Letters. 

45CCP12 Letter. 

46Table 2 does not include information from 

exempt DCOs. Exempt DCOs, such as JSCC and 

HKEX, also offer clearing services for certain RFR 

swaps, but do not offer customer clearing to U.S. 

customers. 

47See CME, CME Submission No. 21–413, CFTC 

Regulation 40.6(a) Certification, Notification 

Regarding Modification of Cleared Euro Overnight 

Index Average (‘‘EONIA’’) Overnight Index Swaps 

to Reference Euro Short Term Rate (‘‘ÖSTR’’) Ahead 

of Scheduled Discontinuation of EONIA, Sept. 29, 

2021, available at https://www.cmegroup.com/ 

content/dam/cmegroup/market-regulation/rulefilings/2021/9/21-413.pdf; LCH, LCH Limited SelfCertification: Benchmark Reform—Rates 

Conversion, Sept. 29, 2021 (LCH Self-Certification: 

Benchmark Reform—Rates Conversion), available at 

https://www.lch.com/system/files/media_root/ 

FINAL%20-%20LCH%20self%20cert_Benchmark

%20Reform%202021%2009%2029%20v3

%20%28Clean%29.pdf; Eurex Clearing, ECAG Rule 

Certification 081–21, Sept. 16, 2021 (Eurex Rule 

Certification 081–21), available at https://

www.eurex.com/resource/blob/2781070/61d1fccdd

00bc1a06753877a5fa3f483/data/ecag_cftc_filing_

for_circular_081-21.pdf; and Eurex, Eurex Clearing 

Circular 111/20 EurexOTC Clear: Summary of 

Consultation on the Transition Plan for 

Transactions Referencing the EONIA Benchmark, 

Dec. 14, 2020, available at https://www.eurex.com/ 

ec-en/find/circulars/clearing-circular-2373634. 

48LCH Self-Certification: Benchmark Reform— 

Rates Conversion; LCH, Supplementary Statement 

on LCH’s Solution for Outstanding Cleared LIBOR 

Contracts, LCH Circular No. 4146, Mar. 18, 2021, 

available at https://www.lch.com/membership/ltdmembership/ltd-member-updates/supplementarystatement-lchs-solution-outstanding; CME, CME 

IBOR Conversion Plan for Cleared Swaps, June 9, 

2021, available at https://www.cmegroup.com/ 

trading/interest-rates/files/cleared-swapsconsiderations-for-ibor-fallbacks-and-conversionplan.pdf; and Eurex Rule Certification 081–21. The 

Commission notes that only LCH conducted a 

conversion event for EUR LIBOR swaps because 

CME and Eurex did not offer these swaps for 

clearing at that time. 

49 JSCC Letter. 

50CMEG, Advisory Notice #21–434, Modification 

of Cleared Over-the-Counter (OTC) British Pound 

(GBP), Japanese Yen (JPY) and Swiss Franc (CHF) 

Denominated Interest Rate Swap Products 

Referencing the London Interbank Offered Rate 

(LIBOR) and Limitation of Acceptance for Clearing, 

Nov. 22, 2021, available at https://

www.cmegroup.com/notices/clearing/2021/11/ 

Chadv21-434.pdf (noting that CME provides limited 

clearing services for certain LIBOR swaps resulting 

from the exercise of bilateral uncleared swaptions, 

which are subject to a same-day conversion event 

on the day such swaps are accepted for clearing); 

LCH, LIBOR Transition—Risk Notice, Nov. 2021, 

available at https://www.lch.com/system/files/ 

media_root/LIBOR%20Transition%20-%20

Risk%20Notice%20Nov%202021.pdf (setting forth 

the terms of time-limited clearing services for 

certain ‘‘legacy’’ LIBOR transactions, including 

LIBOR swaps resulting from the exercise of certain 

swaptions; and Eurex, EurexOTC Clear Product 

List, available at https://www.eurex.com/resource/ 

blob/227404/760dd5a98729621e2de7720d28

bc291a/data/ec15075e_Attach.pdf. 

51Each registered DCO has made public its plans 

for full USD LIBOR transition. CMEG, LSEG, and 

Eurex Letters. 

A. Work by DCOs To Support the 

Transition to RFRs 

The Commission received responses 

to its RFI from CMEG,40 LSEG,41 and 

Eurex, all of which operate or are 

registered DCOs that offer for clearing 

RFR swaps subject to this proposal. The 

Commission also received a response 

from JSCC, an exempt DCO that clears 

JPY TONA swaps.42 Additionally, the 

Commission received a response from 

the CCP12, a global association of 

central counterparties (CCPs). 

DCOs played an important role in the 

transition from IBORs to RFRs by 

offering clearing services for RFR swaps 

and converting cleared IBOR swaps to 

RFR OIS.43 The DCOs’ responses 

highlight the efforts they undertook to 

facilitate a smooth transition from 

cleared IBOR swaps to cleared RFR 

swaps.44 As the CCP12 noted in its 

response, DCOs currently provide 

clearing services for RFR OIS and 

manage the risks associated with 

clearing such swaps.45

Table 2 that follows this paragraph 

shows swaps referencing RFRs that 

registered DCOs have offered for 

clearing to facilitate the transition from 

IBORs.46 After DCOs began clearing RFR 

swaps, they worked to move open 

interest in IBOR swaps to RFR swaps, 

reflecting the growing RFR swap market. 

CME, LCH, and Eurex each converted 

cleared EUR EONIA swaps outstanding 

after October 15, 2021, to ÖSTR OIS, 

ahead of EUR EONIA’s January 3, 2022 

cessation.47 These DCOs also converted 

cleared swaps referencing CHF, EUR, 

JPY, and GBP LIBOR to corresponding 

RFR OIS in December 2021, ahead of the 

December 31, 2021 cessation date for 

these LIBOR rates.48 Additionally, in 

December 2021, JSCC completed a 

conversion of JPY LIBOR swaps to JPY 

TONA OIS.49 Following these 

conversion events, with limited 

exceptions, swaps referencing these 

LIBOR rates were no longer offered for 

clearing.50 The Commission anticipates 

that CME, LCH, and Eurex will launch 

similar conversion events for all swaps 

still referencing USD LIBOR prior to 

June 30, 2023.51

TABLE 2—SUMMARY OF SWAPS OFFERED FOR CLEARING TO SUPPORT IBOR TRANSITION

Swap class Currency Floating rate index Registered DCOs offering clearing 

(Termination date range offered) 

Basis Swaps ............. AUD .......................... BBSW-AONIA ........... LCH (up to 31 yrs). 

CAD .......................... CDOR-CORRA ......... LCH (up to 31 yrs). 

EUR .......................... EURIBOR-ÖSTR ....... CME (up to 51 yrs), Eurex (up to 51 yrs), LCH (up to 51 yrs). 

GBP .......................... LIBOR-SONIA .......... Eurex (up to 51 yrs), LCH (up to 51 yrs). 

JPY ........................... LIBOR-TONA ............ Eurex (up to 31 yrs), LCH (up to 41 yrs). 

SGD .......................... SOR-SORA .............. LCH (up to 21 yrs). 

USD .......................... LIBOR-SOFR ............ CME (up to 51 yrs), Eurex (up to 51 yrs), LCH (up to 51 yrs). 

Fed Funds-SOFR ..... CME (up to 51 yrs), Eurex (up to 51 yrs), LCH (up to 51 yrs). 

OIS ............................ AUD .......................... AONIA ...................... CME (up to 31 yrs), LCH (up to 31 yrs). 

CAD .......................... CORRA ..................... CME (up to 31 yrs), LCH (up to 31 yrs). 

CHF .......................... SARON ..................... CME (up to 31 yrs), Eurex (up to 31 yrs), LCH (up to 31 yrs). 

EUR .......................... ÖSTR ........................ CME (up to 51 yrs), Eurex (up to 51 yrs), LCH (up to 51 yrs). 

GBP .......................... SONIA ...................... CME (up to 51 yrs), Eurex (up to 51 yrs), LCH (up to 51 yrs). 

JPY ........................... TONA ........................ CME (up to 31 yrs), Eurex (up to 31 yrs), LCH (up to 41 yrs). 

SGD .......................... SORA ....................... CME (up to 21 years), LCH (up to 21 yrs). 

USD .......................... SOFR ........................ CME (up to 51 yrs), Eurex (up to 51 yrs), LCH (up to 51 yrs). 


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52For example, ISDA, as an organization of OTC 

derivatives market participants, played a key role in 

the development of contractual fallbacks for IBORs, 

ensuring that swaps documented under ISDA 

agreements that reference certain key IBORs can 

transition to adjusted versions of corresponding 

RFRs when those IBORs cease or become nonrepresentative. ISDA, ‘‘Amendments to the 2006 

ISDA Definitions to include new IBOR fallbacks,’’ 

Oct. 23, 2020, available at http://assets.isda.org/ 

media/3062e7b4/23aa1658.pdf; ISDA, 

‘‘Amendments to the 2006 ISDA Definitions to 

include new IBOR fallbacks,’’ Oct. 23, 2020, 

available at http://assets.isda.org/media/3062e7b4/ 

23aa1658.pdf; ISDA, ISDA 2020 IBOR Fallbacks 

Protocol, Oct. 23, 2020, available at http://

assets.isda.org/media/3062e7b4/08268161-pdf/; 

ISDA 2021 Fallbacks Protocol, December 2021 

Benchmark Module, Dec. 16, 2021, available at 

https://www.isda.org/a/UhtgE/ISDA-2021- 

Fallbacks-Protocol_December-2021-BenchmarkModule_Publication-Version.pdf. See also RFI, 86 

FR at 66483–84 (discussing ISDA’s IBOR fallbacks 

protocol and supplement). 

53Citadel and ISDA Letters. 

54Citadel Letter. Citadel also noted that, for USD 

SOFR swaps, ‘‘robust liquidity exists across a wide 

range of maturities, from 7 days to 50 years.’’ Id. 

55ACLI, CCP12, Eurex, ISDA, LSEG, MFA, and 

TD Bank Letters. 

56E.g., AIMA Letter (‘‘Market participants have 

taken multiple steps in preparation for the cessation 

of IBORs and LIBOR, and there has been a 

corresponding material transition to the use of 

SOFR and other RFRs for OTC contracts. As a 

result, liquidity in swaps referencing SOFR has 

grown, and will continue to grow, sufficient to 

justify the Commission making a clearing 

requirement determination for these contracts. 

Accordingly, we encourage the Commission to 

update the clearing requirement to include swaps 

referencing SOFR with maturities ranging from 7 

days to 50 years.’’); MFA Letter (‘‘MFA strongly 

recommends that the Commission modify its Swap 

Clearing Requirement under Commission regulation 

50.4 by adding a clearing obligation to the OIS class 

for SOFR swaps with a maturity range of 7 days to 

50 years as soon as practicable.’’). 

57See RFI, 86 FR at 66478–66482. 

58Section 752 is not codified in the CEA. 

59Second Determination, 81 FR at 71203. 

60E.g., Second Determination, 81 FR at 71223 

(noting that ‘‘the interest rate swaps market is global 

and market participants are interconnected’’); First 

Determination, 77 FR at 74287 (‘‘The Commission 

is mindful of the benefits of harmonizing its 

regulatory framework with that of its counterparts 

in foreign countries. The Commission has therefore 

monitored global advisory, legislative, and 

regulatory proposals, and has consulted with 

foreign regulators in developing the final 

regulations.’’). 

61ASIC, Consultation Paper 353, ‘‘Proposed 

amendments to the ASIC Derivative Transaction 

Rules (Clearing) 2015,’’ Dec. 2021, at 5, 14, available 

at https://download.asic.gov.au/media/mjknuhlh/ 

cp-353-published-6-december-2021.pdf; ESMA, 

Final Report, ‘‘On draft RTS on the clearing and 

derivative trading obligations in view of the 

benchmark transition to risk free rates,’’ Nov. 18, 

2021, at 36–38, 63, available at https://www.esma.

europa.eu/sites/default/files/library/esma70-156- 

4953_final_report_on_the_co_and_dto_re_

benchmark_transition.pdf; Bank of England, 

‘‘Derivatives clearing obligation—modifications to 

reflect interest rate benchmark reform: 

Amendments to BTS 2015/2205,’’ May 20, 2021, 

Continued 

B. Work by Market Participants To 

Support the Transition to RFRs 

Market participants also played a 

significant role in the transition from 

reliance on IBORs to the adoption of 

RFRs through engagement with RFR 

working groups, such as the ARRC, and 

the provision of trading liquidity in 

interest rate swaps referencing RFRs.52

As Citadel and ISDA noted in their 

responses to the RFI, many RFR swaps 

are now voluntarily cleared by market 

participants in large proportions.53

Citadel explained that, in the interdealer 

market, the ‘‘vast majority’’ of trading 

activity has transitioned to USD SOFR, 

and that ‘‘streaming dealer prices can be 

observed across [swap execution 

facilities (SEFs)], evidencing the number 

of available market makers.’’ 54

For each of the amendments in this 

proposal, the Commission considered 

feedback and data from responses to the 

RFI. Respondents overwhelmingly 

supported updating the clearing 

requirement to account for the cessation 

of LIBOR and other IBORs. Many 

respondents specifically expressed a 

desire that the Commission harmonize 

any changes to the clearing requirement 

with changes taking place in other 

jurisdictions.55 In particular, the 

Commission recognizes the information 

provided by respondents with regard to 

issuing a clearing requirement 

determination for OIS referencing USD 

SOFR with a termination date range as 

long as 50 years.56

III. Domestic and International 

Coordination and Outreach 

The global shift from IBORs to RFRs 

represents a historic effort by 

international standard setting bodies 

such as IOSCO and the FSB, regulators, 

cross-jurisdictional working groups, 

market infrastructure providers, market 

participants, and others, to move global 

swap markets toward reliance on more 

sustainable benchmarks.57 Due to the 

cross-border nature of this effort and the 

size of the affected markets, the 

Commission believes it is a priority to 

engage with domestic and international 

regulators as it considers changes to the 

clearing requirement. As discussed 

further below, the Commission’s 

proposed clearing requirement 

determination is based upon this type of 

ongoing consultation and coordination 

among regulatory authorities and with 

market participants. 

A. Domestic Coordination Efforts 

The Commission is committed to 

working with the FRB, FRBNY, 

Securities and Exchange Commission 

(SEC), and other domestic authorities to 

ensure transparency in its efforts and, to 

the greatest extent possible, consistency 

in the transition from IBORs to RFRs. To 

this end, the Commission consults with 

domestic authorities including the SEC, 

the FRB, and the FRBNY as part of this 

rulemaking process. 

B. International Coordination Efforts 

Section 752(a) of the Dodd-Frank Act 

directs the Commission to consult and 

coordinate with foreign regulatory 

authorities on the establishment of 

consistent international standards for 

the regulations of swaps.58 The 

Commission accomplished this with 

respect to the Second Determination by 

considering the ways in which it could 

harmonize its clearing requirement with 

clearing requirements in other 

jurisdictions.59 The Commission has 

long recognized the interconnectedness 

of the interest rate swap market, and the 

importance of consulting and 

coordinating with its counterparts in 

other jurisdictions in the adoption of 

clearing requirements in order to 

promote regulatory consistency and 

certainty, and to prevent the evasion of 

clearing requirements.60

As part of this rulemaking process, 

the Commission is working with its 

counterparts overseas to ensure a 

coordinated approach to required 

clearing of interest rate swaps during 

the move from use of swaps referencing 

IBORs to swaps referencing RFRs. In 

particular, as part of the ongoing 

regulatory dialogue among authorities, 

Commission staff consulted with 

counterparts, including those at Bank of 

England, FCA, ESMA, Japanese 

Financial Services Agency (JFSA), Hong 

Kong Monetary Authority (HKMA), 

Australian Securities and Investments 

Commission (ASIC), and MAS. This 

type of dialogue reflects an effort to 

ensure consistency in interest rate swap 

clearing requirements across 

jurisdictions. 

C. Clearing Requirements in Other 

Jurisdictions 

In developing this proposal, the 

Commission considered relevant 

changes to clearing requirements in 

other jurisdictions, with a view toward 

ensuring that any changes the 

Commission proposes are harmonized 

to the greatest extent possible with those 

adopted by its international 

counterparts. This goal is consistent 

with the Commission’s approach in the 

Second Determination and the views of 

a significant number of respondents to 

the RFI. 

Table 3 that follows this paragraph 

outlines the way in which regulators in 

other jurisdictions have revised, or 

proposed to revise, clearing 

requirements to account for the 

transition from IBORs to RFRs.61


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available at https://www.bankofengland.co.uk/ 

paper/2021/derivatives-clearing-obligationmodifications-to-reflect-interest-rate-benchmarkreform-amendments; Bank of England, ‘‘Derivatives 

clearing obligation—modifications to reflect interest 

rate benchmark reform: Amendments to BTS 2015/ 

2205,’’ Sept. 29, 2021, available at https://

www.bankofengland.co.uk/paper/2021/derivativesclearing-obligation-modifications-to-reflect-interestrate-benchmark-reform; Bank of England, 

‘‘Derivatives clearing obligation—introduction of 

contracts referencing TONA: Amendment to BTS 

2015/2205,’’ Dec. 3, 2021, available at https://

www.bankofengland.co.uk/paper/2021/derivativesclearing-obligation-introduction-of-contractsreferencing-tona-ps; Bank of England, ‘‘Derivatives 

clearing obligation—introduction of contracts 

referencing TONA: Amendment to BTS 2015/ 

2205,’’ Sept. 29, 2021, available at https://

www.bankofengland.co.uk/paper/2021/derivativesclearing-obligation-introduction-of-contractsreferencing-tona. 

62Although JFSA does not clearly prescribe a 

termination date range in its public notice regarding 

its JPY TONA clearing requirement, the 

requirement went into effect on December 6, 2021. 

JSCC rules provide for the clearing of JPY TONA 

OIS with a termination date range of 7 days to 40 

years. JSCC, Interest Rate Swap Clearing Products: 

List of Cleared Products, available at https://

www.jpx.co.jp/jscc/en/cash/irs/product.html. 

63RFR-linked basis swaps offered for clearing are 

generally RFR–IBOR basis swaps. See ACLI Letter 

(‘‘We also do not believe that SOFR–LIBOR basis 

swaps should be added to the clearing requirement 

due to low liquidity and limitations on electronic 

execution. We expect SOFR–LIBOR basis swaps to 

require bilateral OTC treatment for their limited and 

dwindling use cases.’’); ISDA Letter (‘‘Due to low 

liquidity, we think SOFR–LIBOR basis swaps 

should not be subject to mandatory clearing.’’). 

64See additional discussion of RFI responses 

below. 

TABLE 3—CLEARING REQUIREMENTS IN OTHER JURISDICTIONS

Australia 

(proposed) 

EU 

(Final Regulatory 

Technical Standards— 

EC to approve) 

Japan 

(final) 

UK 

(final) 

USD ................... To be determined (TBD) ....... SOFR—7 days to 3 years .... Not applicable (N/A) .............. TBD. 

GBP ................... SONIA—7 days to 50 years SONIA—7 days to 50 years N/A ........................................ SONIA—7 days to 50 years. 

EUR ................... ÖSTR—7 days to 2 years ..... ÖSTR—7 days to 3 years ..... N/A ........................................ ÖSTR—7 days to 3 years. 

JPY .................... TONA—7 days to 30 years .. TBD ....................................... TONA—7 days to 40 years62 TONA—7 days to 30 years. 

IV. Proposed Amendments to 

Regulation § 50.4(a) 

As described above, the global swap 

marketplace has made tremendous 

progress toward completing the 

transition from reliance on swaps that 

reference LIBOR and other IBORs to 

clearing and trading swaps that 

reference RFRs. The Commission 

intends to facilitate this transition 

further by modifying its interest rate 

swap clearing requirement to reflect the 

cessation or loss of representativeness of 

certain IBORs, and the market adoption 

of RFRs. The Commission is grateful to 

market participants and others who took 

the time to respond to its RFI. As stated 

above, the Commission reviewed those 

responses carefully in formulating this 

proposal, and the Commission looks 

forward to further comment on this 

proposal. 

A. Overview of the Proposed Regulation 

The Commission is proposing to 

amend regulation § 50.4(a) to remove all 

LIBOR and EUR EONIA swap clearing 

requirements, and add requirements to 

clear corresponding RFR swaps. While 

the IBOR swaps for which clearing 

requirements would be removed span 

all four classes of swaps currently 

required to be cleared—fixed-to-floating 

swaps, basis swaps, FRAs, and (in the 

case of EUR EONIA) OIS—the RFR 

swaps that the Commission proposes to 

add to the clearing requirement are all 

OIS. OIS are swaps where one leg is 

calculated based on a fixed rate and the 

other is calculated based on a daily 

overnight floating rate (i.e., the RFR). On 

the other hand, RFR-linked basis swaps 

are currently cleared, but the 

Commission is not proposing to add any 

new requirements to clear RFR-linked 

basis swaps at this time because they are 

used primarily to move out of IBOR 

swap positions and into RFR swap 

positions.63 By not proposing to add 

these interest rate swaps to the clearing 

requirement, the Commission believes 

that it is providing added flexibility for 

market participants. Commission staff 

will continue to monitor the use of RFRlinked basis swaps as the IBOR 

transition process moves forward. 

This proposal is the first rule change 

that the Commission is proposing to 

facilitate the transition from IBORs to 

RFRs for purposes of the clearing 

requirement. But in many ways, the 

proposal is an update rather than 

expansion of the existing clearing 

requirement. In effect, the Commission’s 

proposal would replace the requirement 

to clear IBOR swaps in a number of 

different classes with a requirement to 

clear RFR OIS because the IBOR swaps 

have become unavailable and liquidity 

has shifted into RFR OIS. 

As discussed further below, the 

Commission is proposing that these 

amendments to part 50 to require 

clearing for certain RFR OIS would 

become effective 30 days after 

publication of the final rule in the 

Federal Register. The Commission is 

proposing to remove existing IBOR 

swap clearing requirements from 

regulation § 50.4 in two stages. The 

Commission proposes to remove 

requirements to clear (i) non-USD 

LIBOR and EUR EONIA swaps, 30 days 

after the publication of the final rule in 

the Federal Register; and (ii) USD 

LIBOR and SGD SOR–VWAP swaps, 

effective July 1, 2023. There remains 

outstanding USD LIBOR swaps activity, 

and a number of respondents to the RFI 

requested that the Commission retain its 

USD LIBOR swap clearing requirement 

until such time as that rate is 

unavailable.64

Specifically, the Commission is 

proposing to amend regulation § 50.4(a) 

as follows: 

1. Effective 30 days after publication 

of the final rule in the Federal Register: 

a. Remove swaps denominated in 

GBP, CHF, and JPY that reference 

LIBOR as a floating rate index from each 

of the fixed-to-floating swap, basis 

swap, and FRA classes, as applicable. 

b. Remove swaps denominated in 

EUR that reference EONIA as a floating 

rate index from the OIS class. 

c. Add to the OIS class: 

i. Swaps denominated in USD that 

reference SOFR as a floating rate index 

with a stated termination date range of 

7 days to 50 years, 

ii. Swaps denominated in EUR that 

reference ÖSTR as a floating rate index 

with a stated termination date range of 

7 days to 3 years, 

iii. Swaps denominated in CHF that 

reference SARON as a floating rate 

index with a stated termination date 

range of 7 days to 30 years, 

iv. Swaps denominated in JPY that 

reference TONA as a floating rate index 

with a stated termination date range of 

7 days to 30 years, and 

v. Swaps denominated in SGD that 

reference SORA as a floating rate index 

with a stated termination date range of 

7 days to 10 years. 

d. Change the maximum stated 

termination date range for swaps 

denominated in GBP that reference 


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Federal Register / Vol. 87, No. 104 / Tuesday, May 31, 2022 / Proposed Rules 32905 

SONIA as a floating rate index in the 

OIS class to 50 years, for a new stated 

termination date range of 7 days to 50 

years. 

2. Effective July 1, 2023: 

a. Remove swaps denominated in 

USD that reference LIBOR as a floating 

rate index from each of the fixed-tofloating swap, basis swap, and FRA 

classes. 

b. Remove swaps denominated in 

SGD that reference SOR–VWAP as a 

floating rate index from the fixed-tofloating swap class. 

A comparative overview of the effect 

of these proposed amendments to 

regulation § 50.4(a) is presented 

following this paragraph in tabular form 

for illustrative purposes. Swap classes 

and specifications that would be 

removed if the Commission’s proposal 

is finalized are stricken through. Swap 

classes and specifications that would be 

added if the Commission’s proposal is 

finalized are bolded. The set of tables 

following this paragraph illustrates the 

effect of the amendments as of 30 days 

after publication of a final rule in the 

Federal Register. 

BILLING CODE 6351–01–P 


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Table 1 a Fixed-tofloating 

S pecifi cation swap class 

Australian Canadian Hong Mexican Norwegian 

1. Currency Dollar Dollar Euro Kong Peso Krone 

(AUD) (CAD) (EUR) Dollar (MXN) (NOK) (HKD) 

2. Floating BBSW CDOR EURIBOR HIBOR THE- NIBOR Rate Indexes BANXICO 

3. Stated 28 days to 28 days to 28 days to 28 days 28 days to 28 days to Termination to 10 

Date Range 30 years 30 years 50 years years 

21 years 10 years 

4. Optionality No No No No No No 

5. Dual No No No No No No Currencies 

6. Conditional 

Notional No No No No No No 

Amounts 
32906 Federal Register / Vol. 87, No. 104 / Tuesday, May 31, 2022 / Proposed Rules 


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Table 1 b Fixed-tofloating 

S pecifi cation swap class 

Polish Singapore Swedish ~ gtefliflg U.S. ¥en 1. Currency Zloty Dollar Krona Ff:aoo Dollar 

(PLN) (SGD) (SEK) EGHE9 EGBP) (USD) ~ 

2. Floating WIBOR SOR- STIBOR l:,IBQ&: l:,IBQ&: LIBOR l:,IBQ&: Rate Indexes VWAP 

3. Stated ~g 6i1⁄4j'S ~g 6i1⁄4j'S 28 days ~g 6i1⁄4j'S 

Termination 28 days to 28 days to 28 days to ~ te-W to 50 ~ 

Date Range 10 years 10 years 15 years yeftffi yeftffi years yeftffi 

4. Optionality No No No Ne Ne No Ne 

5. Dual No No No Ne Ne No Ne Currencies 

6. Conditional 

Notional No No No Ne Ne No Ne 

Amounts 
Federal Register / Vol. 87, No. 104 / Tuesday, May 31, 2022 / Proposed Rules 32907 


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Table 2 Basis swap 

S pecifi cation class 

Australian 8terliag U.S. Dollar 1. Currency Euro (EUR) Yea (JPY) Dollar (AUD) (GBP) (USD) 

2. Floating Rate BBSW EURIBOR blBQR LIBOR blBQR Indexes 

3. Stated 28 days to 30 28 days to 50 ~g 6l1⁄4j'S te 28 days to ~g days te Termination Date 

Range years years §Q years 50 years ;3Q years 

4. Optionality No No We No We 

5. Dual Currencies No No We No We 

6. Conditional No No We No We Notional Amounts 
32908 Federal Register / Vol. 87, No. 104 / Tuesday, May 31, 2022 / Proposed Rules 


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Table 3 

Forward 

rate 

S pecifi cation agreement 

class 

Polish Norwegian Swedish Stefl:tag U.S. ¥eft 1. Currency Euro (EUR) Zloty Krone Krona Dollar 

(PLN) (NOK) (SEK) EGBPj (USD) f.JP¥j 

2. Floating EURIBOR WIBOR NIBOR STIBOR blBQR: LIBOR blBQR: Rate Indexes 

3. Stated 3 6l1⁄4j'S 3 days 3 6l1⁄4j'S 

Termination 3 days to 3 3 days to 3 days to 2 3 days to ~ to 3 ~ 

Date Range years 2 years years 3 years yeafS years yeafS 

4. Optionality No No No No Ne No Ne 

5. Dual No No No No Ne No Ne Currencies 

6. Conditional 

Notional No No No No Ne No Ne 

Amounts 
Federal Register / Vol. 87, No. 104 / Tuesday, May 31, 2022 / Proposed Rules 32909 


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Table 4 Overnight 

index swap 

Specification class 

Australian Canadian Euro Singapore Sterling Swiss U.S. U.S. Yen 1. Currency Dollar Dollar (EUR) Dollar (GBP) Franc Dollar Dollar (JPY) (AUD) (CAD) (SGD) (CHF) (USD) (USD) 

2. Floating AONIA- CORRA- €STR SORA 

SONIA SARON FedFunds SOFR TONA Rate Indexes OIS OIS BQNIA 

3. Stated 7 days 

7 days 7 days to 

7 days 

7 days 

7 days to 2 7 days to 7 days to to 50 30 years 7 days to to 30 

Termination to 3 to 50 

Date Range years 2 years 10 years years 3 years years 

years ~ ~eaFS 

years 

4. No No No No No No No No No Optionality 

5. Dual No No No No No No No No No Currencies 

6. 

Conditional No No No No No No No No No Notional 

Amounts 
32910 Federal Register / Vol. 87, No. 104 / Tuesday, May 31, 2022 / Proposed Rules 

The set of tables following this 

paragraph illustrates the effect of further 

regulation § 50.4(a) amendments that, if 

finalized, would be effective as of July 

1, 2023: 


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Table 1 a Fixed-tofloating 

S pecifi cation swap class 

Australian Canadian Hong Mexican Norwegian 

1. Currency Dollar Dollar Euro Kong Peso Krone 

(AUD) (CAD) (EUR) Dollar (MXN) (NOK) (HKD) 

2. Floating BBSW CDOR EURIBOR HIBOR TIIE- NIBOR Rate Indexes BANXICO 

3. Stated 28 days to 28 days to 28 days to 28 days 28 days to 28 days to Termination to 10 

Date Range 30 years 30 years 50 years years 

21 years 10 years 

4. Optionality No No No No No No 

5. Dual No No No No No No Currencies 

6. Conditional 

Notional No No No No No No 

Amounts 
Federal Register / Vol. 87, No. 104 / Tuesday, May 31, 2022 / Proposed Rules 32911 


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Table 1 b Fixed-to-floating 

S pecifi cation swap class 

Polish Zloty 8iaga13ore Dollar Swedish Krona U.8. Dollar 1. Currency (PLN) E8GDj (SEK) (Y8Dj 

2. Floating Rate WIBOR 8QR: ~D,¥AP STIBOR blBQR: Indexes 

3. Stated Termination 28 days to 10 ~g Elaj·s to l Q 28 days to 15 ~g 6l1⁄4j'S to ~Q 

Date Range years ~ years ~ 

4. Optionality No Ne No Ne 

5. Dual Currencies No Ne No Ne 

6. Conditional Notional No Ne No Ne Amounts 
32912 Federal Register / Vol. 87, No. 104 / Tuesday, May 31, 2022 / Proposed Rules 


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Table 2 

Basis swap class 

S pecifi cation 

Australian Dollar :y_g_ :QeUa:F 1. Currency (AUD) Euro (EUR) E:YS:Q~ 

2. Floating Rate Indexes BBSW EURIBOR l:,IBQ~ 

3. Stated Termination Date 28 days to 50 28 days te 50 28 days to 30 years Range years yeafS 

4. Optionality No No Ne 

5. Dual Currencies No No Ne 

6. Conditional Notional No No Ne Amounts 
Federal Register / Vol. 87, No. 104 / Tuesday, May 31, 2022 / Proposed Rules 32913 


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Table 3 Forward rate 

S pecifi cation agreement class 

Polish Norwegian Swedish Y:-& 

1. Currency Euro (EUR) Zloty Krona :QeUaF Krone (NOK) (PLN) (SEK) EYg:g~ 

2. Floating Rate EURIBOR WIBOR NIBOR STIBOR l:,IBQ~ Indexes 

3. Stated 3 days to 3 3 days to 2 3 days to 2 3 days to 3 3 days te 3 Termination Date 

Range years years years years yeafS 

4. Optionality No No No No Ne 

5. Dual Currencies No No No No Ne 

6. Conditional No No No No Ne Notional Amounts 
32914 Federal Register / Vol. 87, No. 104 / Tuesday, May 31, 2022 / Proposed Rules 

65Clearing Requirement Determination Under 

Section 2(h) of the CEA for Interest Rate Swaps, 81 

FR 39506, 39508 (June 16, 2016); Second 

Determination, 81 FR at 71205. 

66Second Determination, 81 FR at 71205; MAS, 

MAS Requires OTC Derivatives to be Centrally 

Cleared to Mitigate Systemic Risk, May 2, 2018, 

available at https://www.mas.gov.sg/news/mediareleases/2018/mas-requires-otc-derivatives-to-becentrally-cleared-to-mitigate-systemic-risk; MAS, 

Response to Feedback Received: Draft Regulations 

for Mandatory Clearing of Derivatives Contracts, 

May 2, 2018, at 4, available at https://

www.mas.gov.sg/-/media/MAS/News-andPublications/Consultation-Papers/2018-May-02- 

Response-to-consultation-on-draft-regs-onmandatory-clearing-of-derivatives/Response-toFeedback-on-Draft-Regulations-for-MandatoryClearing-of-Derivatives-Contracts.pdf. 

BILLING CODE 6351–01–C 

The Commission observes that it is 

the only authority to require CHF LIBOR 

swaps be submitted to clearing. In 2016, 

the CFTC was aware that the Swiss 

Financial Market Supervisory Authority 

(FINMA) was considering adopting a 

clearing requirement for swaps 

referencing CHF LIBOR, and sought 

public comment on the matter prior to 

adopting a final rule that included CHF 

LIBOR swaps.65 After the CFTC’s final 

rule went into effect, FINMA did not 

adopt a clearing requirement for CHF 

LIBOR, and no other jurisdictions 

adopted such a clearing requirement. At 

this time, FINMA has not yet 

implemented mandatory clearing for 

CHF SARON OIS. 

Similarly, while MAS did not require 

clearing of SGD SOR–VWAP swaps with 

a termination date range of 28 days to 

10 years, until October 2018, the 

Commission was aware of this expected 

action, and took it into account when 

adopting a clearing requirement for SGD 

SOR–VWAP swaps in 2016.66 At this 

time, MAS has not yet implemented 

mandatory clearing for SGD SORA OIS. 

The Commission observes that 

clearing rates for CHF SARON OIS and 

SGD SORA OIS are already high. As 

Table 6 below illustrates, the 

Commission estimates that more than 

98% of notional transacted in these 

rates in each of November 2021, 

December 2021, and January 2022, was 


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Table 4 Overnight 

index 

Specification swap 

class 

Australian Canadian Euro Singapore Sterling Swiss U.S. U.S. Yen 1. Currency Dollar Dollar (EUR) Dollar (GBP) Franc Dollar Dollar (JPY) (AUD) (CAD) (SGD) (CHF) (USD) (USD) 

2. Floating AONIA- CORRA- €STR SORA SONIA SARON FedFunds SOFR TONA Rate Indexes OIS OIS 

3. Stated 7 days to 7 days to 7 days 7 days to 7 days 7 days 7 days to 7 days 7 days 

Termination to 3 to 50 to 30 to 50 to 30 

Date Range 2 years 2 years years 

10 years years years 3 years years years 

4. No No No No No No No No No Optionality 

5. Dual No No No No No No No No No Currencies 

6. 

Conditional No No No No No No No No No Notional 

Amounts 
Federal Register / Vol. 87, No. 104 / Tuesday, May 31, 2022 / Proposed Rules 32915 

67The data in Table 6 is based on the 

Commission’s weekly swaps report data. 

68These outstanding notional figures are based on 

data for swaps that have been cleared at CME, LCH, 

or Eurex and reported to the CFTC under part 39 

of the Commission’s regulations. Commission staff 

compiled, processed, and reviewed the data 

presented in this proposal. 

69 Id. 

70While clearing services generally are no longer 

available for EUR LIBOR swaps, swaps referencing 

EUR LIBOR are not subject to required clearing 

under regulation § 50.4(a). 

71Bank of England, ‘‘Derivatives clearing 

obligation—modifications to reflect interest rate 

benchmark reform: Amendments to BTS 2015/ 

2205,’’ Sept. 29, 2021, available at https://

www.bankofengland.co.uk/paper/2021/derivativesclearing-obligation-modifications-to-reflect-interestrate-benchmark-reform. 

72ESMA, Final Report, ‘‘On draft RTS on the 

clearing and derivative trading obligations in view 

of the benchmark transition to risk free rates,’’ Nov. 

18, 2021, at 36–38, 63, available at https://

www.esma.europa.eu/sites/default/files/library/ 

esma70-156-4953_final_report_on_the_co_and_dto_

re_benchmark_transition.pdf. In choosing to 

replace its USD LIBOR swap clearing requirement 

with a USD SOFR OIS clearing requirement, ESMA 

stated, ‘‘ESMA believes it is important to be 

consistent for the [clearing obligation] with the 

communication made by ESMA and other EU 

authorities, as well as the communications made by 

several other authorities in other jurisdictions and 

at the international level who expect entities to stop 

referencing LIBOR (including USD LIBOR) by the 

end of the year. If ESMA and other regulators[

’]

expectations are fulfilled, there should no longer be 

material liquidity in OTC interest rate derivatives 

referencing USD LIBOR from the start of next year. 

Therefore, the liquidity criteria of the [European 

Market Infrastructure Regulation] procedure would 

no longer be met at the end of the year. Following 

from this, ESMA is proposing to remove the USD 

LIBOR classes from the clearing obligation and the 

RTS has been modified accordingly.’’ Id. at 31. 

However, as shown in tables 4 and 5 below, there 

continues to be trading activity in USD LIBOR 

swaps. 

73E.g., TD Bank Letter (suggesting that the 

Commission’s clearing requirement ‘‘may be 

updated to reflect those of UK and EU’’); ISDA 

Letter (‘‘The market needs global conformity with 

respect to mandated clearing as much as 

possible.’’); ACLI Letter (‘‘ESMA has issued its 

Final Report on Draft RTS on the Clearing and 

Derivative Trading Obligations in View of the 

Benchmark Transition to Risk Free Rates, which 

includes a recommendation to remove classes of 

swaps referencing EONIA (EUR) and LIBOR (GBP, 

JPY and USD) from its clearing obligation. We 

encourage the Commission similarly to remove 

classes of swaps referencing IBORs—including 

USD–LIBOR—from the clearing requirement.’’); 

Eurex Letter (‘‘Eurex Clearing notes that it 

previously responded to [ESMA’s] request for 

comment . . . and strongly encourages continued 

cooperation among the Commission, ESMA, and 

other regulators to facilitate international 

cooperation and global convergence in the 

transition to the RFRs to the extent possible. . . . 

Eurex Clearing believes the Commission and ESMA 

should coordinate their decision on a prospective 

removal of the USD LIBOR from the clearing 

obligation and implementation of a clearing 

obligation on SOFR OIS.’’). 

cleared.67 Furthermore, the Commission 

estimates that, as of January 28, 2022, 

there was $1,730 billion in outstanding 

notional in CHF SARON OIS, whereas 

there was $686 billion in outstanding 

notional in CHF LIBOR fixed-to-floating 

swaps.68 Similarly, the Commission 

estimates that, as of January 28, 2022, 

there was $449 billion in outstanding 

notional in SGD SORA OIS, and $307 

billion in outstanding notional in SGD 

SOR–VWAP fixed-to-floating swaps.69

Based on this data, it would appear 

that roughly half of the CHF market 

remains in LIBOR, and that, while SGD 

SOR–VWAP is expected to continue 

until June 30, 2023, the transition to 

SGD SORA is well underway. Data 

presented in tables 4 and 5 below 

further illustrate that the CHF LIBOR 

and SGD SOR–VWAP swap markets 

have rapidly diminished as markets 

shift to swaps referencing RFRs. The 

Commission estimates that, in January 

2022, there were no CHF LIBOR fixedto-floating swap transactions, and 69 

SGD SOR–VWAP fixed-to-floating swap 

transactions (comprising $5 billion 

notional). The Commission also 

estimates that, in January 2022, there 

were 2,283 CHF SARON OIS 

transactions (comprising $130 billion 

notional) and 3,794 SGD SORA OIS 

transactions (comprising $119 billion 

notional). 

Request for Comment 

The Commission requests comment 

on the proposed modifications to 

regulation § 50.4(a), including the 

adoption of clearing requirements for 

CHF SARON OIS and SGD SORA OIS. 

B. Modifications to the Existing Clearing 

Requirements 

1. Swaps No Longer Offered for Clearing 

In addition to adding certain RFR OIS 

to the clearing requirement, this 

proposal would modify the existing 

clearing requirement to reflect the 

cessation or loss of representativeness of 

certain IBOR swaps. Currently, all 

LIBOR settings with the exception of 

overnight, 1-month, 3-month, 6-month, 

and 12-month USD LIBOR, and EUR 

EONIA, have ceased or become 

nonrepresentative. As explained above, 

CME, LCH, and Eurex have converted 

cleared EUR EONIA and non-USD 

LIBOR swaps into RFR OIS, and with 

limited exceptions, swaps referencing 

GBP, CHF, and JPY LIBOR, as well as 

EUR EONIA, are no longer offered for 

clearing.70 As discussed above, 

regulators in the United States and other 

jurisdictions have called on market 

participants to transfer their swap 

positions from IBORs to RFRs, with 

corresponding liquidity shifting, and 

continuing to shift, from swaps 

referencing these IBORs to swaps 

referencing RFRs. Therefore, the 

Commission has preliminarily 

determined to update the clearing 

requirement for interest rate swaps 

where such IBOR swaps are no longer 

offered for clearing and have been 

replaced by RFR OIS. 

2. Swaps Affected by Future IBOR 

Unavailability 

By contrast, remaining USD LIBOR 

settings, as well as SGD SOR–VWAP 

settings, are not expected to cease or 

become nonrepresentative until after 

June 30, 2023. For this reason, the 

Commission proposes not to remove the 

clearing requirement for swaps 

referencing USD LIBOR and SGD SOR– 

VWAP, which relies on USD LIBOR as 

an input, until July 1, 2023. Because 

interest rate swaps referencing USD 

LIBOR and SGD SOR–VWAP are offered 

for clearing currently, and there are still 

outstanding notional exposures and 

trading activity in these swaps, the 

Commission believes that these swaps 

should remain subject to the clearing 

requirement. The remaining USD LIBOR 

settings are expected to cease or become 

nonrepresentative after June 30, 2023, 

and the Commission anticipates that 

there will be no new interest rate swaps 

referencing USD LIBOR on or after July 

1, 2023. The Commission will continue 

to monitor the use of interest rate swaps 

referencing USD LIBOR and SGD SOR– 

VWAP as the IBOR transition process 

moves forward. 

In anticipation of this USD LIBOR end 

date, the Commission anticipates that 

DCOs will continue to conduct 

conversion events to replace all 

outstanding USD LIBOR swaps with 

USD SOFR OIS, and will cease offering 

clearing services for USD LIBOR swaps. 

Until that time, however, the 

Commission proposes to maintain the 

clearing requirement for USD LIBOR 

swaps, and SGD SOR–VWAP swaps, 

until those rates cease publication. 

This decision would be consistent 

with the fact that Bank of England has 

not yet proposed a clearing requirement 

for USD SOFR swaps and has left its 

USD LIBOR swap clearing obligation in 

place.71 By contrast, ESMA adopted 

regulatory technical standards that, 

subject to European Commission 

approval, will remove ESMA’s current 

USD LIBOR clearing requirements and 

add a requirement to clear USD SOFR 

OIS (7 days to 3 years).72 While a 

number of respondents to the RFI 

expressed a desire for the Commission 

to harmonize its clearing requirement 

with clearing obligations in other 

jurisdictions, including the EU,73

several respondents specifically called 

for the Commission to maintain its USD 

LIBOR clearing requirement until such 


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32916 Federal Register / Vol. 87, No. 104 / Tuesday, May 31, 2022 / Proposed Rules 

74E.g., AIMA Letter (‘‘The RFI notes that the U.K. 

Financial Conduct Authority has determined that 

USD LIBOR in the overnight and 12-month tenors 

will cease after June 30, 2023, and that USD LIBOR 

in 1-month, 3-month and 6-month tenors will not 

be representative after that date. Until such time, 

we believe the Commission should maintain its 

clearing requirement for USD LIBOR as it continues 

to monitor the developments associated with 

LIBOR’s cessation.’’) (footnote omitted); Citadel 

Letter (‘‘While we support updating the clearing 

requirement to include certain OTC derivatives 

referencing SOFR, it remains premature to remove 

the clearing requirement for OTC derivatives 

referencing USD LIBOR. This is because material 

volumes continue to be executed in USD LIBOR 

swaps that are currently subject to the clearing 

requirement, particularly in the dealer-to-customer 

segment of the market.’’); MFA Letter (‘‘Since 

trading activity continues to occur in USD LIBOR 

swaps as well, USD LIBOR should not be removed 

from the Swap Clearing Requirement until such 

time as the rate is not available (either because the 

rate is permanently discontinued or is deemed nonrepresentative as of its cessation date).’’). 

75Regulation § 39.5(b) submissions from DCOs 

are available on the Commission’s website, 

www.cftc.gov, under DCO Swaps Submissions. 

76A discussion of the costs and benefits of this 

proposed rulemaking appears below. 

77 7 U.S.C. 2(h)(2)(D)(i). The core principles 

address numerous issues, including financial 

resources, participant and product eligibility, risk 

management, settlement procedures, default 

management, system safeguards, reporting, 

recordkeeping, public information, and legal risk, 

among other subjects. 7 U.S.C. 7a–1(c)(2). The 

Commission implemented the core principles 

through regulations that are applicable to registered 

DCOs. 17 CFR part 39. 

78CMEG Letter (‘‘CME Clearing currently offers 

clearing for swaps referencing SOFR and other 

alternative reference rates that are not currently 

subject to the Clearing Requirement . . . . CME 

Group considers that should such swaps become 

subject to the Clearing Requirement this would not 

have any impact on CME Clearing’s ability to 

comply with the relevant core principles for 

DCOs’’); LSEG Letter (‘‘Provided that each DCO 

remains in control of setting its product eligibility 

criteria, the ability to comply with the core 

principles . . . would not be affected by the 

implementation of a clearing requirement for SOFR 

or any other relevant alternative reference rate’’); 

and Eurex Letter (‘‘Requiring the clearing of swaps 

referencing SOFR or other RFRs that are not 

currently subject to the Clearing Requirement will 

not affect Eurex Clearing’s ability to comply with 

the CEA’s core principles for DCOs.’’). 

79The Commission may exempt a DCO from 

registration if it determines that the DCO is subject 

to comparable, comprehensive supervision by 

appropriate government authorities in its home 

country. The Commission determined that JSCC 

demonstrated compliance with the requirements of 

the CEA for which it must comply in order to be 

eligible for an exemption from registration as a 

DCO. JSCC Order of Exemption from Registration, 

Oct. 26, 2015, at 1, available at http://www.cftc.gov/ 

idc/groups/public/@otherif/documents/ifdocs/ 

jsccdcoexemptorder10-26-15.pdf; JSCC Amended 

Order of Exemption from Registration, May 15, 

2017, at 1, available at https://www.cftc.gov/sites/ 

default/files/idc/groups/public/@otherif/ 

documents/ifdocs/jsccdcoexemptamdorder5-15- 

17.pdf. Likewise, HKEX is an exempt DCO that the 

Commission determined has demonstrated 

compliance with the requirements of the CEA. OTC 

Clearing Hong Kong Limited Order of Exemption 

from Registration, Dec. 21, 2015, at 1, available at 

https://www.cftc.gov/sites/default/files/idc/groups/ 

public/@otherif/documents/ifdocs/otccleard

coexemptorder12-21-15.pdf. See also section V.C. 

for additional information regarding maintaining 

status as an exempt DCO. 

80 JSCC Letter (‘‘Including JPY TONA OIS in the 

CFTC’s Clearing Requirement would not affect the 

ability of DCOs to comply with the CEA or the 

relevant legal and regulatory regime in any other 

jurisdiction.’’). 

time as that rate is unavailable.74

Maintaining the clearing requirement 

for USD LIBOR swaps, and SGD SOR– 

VWAP swaps, until those rates cease 

publication would reflect both 

international coordination and input 

from responses to the RFI. 

Request for Comment 

The Commission requests comment 

regarding implementing changes to the 

existing interest rate swap clearing 

requirement, including when to remove 

the USD LIBOR and SGD SOR–VWAP 

swap clearing requirements. 

V. Proposed Determination Analysis for 

RFR OIS 

The Commission is proposing to 

modify its interest rate swap clearing 

requirement to include OIS referencing 

RFRs by adopting a new clearing 

requirement determination. The 

Commission has completed a review of 

the current RFR OIS offered for clearing 

and is prepared to consider the specific 

statutory factors required to make a new 

clearing requirement determination. 

A. General Description of Information 

Considered 

CME, LCH, and Eurex provided the 

Commission with regulation § 39.5(b) 

submissions relating to RFR OIS.75 In 

addition to the DCOs’ submissions, the 

Commission looks to the ability of each 

DCO to clear RFR OIS, DCO swap data, 

swap data repository (SDR) data, 

publicly available data, the rule 

frameworks and risk management 

policies of each DCO, and information 

provided in response to the RFI. 

This proposed clearing requirement 

determination is distinguishable from 

prior determinations insofar as it 

responds to a public and private sector, 

consensus-driven market event that has 

resulted, or will result, in liquidity 

shifting to new benchmark rates from 

rates that have become, or will soon 

become, unavailable. In that sense, 

central clearing in the RFR OIS markets, 

which rely on benchmark rates that are 

less susceptible to manipulation, may 

offer unique benefits that prior interest 

rate swap market clearing did not.76 As 

a result of this, and in light of the quick 

pace of market adoption along with 

DCOs’ willingness to provide clearing 

for a wide variety of RFR swaps, the 

Commission believes the RFR swap 

markets are prepared for this clearing 

requirement determination proposal. 

B. Consistency With DCO Core 

Principles 

Section 2(h)(2)(D)(i) of the CEA 

requires the Commission to determine 

whether a clearing requirement 

determination would be consistent with 

core principles for DCOs set forth in 

section 5b(c)(2) of the CEA.77 CME, 

LCH, and Eurex are registered DCOs, 

and currently clear the RFR OIS 

identified in Table 2 above. CME, LCH, 

and Eurex are required to comply with 

the DCO core principles (and applicable 

Commission regulations) with respect to 

the RFR OIS being considered by the 

Commission as part of this proposed 

determination, and are subject to the 

Commission’s DCO examination and 

risk surveillance programs. 

The Commission believes that CME, 

LCH, and Eurex will be able to maintain 

compliance with the DCO core 

principles and applicable Commission 

regulations if the Commission adopts a 

clearing requirement determination for 

the RFR OIS. For the reasons discussed 

below, the Commission has 

preliminarily determined that subjecting 

any of the RFR OIS identified in this 

proposal to a clearing requirement is 

unlikely to impair CME’s, LCH’s, or 

Eurex’s ability to comply with the DCO 

core principles, along with applicable 

Commission regulations. Moreover, in 

their responses to the RFI, each DCO 

stated that requiring clearing of USD 

SOFR or other RFR OIS would not 

negatively affect their ability to comply 

with the DCO core principles and 

applicable Commission regulations.78

While exempt DCOs are not subject to 

the DCO core principles per se, the 

Commission determined that each was 

subject to comparable, comprehensive 

supervision and regulation by its home 

country regulator before granting such 

DCOs an exemption from registration, as 

required by the CEA.79 With regard to 

the two exempt DCOs that offer RFR OIS 

for clearing, namely, JSCC and HKEX, 

the Commission believes that both 

DCOs will continue to comply with 

their home country law and regulations 

if the Commission adopts a clearing 

requirement determination for the RFR 

OIS.80

Request for Comment 

The Commission requests comment as 

to whether the proposed determination 

would adversely affect any DCO’s 

ability to comply with the DCO core 

principles. 


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81The Commission is conducting this analysis 

only with respect to the swaps that would be added 

to the clearing requirement under this proposed 

determination. Modifications to the clearing 

requirement, such as removing swaps that are no 

longer offered for clearing from Commission 

regulation § 50.4, are not considered in this 

analysis. 

82 7 U.S.C. 2(h)(2)(D)(ii). 

83The data presented in these tables is the same 

as the data used to create the Commission’s weekly 

swaps report. This data represents only those swaps 

that are reported to the CFTC’s registered SDRs by 

swap market participants. The Commission’s 

weekly swaps report currently incorporates data 

from three SDRs (CME Group SDR, DTCC Data 

Repository, and ICE Trade Vault). The raw SDR data 

has been filtered to represent, as accurately as 

possible, the market-facing trades that occur and 

excludes certain inter-affiliate transactions. For 

more information about the data components in the 

weekly swaps report, please visit the CFTC’s web 

page available at: https://www.cftc.gov/ 

MarketReports/SwapsReports/index.htm. 

84Table 4 shows notional volume in USD LIBOR 

more than doubling from December 2021 to January 

2022, but Table 5 below shows only a slight 

increase in trade count, suggesting the average trade 

size doubled in USD LIBOR but actually fell slightly 

in USD SOFR. 

85The data in Table 4 is based on the 

Commission’s weekly swaps report data. In this 

table, a notional figure of $0 billion indicates that 

the notional transacted during a given time period 

was less than $1 billion. 

C. Consideration of the Five Statutory 

Factors 

Set forth below is the Commission’s 

consideration of the five factors set forth 

in section 2(h)(2)(D)(ii) of the CEA as 

they relate to OIS (i) denominated in 

USD and referencing SOFR; (ii) 

denominated in GBP and referencing 

SONIA; (iii) denominated in CHF and 

referencing SARON; (iv) denominated 

in JPY and referencing TONA; (v) 

denominated in EUR and referencing 

ÖSTR; and (vi) denominated in SGD and 

referencing SORA.81

1. Factor (I)—Outstanding Notional 

Exposures and Trading Liquidity 

Liquidity has shifted, and continues 

to shift, from swaps referencing IBORs 

to swaps referencing RFRs. The first of 

the five factors under section 

2(h)(2)(D)(ii) of the CEA requires the 

Commission to consider ‘‘the existence 

of significant outstanding notional 

exposures, trading liquidity, and 

adequate pricing data’’ related to ‘‘a 

submission made [by a DCO].’’ 82 The 

Commission reviewed data from 

multiple sources, including but not 

limited to data from SDRs, data from 

DCOs, and other, publicly available data 

(e.g., data published by ISDA). For 

purposes of this proposed rulemaking, 

the Commission principally presents 

notional and liquidity information 

based on the Commission’s own 

collected data. 

a. Outstanding Notional Exposures and 

Trading Liquidity 

In assessing outstanding notional 

exposures and trading liquidity for a 

swap, the Commission reviews data to 

determine whether there is an active 

market for the swap, including whether 

there is a measurable amount of 

notional exposure and whether the 

swap is traded regularly as reflected by 

trade count, such that a DCO can 

adequately risk manage the swap. The 

data indicates that there is sufficient 

outstanding notional exposure and 

trading liquidity in RFR OIS to support 

a clearing requirement determination. 

Specifically, the data presented below 

generally demonstrates that there is 

significant activity in new USD SOFR, 

GBP SONIA, EUR ÖSTR, CHF SARON, 

JPY TONA, and SGD SORA OIS trading. 

The Commission compiled the data 

used in tables 4–7 below from 

transaction data collected under part 45 

of the Commission’s regulations.83

In Table 4 below, the Commission 

provides estimates of notional 

transacted by month for various 

categories of RFR OIS, and IBOR fixedto-floating and basis swaps, for the 

period beginning November 1, 2021 and 

ending January 31, 2022. The data in 

Table 4 generally indicates significant, 

and relatively steady or increasing, 

amounts of notional transacted in RFR 

OIS from November 2021 through 

January 2022. The data also illustrates 

that there was comparatively little 

notional transacted during the same 

time period in fixed-to-floating swaps 

referencing IBORs that ceased or became 

nonrepresentative in December 2021 

and January 2022. 

The Commission notes, however, that 

significant amounts of notional were 

transacted in USD LIBOR fixed-tofloating swaps, and that while notional 

traded per month in USD SOFR OIS 

nearly doubled between December 2021 

and January 2022, the amount of such 

notional transacted in January 2022 was 

still less than half that of the amount of 

notional transacted during the same 

month in USD LIBOR fixed-to-floating 

swaps.84 Thus, it appears that while the 

transition of liquidity from USD LIBOR 

fixed-to-floating swaps to USD SOFR 

OIS is well underway, it is not yet 

complete. 

TABLE 4—ESTIMATED NOTIONAL TRANSACTED

[USD billions] 85

Product November 2021 December 2021 January 2022 

USD SOFR OIS ............................................................................................................... $2,384 $2,011 $3,918 

USD LIBOR Fixed-to-Floating Swaps ............................................................................. 6,674 4,409 9,598

USD LIBOR–LIBOR Basis Swaps ................................................................................... 1,049 602 292 

EUR ÖSTR OIS ............................................................................................................... 3,394 2,022 3,488 

EUR EONIA OIS .............................................................................................................. 2 8 0 

CHF SARON OIS ............................................................................................................ 208 108 130 

CHF LIBOR Fixed-to-Floating Swaps ............................................................................. 62 0 0 

GBP SONIA OIS .............................................................................................................. 5,852 3,151 4,149 

GBP LIBOR Fixed-to-Floating Swaps ............................................................................. 340 205 2 

JPY TONA OIS ................................................................................................................ 425 360 377 

JPY LIBOR Fixed-to-Floating Swaps .............................................................................. 45 15 0 

SGD SORA OIS .............................................................................................................. 74 41 119 

SGD SOR Fixed-to-Floating Swaps ................................................................................ 8 3 5 

Table 5 that follows this paragraph 

provides estimates of trade counts for 

the same categories of RFR and IBOR 

swaps during the same three-month 

period. The data in Table 5 indicates 

that, with regard to RFR OIS, monthly 

trade count generally increased or was 

relatively steady between November 

2021 and January 2022, with an 

especially pronounced increase in the 

number of USD SOFR OIS transactions. 

Conversely, trade counts for swaps 

referencing IBORs that ceased or became 

nonrepresentative in December 2021 

and January 2022 dropped off 


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86The data in Table 5 is based on the 

Commission’s weekly swaps report data. 

87The data in Table 6 is based on the 

Commission’s weekly swaps report data. 

precipitously by January 2022. While 

there were still a significant number of 

USD LIBOR fixed-to-floating swap 

transactions during the three-month 

period that Table 5 measures, the 

monthly trade count for such 

transactions declined significantly 

during that period. 

TABLE 5—ESTIMATED TRADE COUNT 86

Product November 2021 December 2021 January 2022 

USD SOFR OIS ............................................................................................................... 18,484 19,110 41,728 

USD LIBOR Fixed-to-Floating Swaps ............................................................................. 48,245 29,309 30,749 

USD LIBOR–LIBOR Basis Swaps ................................................................................... 1,025 831 329 

EUR ÖSTR OIS ............................................................................................................... 8,415 5,420 8,962 

EUR EONIA OIS .............................................................................................................. 7 1 0 

CHF SARON OIS ............................................................................................................ 2,698 1,574 2,283 

CHF LIBOR Fixed-to-Floating Swaps ............................................................................. 390 19 0 

GBP SONIA OIS .............................................................................................................. 24,275 12,913 17,654 

GBP LIBOR Fixed-to-Floating Swaps ............................................................................. 2,061 1,286 12 

JPY TONA OIS ................................................................................................................ 5,311 4,639 5,141 

JPY LIBOR Fixed-to-Floating Swaps .............................................................................. 577 69 9 

SGD SORA OIS .............................................................................................................. 2,422 1,846 3,794 

SGD SOR Fixed-to-Floating Swaps ................................................................................ 197 94 69 

Table 6 that follows this paragraph 

presents estimates of the percentage of 

notional cleared for the RFR OIS subject 

to this proposed determination, based 

on notional transacted by month during 

the period beginning November 1, 2021 

and ending January 31, 2022. The data 

in Table 6 illustrates that, with respect 

to the RFR OIS, significant amounts of 

notional are already being cleared 

voluntarily. The proportion of notional 

transacted each month from November 

2021 through January 2022 that was 

cleared was consistently high— 

approaching 100%—with regard to OIS 

referencing each of USD SOFR, GBP 

SONIA, EUR ÖSTR, CHF SARON, JPY 

TONA, and SGD SORA. 

TABLE 6—ESTIMATED PERCENTAGE OF NOTIONAL CLEARED (BASED ON NOTIONAL TRANSACTED BY MONTH) 87

OIS 

Percentage 

notional cleared— 

November 2021 

Percentage 

notional cleared— 

December 2021 

Percentage 

notional cleared— 

January 2022 

USD SOFR .............................................................................................. 96.3 94.9 95.1 

GBP SONIA ............................................................................................. 98.8 98.7 97.8 

EUR ÖSTR ............................................................................................... 99.0 99.2 97.6 

CHF SARON ............................................................................................ 99.6 98.1 99.2 

JPY TONA ............................................................................................... 96.6 98.7 98.0 

SGD SORA .............................................................................................. 98.2 98.6 98.7 

Table 7 that follows this paragraph 

presents a breakdown of notional 

transacted and trade count for the 

period beginning January 1, 2022 and 

ending January 31, 2022, by tenor, for 

the relevant RFR OIS. Table 7 illustrates 

that RFR OIS are being cleared across a 

wide range of maturities. By notional 

and trade count, most clearing activity 

occurs in RFR OIS dated between 6 

months and 15 years. However, the 

Commission notes that with respect to 

USD SOFR and GBP SONIA OIS in 

particular, there is also significant 

clearing activity in swaps dated 15 years 

or greater. 

TABLE 7—ESTIMATED CLEARED NOTIONAL AND TRADE COUNT BY TENOR

[January 2022 transaction data] 88

OIS Tenor Notional cleared 

(USD billions) Trade count 

USD SOFR ....................................................... 7 days–3 months .............................................. $199 213 

3–6 months ....................................................... 210 296 

6 months–1 year .............................................. 191 498 

1–5 years .......................................................... 1,328 8,841 

5–15 years ........................................................ 1,559 22,230 

>15 years .......................................................... 234 7,589 

GBP SONIA ...................................................... 7 days–3 months .............................................. 778 434 

3–6 months ....................................................... 1,136 470 

6 months–1 year .............................................. 673 357 

1–5 years .......................................................... 846 5,016 

5–15 years ........................................................ 503 7,570 

>15 years .......................................................... 124 3,351 

EUR ÖSTR ........................................................ 7 days–3 months .............................................. 336 210


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88The data in Table 7 is based on the 

Commission’s weekly swaps report data. Tenor 

length is approximate. In Table 7, a notional figure 

of $0 billion USD indicates that the notional 

transacted during a given time period was less than 

$1 billion. 

89The data in Table 8 represents swaps that have 

been cleared at CME, LCH, or Eurex and reported 

to the CFTC under part 39 of the Commission’s 

regulations. 

TABLE 7—ESTIMATED CLEARED NOTIONAL AND TRADE COUNT BY TENOR—Continued 

[January 2022 transaction data] 88

OIS Tenor Notional cleared 

(USD billions) Trade count 

3–6 months ....................................................... 302 226 

6 months–1 year .............................................. 1,295 642 

1–5 years .......................................................... 1,110 3,365 

5–15 years ........................................................ 329 3,487 

>15 years .......................................................... 32 865 

CHF SARON ..................................................... 7 days–3 months .............................................. 7 11

3–6 months ....................................................... 16 26 

6 months–1 year .............................................. 6 12 

1–5 years .......................................................... 56 625 

5–15 years ........................................................ 42 1,447 

>15 year ........................................................... 2 135 

JPY TONA ........................................................ 7 days–3 months .............................................. 12 10 

3–6 months ....................................................... 20 20 

6 months–1 year .............................................. 15 30 

1–5 years .......................................................... 122 718 

5–15 years ........................................................ 164 2,801 

>15 years .......................................................... 36 1,455 

SGD SORA ....................................................... 7 days–3 months .............................................. 2 10 

3–6 months ....................................................... 2 12 

6 months–1 year .............................................. 16 122 

1–5 years .......................................................... 69 1,480 

5–15 years ........................................................ 29 2,114 

>15 years .......................................................... 0 8 

In addition to this transaction-level 

data, Table 8 that follows this paragraph 

presents open swaps data illustrating 

outstanding notional in the RFR OIS 

subject to this proposed determination. 

TABLE 8—OUTSTANDING NOTIONAL AS OF JANUARY 28, 2022 89

OIS Outstanding notional 

(USD billions) 

USD SOFR .............................................................................................................................................................................. $8,558 

GBP SONIA ............................................................................................................................................................................. 23,363 

EUR ÖSTR ............................................................................................................................................................................... 10,496 

CHF SARON ............................................................................................................................................................................ 1,730 

JPY TONA ............................................................................................................................................................................... 4,256 

SGD SORA .............................................................................................................................................................................. 449 

Finally, to demonstrate that clearing 

has expanded beyond the short-dated 

maturities for USD SOFR fixed-tofloating swaps, in particular, the data in 

Table 9 that follows this paragraph 

reflects the total volumes of cleared 

outstanding notional swaps by tenor. 

The Commission has preliminarily 

determined that the data collectively 

indicates sufficient outstanding notional 

exposures and regular trading activity in 

RFR OIS for purposes of demonstrating 

the liquidity necessary for DCOs to risk 

manage these products and to support a 

proposed clearing requirement. The 

Commission anticipates that RFR OIS 

notional exposures and trading activity 

will increase over time as markets 

continue to adopt RFR OIS in place of 

swaps referencing IBORs that have, or 

will by mid-2023, become unavailable. 

In addition to the extensive data 

presented and analyzed in this proposal, 

and as discussed in detail below, the 

Commission is basing this preliminary 

determination on its ongoing 

supervision of DCOs and its monitoring 

of the cleared interest rate swap market 

for purposes of risk surveillance. 

TABLE 9—OUTSTANDING NOTIONAL AS OF JANUARY 25, 2022 90

OIS Tenor Notional cleared 

(USD billions) 

USD LIBOR Fixed-to-Floating Swaps .................................................................. 0–1 months ........................................... $118 

>1 month to 3 months .......................... 299 

>3 months to 1 year ............................. 876 

>1–3 years ............................................ 1,933 


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90The data in Table 9 represents swaps that have 

been cleared at CME, LCH, or Eurex and reported 

to the CFTC under part 39 of the Commission’s 

regulations. 

91As discussed further below, Commission staff 

receives and reviews margin model information 

from the registered DCOs that clear these swaps, 

including information regarding how those DCOs 

would ensure that liquidity exists in order to exit 

a position in a stressed market. For purposes of the 

first statutory factor, the Commission considers 

possible periods of market stress, particularly when 

assessing whether there is sufficient liquidity and 

pricing data. Second Determination, 81 FR at 71210 

(noting that the Commission considered ‘‘the effect 

a new clearing mandate will have on a DCO’s 

ability to withstand stressed market conditions’’ as 

part of its analysis in connection with the Second 

Determination). 

92CMEG Letter (‘‘CME Clearing has accepted 

SOFR swaps for clearing since October 2018. 

Throughout this time there has been, and continues 

to be, adequate pricing data for DCO risk and 

default management of swaps referencing SOFR 

given the depth and liquidity of SOFR markets.’’); 

LSEG Letter (‘‘SOFR liquidity and related pricing 

data has developed to an adequate extent and 

continues to further increase. We also note that the 

number of underlying transactions supporting the 

production of the SOFR rate itself is very high, 

supporting the rate’s robustness. Such robustness, 

transparency and confidence in the SOFR rate is 

reflected in the swap market, both in terms of 

trading and clearing volumes, including in relation 

to the availability of pricing data. This ultimately 

means that in the case of a default, there would be 

adequate swap pricing data for LCH to manage such 

default.’’); Eurex Letter (‘‘Eurex Clearing believes 

there is adequate pricing data for DCO risk and 

default management of swaps referencing SOFR.’’). 

JSCC did not have any specific responses related to 

this question, as JSCC ‘‘[does] not have a plan to 

clear swaps referencing SOFR.’’ JSCC Letter. 

93LSEG noted significant increases in USD SOFR 

volumes after SOFR First, and Eurex noted that 

liquidity in USD SOFR swaps increased 

considerably after March 5, 2021. LSEG and Eurex 

Letters. TD Bank agreed that market participants 

have observed sufficient outstanding notional 

exposures and trading liquidity in swaps 

referencing USD SOFR during both stressed and 

non-stressed market conditions to support a 

clearing requirement. TD Bank Letter. 

TABLE 9—OUTSTANDING NOTIONAL AS OF JANUARY 25, 2022 90—Continued 

OIS Tenor Notional cleared 

(USD billions) 

>3–5 years ............................................ 848 

>5–7 years ............................................ 509 

>7–10 years .......................................... 426 

>10–15 years ........................................ 249 

>15–25 years ........................................ 291 

>25–35 years ........................................ 137 

>35 years .............................................. 13 

USD SOFR Fixed-to-Floating Swaps ................................................................... 0–1 months ........................................... 30 

>1 month to 3 months .......................... 220 

>3 months to 1 year ............................. 741 

>1–3 years ............................................ 985 

>3–5 years ............................................ 269 

>5–7 years ............................................ 110 

>7–10 years .......................................... 125 

>10–15 years ........................................ 54 

>15–25 years ........................................ 59 

>25–35 years ........................................ 41 

>35 years .............................................. 4 

Request for Comment 

The Commission requests comment 

and any relevant market analysis 

regarding the sufficiency of outstanding 

notional exposures and trading liquidity 

in USD SOFR, GBP SONIA, EUR ÖSTR, 

CHF SARON, JPY TONA, and SGD 

SORA OIS, including for the proposed 

termination date ranges, to support a 

clearing requirement. 

The Commission invites commenters 

to submit additional data from any 

available data sources. 

b. Pricing Data 

The Commission regularly reviews 

pricing data for the RFR OIS subject to 

this proposed determination and has 

found that these OIS are capable of 

being priced off of deep and liquid 

markets. Commission staff regularly 

receives and reviews margin model 

information from DCOs that includes 

particular procedures that they follow to 

ensure that market liquidity exists in 

order to close out a position in a 

stressed market, including the time 

required to determine a price.91 Because 

of the stability of access to pricing data 

from these markets, the pricing data for 

the OIS that are the subject of this 

proposed determination is generally 

viewed as being reliable. Based on this 

information, the Commission has 

preliminarily determined that there is 

adequate pricing data to support 

required clearing of RFR OIS. 

In addition, as part of their regulation 

§ 39.5(b) submissions, the registered 

DCOs that clear the RFR OIS subject to 

this proposed determination provided 

information to support the 

Commission’s conclusion that there 

exists adequate pricing data to justify a 

clearing requirement determination. In 

its regulation § 39.5(b) submissions, 

CME provided data regarding 

transaction volumes and market 

participation, and LCH provided 

information on daily volumes, and 

noted that pricing data for each of the 

RFR OIS that it clears is available from 

brokers. LCH also noted the range of 

maturities for which quotes can be 

obtained from brokers. In its 

submissions to the Commission, Eurex 

provided relevant language from its 

FCM Regulations and Clearing 

Conditions regarding determination of 

daily pricing. Eurex stated that it 

believes its reliance on Reuters for 

pricing data is accurate because it is a 

readily available and conventional 

source. Eurex noted that it also can 

receive pricing data from Bloomberg 

and has multiple backup sources. 

In the RFI, the Commission 

specifically requested feedback on 

whether adequate pricing data exists for 

DCO risk and default management of 

swaps referencing USD SOFR. CME, 

LCH, and Eurex each stated that 

adequate pricing data exists for DCO 

risk and default management of USD 

SOFR swaps.92 Respondents to the RFI 

also provided support for the 

conclusion that sufficient liquidity and 

pricing data exists in RFR OIS markets 

to withstand stressed market 

conditions.93

Request for Comment 

The Commission requests comment 

and any relevant market analysis 

regarding whether there is adequate 

pricing data for DCO risk and default 

management of the products subject to 

this proposal, including with regard to 

the proposed stated termination date 

ranges. 


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94 In order to be registered with the Commission, 

a DCO must comply with the DCO core principles 

under section 5b of the CEA and applicable 

Commission regulations. Once a DCO is registered 

with the Commission, Commission staff 

periodically examine each DCO to determine 

whether the DCO is maintaining compliance with 

the CEA and Commission regulations. In addition, 

Commission staff monitors the risks posed to and 

by DCOs, clearing members, and market 

participants, and conducts independent stress 

testing. 

95E.g., historical volatility, intraday volatility, 

seasonal volatility, liquidity, open interest, market 

concentration, and potential moves to default. For 

additional information, each of CME, LCH, and 

Eurex has published a document outlining its 

compliance with the Principles for Financial 

Market Infrastructures (PFMI) published by the 

Committee on Payments and Market Infrastructures 

(CPMI; formerly, CPSS) and IOSCO. CPSS–IOSCO 

Principles for Financial Market Infrastructure 

(PFMI), Apr. 16, 2012, available at https://

www.bis.org/cpmi/publ/d101.htm. See CMEG, CME 

Clearing: PFMI Disclosure, Nov. 30, 2021, available 

at https://www.cmegroup.com/clearing/riskmanagement/files/cme-clearing-principles-forfinancial-market-infrastructures-disclosure.pdf; 

LCH PFMI Self-Assessment 2020, available at 

https://www.lch.com/system/files/media_root/ 

CPMI%20IOSCO%20Self%20Qualitative%20

Assessment%20of%20LCH%20LTD_1.pdf; and 

Eurex Clearing AG, Assessment of Eurex Clearing 

AG’s compliance against the PFMI and disclosure 

framework associated to the PFMI, Feb. 16, 2021, 

available at https://www.eurex.com/resource/blob/ 

2446522/22f4869a8649f15b54a1e86bf635c63c/ 

data/cpss-iosco-pfmi_assessment_2020_en.pdf. 

96Reverse stress testing uses plausible market 

movements that could deplete guaranty funds and 

cause large losses for top clearing members. For 

example, CME, LCH, and Eurex may use scenarios 

for stress testing and reverse stress testing that 

capture, among other things, historical price 

volatilities, shifts in price determinants and yield 

curves, multiple defaults over various time 

horizons, and simultaneous pressures in funding 

and asset markets. 

97Back testing tests margin models to determine 

whether they are performing as intended, and 

checks whether margin models produce margin 

coverage levels that meet the DCO’s established 

standards. Back testing helps CME, LCH, and Eurex 

determine whether their clearing members satisfy 

the required margin coverage levels and liquidation 

timeframe. 

98Exempt DCOs, such as JSCC and HKEX, are 

subject to oversight by their home country 

regulators, along with regulations regarding risk 

management. For instance, JSCC is subject to the 

supervision of JFSA. JSCC, Principles for Financial 

Market Infrastructures Disclosure, Mar. 31, 2021, at 

19, available at https://www.jpx.co.jp/jscc/en/ 

company/cimhll0000000osu-att/JSCC_PFMI_

Disclosure_20210331_EN.pdf. In granting JSCC’s 

order of exemption, the Commission determined 

that JSCC is subject to comparable, comprehensive 

supervision and regulation by its home country 

regulator. See JSCC Order of Exemption from 

Registration, Oct. 26, 2015, at 1, available at http:// 

www.cftc.gov/idc/groups/public/@otherif/ 

documents/ifdocs/jsccdcoexemptorder10-26-15.pdf; 

JSCC Amended Order of Exemption from 

Registration, May 15, 2017, at 1, available at https:// 

www.cftc.gov/sites/default/files/idc/groups/public/ 

@otherif/documents/ifdocs/jsccdcoexempt

amdorder5-15-17.pdf. Among other requirements, 

JSCC must provide the Commission with an annual 

certification that it continues to observe the PFMI 

in all material respects, and the Commission must 

receive annually, at JSCC’s request, a certification 

from JFSA that JSCC is in good regulatory standing. 

Likewise, HKEX is overseen by HKMA, which 

provides ongoing supervision, and must meet the 

same requirements for registration as an exempt 

DCO as JSCC. See HKFE Clearing Corporation 

Limited, Principles for Financial Market 

Infrastructures Disclosure, Feb. 2021, available at 

https://www.hkex.com.hk/-/media/HKEX-Market/ 

Services/Clearing/Listed-Derivatives/PFMI/HKCC_

PFMI_Disclosure_Feb2021.pdf?la=en. 

The Commission also requests 

comment regarding whether DCOs 

offering clearing for RFR OIS markets 

would be able to risk manage these 

products during stressed market 

conditions. 

2. Factor (II)—Availability of Rule 

Framework, Capacity, Operational 

Expertise and Resources, and Credit 

Support Infrastructure 

Section 2(h)(2)(D)(ii)(II) of the CEA 

requires the Commission to take into 

account the availability of rule 

framework, capacity, operational 

expertise and resources, and credit 

support infrastructure to clear the 

proposed classes of swaps on terms that 

are consistent with the material terms 

and trading conventions on which they 

are now traded. Based on their 

regulation § 39.5(b) submissions, as well 

as ongoing oversight, the Commission 

believes that each of the registered 

DCOs has developed rule frameworks, 

capacity, operational expertise and 

resources, and credit support 

infrastructure to clear the interest rate 

swaps they currently clear, including 

the RFR OIS subject to this proposal, on 

terms that are consistent with the 

material terms and trading conventions 

on which those swaps are being traded. 

The Commission subjects each of the 

registered DCOs to ongoing review, risk 

surveillance, and examination to ensure 

compliance with the CEA’s core 

principles and Commission regulations, 

including with respect to the submitted 

swaps.94

Each of the registered DCOs has 

procedures pursuant to which they 

regularly review their clearing of the 

RFR OIS subject to this proposal in 

order to confirm or adjust margin and 

other risk management tools. When 

reviewing each of the registered DCOs’ 

risk management tools, the Commission 

considers whether the DCO is able to 

manage risk during stressed market 

conditions to be one of the most 

significant considerations. Each of the 

registered DCOs has developed detailed 

risk management practices, including a 

description of risk factors considered 

when establishing margin levels.95 The 

Commission reviews and oversees each 

of the registered DCOs’ risk management 

practices and development of margin 

models. Margin models are further 

refined by stress testing and daily back 

testing. The Commission also considers 

stress testing and back testing when 

assessing whether each of the registered 

DCOs can clear swaps safely during 

stressed market conditions. 

The registered DCOs clearing the RFR 

OIS subject to this proposed 

determination design and conduct stress 

tests, and Commission staff monitors 

development of these stress tests. Each 

of the registered DCOs also conducts 

reverse stress tests to ensure that their 

default funds are sized appropriately 

and to ascertain whether any changes to 

their financial resources or margin 

models are necessary.96 Commission 

staff monitors markets in real-time and 

also performs stress tests against the 

DCOs’ margin models and may 

recommend changes to a margin model. 

The registered DCOs conduct back 

testing on a daily basis to ensure that 

the margin models capture market 

movements for member portfolios.97

Before offering a new product for 

clearing, each of the DCOs considers 

stress tests and back testing results in 

determining whether it has sufficient 

financial resources to offer new clearing 

services. The Commission also reviews 

initial margin models and default 

resources to ensure that the DCOs can 

risk manage their portfolio of products 

offered for clearing. This combination of 

stress testing and back testing in 

anticipation of offering new products for 

clearing provides the registered DCOs 

with greater certainty that new product 

offerings will be risk-managed 

appropriately. The process of stress 

testing and back testing also gives the 

DCOs practice incorporating the new 

product into their models. In addition to 

the Commission’s surveillance and 

oversight, each of the registered DCOs 

continues to monitor and test their 

margin models over time so that they 

can operate effectively in stressed and 

non-stressed market environments. 

Registered DCOs review and validate 

their margin models regularly.98

Each registered DCO monitors and 

manages credit risk exposure by asset 

class, clearing member, account, or 

individual customer. They manage 

credit risk by establishing position and 

concentration limits based on product 

type or counterparty. These limits 

reduce potential market risks so that 

DCOs are better able to withstand 

stressed market conditions. Each of the 

registered DCOs monitors exposure 

concentrations and may require 

additional margin deposits for clearing 

members with weak credit scores, with 

large or concentrated positions, with 

positions that are illiquid or exhibit 

correlation with the member itself, and/ 

or where the member has particularly 


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99As a general matter, any DCO offering RFR OIS 

for clearing, including exempt DCOs, would follow 

this risk management approach with regard to 

offering these products for clearing. 

100CME, CME Clearing: Principles for Financial 

Market Infrastructures Disclosure, Nov. 30, 2021, 

available at https://www.cmegroup.com/clearing/ 

risk-management/files/cme-clearing-principles-forfinancial-market-infrastructures-disclosure.pdf; 

LCH Ltd., CPMI—IOSCO Self-Assessment 2020, 

Mar. 31, 2020, available at https://www.lch.com/ 

system/files/media_root/CPMI%20IOSCO%20

Self%20Qualitative%20Assessment%20of%20

LCH%20LTD_1.pdf; Eurex, ‘‘Assessment of Eurex 

Clearing AG’s compliance against the CPMI–IOSCO 

Principles for financial market infrastructures 

(PFMI) and the disclosure framework associated to 

the PFMIs,’’ Feb. 28, 2022, available at https://

www.eurex.com/resource/blob/2973806/422b675a

412d96e3c8cf97a570b899a2/data/cpss-iosco-pfmi_

assessment_2021_en.pdf. As explained above, 

similar disclosures are available for JSCC and 

HKEX. 

101 JSCC Letter. 102CMEG Letter. 

103LSEG Letter. 

104Citadel Letter. 

105TD Bank Letter. See also Tradeweb Letter 

(‘‘The swap clearing and execution requirements 

under Title VII of the Dodd-Frank Wall Street 

Reform and Consumer Protection Act have 

increased investor protections, improved market 

liquidity, and reduced systemic risk, especially in 

the dealer-to-customer market. It will be critical for 

the CFTC to maintain these market improvements 

as new swap transactions increasingly utilize 

alternative risk-free reference rates . . . .’’). 

106For further discussion of treatment of 

customer and swap counterparty positions, funds, 

and property in the event of the insolvency of a 

DCO or one or more of its clearing members, please 

see Factor (V)—Legal certainty in the event of 

insolvency, section V.C below. 

large exposures under stress scenarios. 

Registered DCOs also can call for 

additional margin, on top of collecting 

initial and variation margin, to meet the 

current DCO exposure and protect 

against stressed market conditions.99

In support of its ability to clear the 

RFR OIS subject to this proposal, CME’s 

regulation § 39.5(b) submissions cite to 

its rulebook to demonstrate the 

availability of rule framework, capacity, 

operational expertise and resources, and 

credit support infrastructure to clear 

interest rate swap contracts on terms 

that are consistent with the material 

terms and trading conventions on which 

the contracts are traded. LCH’s 

submissions state that it has a welldeveloped rule framework and support 

infrastructure for clearing interest rate 

swaps, which it leverages to offer 

clearing services for the RFR OIS subject 

to this proposal. Eurex’s submissions 

state that Eurex has a well-developed 

rule framework and support 

infrastructure for clearing the RFR OIS 

that are subject to this proposal. Eurex 

further states that it has the appropriate 

risk management, operations, and 

technology capabilities to ensure that it 

is able to liquidate positions in such 

swaps in an orderly manner in the event 

of a clearing member default, and that 

the RFR OIS are subject to margin and 

clearing fund requirements set forth in 

Eurex’s FCM Regulations and Clearing 

Conditions. 

For all of these reasons, the 

Commission has preliminarily 

determined that the application of DCO 

risk management practices to the RFR 

OIS subject to this proposed clearing 

requirement determination should 

ensure that the swaps subject to this 

proposal can be cleared safely, even 

during times of market stress. For 

additional information related to this 

factor, please see public disclosures 

made CME, LCH, and Eurex.100

Request for Comment 

The Commission requests comments 

concerning all aspects of this factor, 

including whether commenters agree 

that DCOs offering to clear the RFR OIS 

subject to this proposed clearing 

requirement determination can satisfy 

the factor’s requirements. 

3. Factor (III)—Effect on the Mitigation 

of Systemic Risk 

Section 2(h)(2)(D)(ii)(III) of the CEA 

requires the Commission to consider the 

effect of the clearing requirement on the 

mitigation of systemic risk, taking into 

account the size of the market for such 

contract and the resources of the DCO 

available to clear the contract. As 

presented in the data and discussion 

above, the Commission believes that the 

market for each RFR OIS subject to this 

proposed determination is significant 

and mitigating counterparty credit risk 

through clearing likely would reduce 

systemic risk in the interest rate swap 

market generally. While not every 

individual RFR OIS market has large 

outstanding notional exposures, each 

such market is important, and as 

liquidity shifts from IBOR swaps to RFR 

OIS, continuity of clearing for RFR OIS 

serves to reduce systemic risk. 

In its regulation § 39.5(b) submissions, 

CME explains the benefits of centralized 

clearing, including freer counterparty 

credit lines, enhanced risk management, 

operational efficiencies, and ease of 

offsetting risk exposures. LCH’s 

submissions note that clearing avoids 

complex bilateral relationships, 

provides for default management, and 

enhances transparency into the risks 

posed by swap positions. Eurex’s 

submissions highlight the benefits of 

reduction of counterparty risk, margin 

and collateral efficiencies, protections 

for customer assets, and legal certainty. 

Each DCO’s submissions indicate that 

they maintain adequate resources to 

clear the swaps that are the subject of 

this proposal. Additionally, in 

responding to the RFI, JSCC noted that 

it has been clearing JPY TONA OIS 

since 2014 ‘‘without facing any 

challenge from a governance, rule 

framework, operational, resourcing, or 

credit support infrastructure 

perspective.’’ 101

In responding to the RFI, CME noted 

that mitigation of systemic risk is one of 

the key advantages of centralized 

clearing over bilateral arrangements.102

LSEG stated that ‘‘a clearing 

requirement will mitigate systemic risk, 

making sure that USD SOFR risk moves 

from the bilateral space to the cleared 

market to the necessary extent.’’ 103

Additionally, Citadel noted that 

‘‘[a]pplying a clearing requirement to 

OTC derivatives referencing SOFR will 

ensure these markets develop as 

centrally-cleared markets,’’ and further 

noted that ‘‘central clearing provides 

greater systemic risk mitigation than 

bilateral margining for uncleared 

swaps.’’ 104 TD Bank agreed that a 

clearing requirement for USD SOFR 

swaps ‘‘might increase the clearing rate 

and therefore mitigate[] systemic risk 

even more,’’ but TD Bank also noted 

that the ‘‘bulk’’ of USD SOFR swaps are 

already voluntarily cleared.105

Centrally clearing the RFR OIS subject 

to this proposal through a registered or 

exempt DCO should reduce systemic 

risk by providing counterparties with 

daily mark-to-market valuations upon 

which to exchange variation margin 

pursuant to the DCO’s risk management 

framework and requiring posting of 

initial margin to cover potential future 

exposures in the event of a default. In 

addition, swaps transacted through a 

DCO are secured by the DCO’s guaranty 

fund and other available financial 

resources, which are intended to cover 

extraordinary losses that would not be 

covered by initial margin. 

Central clearing was developed and 

designed to handle significant 

concentration of risk. Each of the DCOs 

that clears the RFR OIS covered by this 

proposal has a procedure for closing out 

and/or transferring a defaulting clearing 

member’s positions and collateral.106

Transferring customer positions to 

solvent clearing members in the event of 

a default is critical to reducing systemic 

risk. DCOs are designed to withstand 

defaulting positions and to prevent a 

defaulting clearing member’s loss from 

spreading further and triggering 

additional defaults. To the extent that 

introduction of an RFR OIS clearing 

requirement increases the number of 

clearing members and market 

participants in the interest rate swap 

market, then DCOs may find it easier to 

transfer positions from defaulting 


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107The Commission recognizes that with high 

rates of voluntary clearing RFR OIS at this time, the 

prospect of adding additional clearing members and 

market participants in these swaps is limited. 108First Determination, 77 FR at 74313; Second 

Determination, 81 FR at 71220. 

109First Determination, 77 FR at 74313 

(discussing market power as described under U.S. 

Department of Justice guidelines). See generally 

U.S. Department of Justice and the Federal Trade 

Commission, Horizontal Merger Guidelines 

(Horizontal Merger Guidelines) at section 1 (Aug. 

19, 2010), available at https://www.justice.gov/sites/ 

default/files/atr/legacy/2010/08/19/hmg-2010.pdf. 

110First Determination, 77 FR at 74298; Second 

Determination, 81 FR at 71220. The DCO service 

market includes the registered and exempt DCOs 

that currently offer RFR OIS for clearing. 

111That said, the Commission recognizes that (1) 

to the extent the clearing services market for the 

interest rate swaps identified in this proposal, after 

foreclosing uncleared swaps, would be limited to a 

concentrated few participants with highly aligned 

incentives, and (2) the clearing services market is 

insulated from new competitive entry through 

barriers (e.g., high sunk capital cost requirements, 

high switching costs to transition from embedded 

incumbents, and access restrictions), the proposed 

determination could have a negative competitive 

impact by increasing market concentration. 

112See, e.g., Horizontal Merger Guidelines, 

section 9.2 (entry likely if it would be profitable 

which is in part a function of ‘‘the output level the 

entrant is likely to obtain’’). 

113Citadel Letter (citing Staff Working Paper No. 

580 ‘‘Centralized trading, transparency and interest 

rate swap market liquidity: evidence from the 

implementation of the Dodd-Frank Act,’’ Bank of 

England, Jan. 2016, available at http://www.bankof

england.co.uk/research/Documents/workingpapers/ 

2016/swp580.pdf). 

114LSEG Letter (‘‘LCH does not believe that 

adopting a clearing requirement for a new product 

that references an alternative reference rate, or 

expanding the scope of an existing clearing 

requirement to cover additional maturities would 

create conditions that increase or facilitate an 

exercise of market power over clearing services by 

any DCO. Any clearing requirement that applies 

equally to all DCOs that provide clearing services 

for a product would not adversely affect 

competition.’’); Eurex Letter (‘‘Eurex Clearing 

believes there is healthy competition currently in 

the market for the clearing of swaps referencing the 

RFRs and, previously, the LIBORs. Eurex Clearing 

does not believe that adopting a clearing 

requirement for a new product that references an 

RFR or expanding the scope of the Clearing 

Requirement to cover additionally maturities would 

cause [adverse effects related to competition or an 

increase in the cost of clearing services].’’); JSCC 

Letter (‘‘In relation to TONA OIS, it has been 

accepted for clearing at 3 registered DCOs . . . . 

Therefore, we believe that replacing JPY–LIBOR 

with TONA OIS would not change (i) the existing 

competition for clearing services of JPY swaps nor 

(ii) the cost of clearing services, in any regard.’’); 

and TD Bank Letter (‘‘We do not perceive these 

issues [related to adverse competitive effects or 

increasing costs of clearing services] to come’’ as a 

result of a clearing requirement for a new product 

Continued 

clearing members if there is a larger 

pool of potential clearing members to 

receive the positions.107

Each DCO has experience risk 

managing interest rate swaps, and the 

Commission believes that the DCOs 

have the necessary financial resources 

available to clear the RFR OIS that are 

the subject of this proposal. 

Accordingly, the Commission believes 

that these DCOs would be able to 

manage the risk posed by clearing the 

new RFR OIS that would be required to 

be cleared by virtue of this proposal. 

In addition, the Commission believes 

that the central clearing of the RFR OIS 

that are to be added under this proposal 

should serve to mitigate counterparty 

credit risk, thereby potentially reducing 

systemic risk. Having considered the 

likely effect on the mitigation of 

systemic risk, the Commission is 

proposing to add these RFR OIS to the 

clearing requirement. 

Request for Comment 

The Commission requests comments 

concerning the proposal to add these 

RFR OIS to the clearing requirement, 

with regard to the possible reduction of 

systemic risk. 

How, if at all, should the Commission 

consider the ongoing implementation of 

uncleared swap margin requirements for 

swap dealers in assessing this factor? 

4. Factor (IV)—Effect on Competition 

Section 2(h)(2)(D)(ii)(IV) of the CEA 

requires the Commission to take into 

account the effect on competition, 

including appropriate fees and charges 

applied to clearing. Of particular 

concern to the Commission is whether 

this proposed determination would 

harm competition by creating, 

enhancing, or entrenching market power 

in an affected product or service market, 

or facilitating the exercise of market 

power.108 Market power is viewed as 

the ability to raise prices, including 

clearing fees and charges, reduce 

output, diminish innovation, or 

otherwise harm customers as a result of 

diminished competitive constraints or 

incentives.109

The Commission has identified one 

putative service market as potentially 

affected by this proposed clearing 

determination: A DCO service market 

encompassing those clearinghouses that 

currently clear the RFR OIS subject to 

this proposal.110 The Commission 

recognizes that this proposed clearing 

requirement potentially could impact 

competition within the affected market. 

Of particular importance to whether any 

such impact is positive or negative, is: 

(1) Whether the demand for these 

clearing services and swaps is 

sufficiently elastic that a small but 

significant price increase above 

competitive levels would prove 

unprofitable because users of the 

interest rate swap products and DCO 

clearing services would substitute other 

clearing services coexisting in the same 

market(s); and (2) the potential for new 

entry into this market. The availability 

of substitute clearing services to 

compete with those encompassed by 

this proposed determination, and the 

likelihood of timely, sufficient new 

entry in the event prices do increase 

above competitive levels, each operate 

independently to constrain 

anticompetitive behavior. 

Any competitive import likely would 

stem from the fact that the proposed 

determination and regulations would 

remove the alternative of not clearing 

for RFR OIS subject to this proposal. 

The proposed determination would not 

specify who may or may not compete to 

provide clearing services for the RFR 

OIS subject to this proposal, as well as 

those not required to be cleared. 

Removing the choice to enter into a 

swap without submitting it for clearing 

under this proposed rulemaking is not 

determinative of negative competitive 

impact. Other factors, including the 

availability of other substitutes within 

the market or potential for new entry 

into the market, may constrain market 

power. The Commission does not 

foresee that the proposed determination 

constructs barriers that would deter or 

impede new entry into a clearing 

services market,111 and the Commission 

anticipates that a determination to 

modify the clearing requirement for 

interest rate swaps could foster an 

environment conducive to new entry. 

For example, the proposed clearing 

determination is likely to reinforce, if 

not encourage, growth in demand for 

clearing services. Demand growth, in 

turn, can enhance the sales opportunity, 

a condition hospitable to new entry.112

Moreover, to the extent that there are 

high rates of voluntary clearing in the 

RFR OIS subject to this proposed 

determination already, a regulatory 

requirement to clear such swaps would 

provide additional certainty that those 

high rates of clearing would remain 

constant. 

Respondents to the RFI who provided 

feedback regarding the potential effect 

on competition due to a modified 

clearing requirement did not identify 

any potential negative effects. For 

instance, Citadel stated that applying a 

clearing requirement to OTC derivatives 

referencing USD SOFR would increase 

liquidity and competition, citing, among 

other research, a study that found that 

‘‘the Commission’s clearing and trading 

reforms led to a significant reduction in 

execution costs in the USD interest rate 

swap market, with market participants 

saving as much as $20 million–$40 

million per day.’’ 113 LSEG, Eurex, JSCC, 

and TD Bank also did not identify 

potential competition-related 

concerns.114


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that references an alternative reference rate or 

expanding the scope of the clearing requirement to 

cover additional maturities). 

115An FCM or DCO also may be subject to 

resolution under Title II of the Dodd-Frank Act to 

the extent it would qualify as a covered financial 

company (as defined in section 201(a)(8) of the 

Dodd-Frank Act). Under Title II, different rules 

would apply to the resolution of an FCM or DCO. 

Discussion in this section relating to what might 

occur in the event an FCM or DCO defaults or 

becomes insolvent describes procedures and 

powers that exist in the absence of a Title II 

receivership. 

116 If an FCM is registered as a broker-dealer, 

certain issues related to its insolvency proceeding 

would be governed by the Securities Investor 

Protection Act, as well. 

117Claims seeking payment for the administration 

of customer property would share this priority. 

118Letters of counsel on file with the 

Commission. 

119Commission Letter Nos. 18–30, 18–31, and 

18–32. Additionally, in responding to the RFI, 

Eurex noted that, with respect to Eurex clearing 

members that are FCMs and that clear swaps under 

Eurex’s U.S. regulatory framework, Eurex’s FCM 

Regulations ‘‘foresee a clear process for a potential 

porting of client-related transactions to a 

replacement clearing member following the 

termination of a clearing member.’’ Eurex Letter. In 

the event that the termination is based on an 

Insolvency Termination Event, as defined in 

Eurex’s FCM Regulations, Eurex will seek to 

coordinate with the CFTC and bankruptcy trustee 

with respect to porting the positions. This 

procedure applies to all cleared products. However, 

Eurex noted that following IBOR conversion events, 

it no longer clears any trades where obtaining new 

GBP LIBOR, JPY LIBOR, or CHF LIBOR fixings (or 

reliance on the relevant fallback provisions) would 

be necessary. Id. 

Request for Comment 

The Commission requests comment 

on the extent to which: (1) Entry barriers 

currently do or do not exist with respect 

to a clearing services market for the RFR 

OIS to be added to the clearing 

requirement under this proposal; (2) the 

proposed determination may lessen or 

increase these barriers; and (3) the 

proposed determination otherwise may 

encourage, discourage, facilitate, and/or 

dampen new entry into the market. In 

addition to what is noted above, the 

Commission requests comment, and 

quantifiable data, on whether the 

required clearing of any or all of the 

RFR OIS to be added to the clearing 

requirement under this proposal will 

generate conditions that create, increase, 

or facilitate an exercise of: (1) Clearing 

services market power in CME, LCH, 

Eurex, and/or any other clearing service 

market participant, including conditions 

that would dampen competition for 

clearing services and/or increase the 

cost of clearing services, and/or (2) 

market power in any product markets 

for interest rate swaps, including 

conditions that would dampen 

competition for these product markets 

and/or increase the cost of RFR OIS to 

be added to the clearing requirement 

under this proposal. The Commission 

seeks comment, and quantifiable data, 

on the likely cost increases associated 

with clearing, particularly those fees 

and charges imposed by DCOs, and the 

effects of such increases on 

counterparties currently participating in 

the market. 

The Commission also requests 

comment regarding whether 

commenters have any concerns 

regarding access to clearing services in 

the market for any RFR OIS subject to 

this proposed determination. 

5. Factor (V)—Legal Certainty in the 

Event of Insolvency 

Section 2(h)(2)(D)(ii)(V) of the CEA 

requires the Commission to take into 

account the existence of reasonable legal 

certainty in the event of the insolvency 

of the relevant DCO or one or more of 

its clearing members with regard to the 

treatment of customer and swap 

counterparty positions, funds, and 

property. The Commission is proposing 

this clearing requirement determination 

based on its view that there is 

reasonable legal certainty with regard to 

the treatment of customer and swap 

counterparty positions, funds, and 

property in connection with cleared 

swaps, including the RFR OIS subject to 

this proposal, in the event of the 

insolvency of the relevant DCO or one 

or more of the DCO’s clearing members. 

The Commission believes that, in the 

case of a clearing member insolvency at 

CME, where the clearing member is the 

subject of a proceeding under the U.S. 

Bankruptcy Code, subchapter IV of 

Chapter 7 of the U.S. Bankruptcy Code 

(11 U.S.C. 761–767) along with parts 22 

and 190 of the Commission’s regulations 

would govern the treatment of customer 

positions.115 Pursuant to section 4d(f) of 

the CEA, 7 U.S.C. 4d(f), a clearing 

member accepting funds from a 

customer to margin a cleared swap must 

be a registered futures commission 

merchant (FCM). Pursuant to 11 U.S.C. 

761–767 and part 190 of the 

Commission’s regulations, the 

customer’s interest rate swap positions, 

carried by an insolvent FCM, would be 

deemed ‘‘commodity contracts.’’ 116 As a 

result, neither a clearing member’s 

bankruptcy nor any order of a 

bankruptcy court could prevent CME 

from closing out/liquidating such 

positions. However, customers of 

clearing members would have priority 

over all other claimants with respect to 

customer funds that had been held by 

the defaulting clearing member to 

margin swaps, such as the RFR OIS 

subject to this proposal.117 Thus, 

customer claims would have priority 

over proprietary claims and general 

creditor claims. Customer funds would 

be distributed to swap customers, 

including interest rate swap customers, 

in accordance with Commission 

regulations and section 766(h) of the 

Bankruptcy Code. Moreover, the 

Bankruptcy Code and the Commission’s 

rules thereunder (in particular 11 U.S.C. 

764(b) and 17 CFR 190.07) permit the 

transfer of customer positions and 

collateral to solvent clearing members. 

Similarly, 11 U.S.C. 761–767 and part 

190 would govern the bankruptcy of a 

DCO where the DCO is the subject of a 

proceeding under the U.S. Bankruptcy 

Code, in conjunction with DCO rules 

providing for the termination of 

outstanding contracts and/or return of 

remaining clearing member and 

customer property to clearing members. 

With regard to LCH, the Commission 

understands that in general the default 

of an LCH clearing member would be 

governed by LCH’s rules, and LCH 

would be permitted to close out and/or 

transfer positions of a defaulting 

clearing member. The Commission 

further understands that, under 

applicable law, LCH’s rules governing a 

clearing member default would 

supersede insolvency laws in the 

clearing member’s jurisdiction. For an 

FCM based in the United States and 

clearing at LCH, the applicable law as a 

general matter, would be the U.S. 

Bankruptcy Code and part 190 of the 

Commission’s regulations. According to 

LCH’s regulation § 39.5(b) submissions, 

the insolvency of LCH itself would be 

governed by English insolvency law, 

which protects the enforceability of the 

default-related provisions of LCH’s 

rulebook, including in respect of 

compliance with applicable provisions 

of the U.S. Bankruptcy Code and part 

190 of the Commission’s regulations. 

LCH has obtained, and made available 

to the Commission, legal opinions that 

support the existence of such legal 

certainty in relation to the protection of 

customer and swap counterparty 

positions, funds, and property in the 

event of the insolvency of one or more 

of its clearing members.118

On December 20, 2018, the 

Commission issued permission for 

Eurex to begin clearing swap 

transactions on behalf of customers of 

FCMs.119 According to Eurex’s 

regulation § 39.5(b) submissions, Eurex 

observes the PFMI. Eurex represented 

that in February 2015, it published an 

assessment of its compliance with the 

PFMI, which was reviewed and 

validated by an independent outside 

auditor. The assessment concluded that 

Eurex fully complies with the PFMI, 

and Eurex’s default management 


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120Eurex Clearing AG, Assessment of Eurex 

Clearing AG’s compliance against the PFMI and 

disclosure framework associated to the PFMI, 

available at https://www.eurex.com/resource/blob/ 

2446522/22f4869a8649f15b54a1e86bf635c63c/ 

data/cpss-iosco-pfmi_assessment_2020_en.pdf. 

121For example, in the case of an insolvency 

termination event, as defined in Eurex’s Clearing 

Conditions, the relevant FCM clearing member 

would be subject to an insolvency proceeding 

pursuant to applicable U.S. law, and Eurex would 

seek to coordinate with the Commission and the 

bankruptcy trustee (or comparable person 

responsible for administering the proceeding) with 

respect to the transfer of FCM client transactions 

and eligible margin assets allocated to the relevant 

FCM client. Id. at 100. 

122Exempt DCOs are not permitted to clear swaps 

for U.S. customers pursuant to regulation 

§ 39.6(b)(1). Accordingly, this discussion of JSCC’s 

and HKEX’s insolvency regimes does not address 

issues related to U.S. customer clearing. 

123 JSCC, Principles for Financial Market 

Infrastructures Disclosure, Mar. 31, 2021, available 

at https://www.jpx.co.jp/jscc/en/company/ 

cimhll0000000osu-att/JSCC_PFMI_Disclosure_

20210331_EN.pdf; and HKFE Clearing Corporation 

Limited, Principles for Financial Market 

Infrastructures Disclosure, Feb. 2021, available at 

https://www.hkex.com.hk/-/media/HKEX-Market/ 

Services/Clearing/Listed-Derivatives/PFMI/HKCC_

PFMI_Disclosure_Feb2021.pdf?la=en. 

124PFMI, Principle 1. 

125PFMI, Principle 1, Key consideration 1. 

126PFMI, Principle 13. 

127 JSCC, Principles for Financial Market 

Infrastructures Disclosure, Mar. 31, 2021, at 19–24, 

83–91, available at https://www.jpx.co.jp/jscc/en/ 

company/cimhll0000000osu-att/JSCC_PFMI_

Disclosure_20210331_EN.pdf; and HKFE Clearing 

Corporation Limited, Principles for Financial 

Market Infrastructures Disclosure, Feb. 2021, at 20– 

21, 58–60, available at https://www.hkex.com.hk/-/ 

media/HKEX-Market/Services/Clearing/ListedDerivatives/PFMI/HKCC_PFMI_Disclosure_

Feb2021.pdf?la=en. 

128See JSCC’s relevant PFMI disclosures. 

129 JSCC Letter (stating that, for default 

management purposes, TIBOR–TONA basis swaps 

will be treated in the same manner as cleared JPY 

TONA OIS. JSCC noted that creation of these basis 

swaps was a temporary measure and the basis 

swaps will expire at the settlement of the rates that 

were fixed prior to the end of 2021). 

130Swap Transaction Compliance and 

Implementation Schedule: Clearing Requirement 

Under Section 2(h) of the CEA, 77 FR 44441 (July 

30, 2012). 

131Second Determination, 81 FR at 71227. 

132 Id. at 71227—71228. 

133E.g., Tradeweb Letter; Citadel Letter. 

134 ICI Letter (requesting a 90-day comment 

period); ISDA Letter (‘‘Members request a minimum 

of 6 months’ notice to implement new [clearing 

requirement]’’); ACLI Letter (‘‘To ensure a smooth 

implementation of any expanded clearing 

requirement, a minimum of six months should be 

provided between the adoption of an expanded 

clearing requirement and the effective date of the 

requirement, to give market participants time to 

ready systems and processes.’’). 

135LSEG Letter. 

procedures were assessed to be certain 

in the event of its or a clearing member’s 

insolvency with regard to the treatment 

of customer and counterparty positions 

and collateral. Such certainty continues 

to be reflected in Eurex’s most recent 

PFMI assessment.120 According to 

Eurex’s regulation § 39.5(b) 

submissions, a potential insolvency of 

Eurex Clearing, and the operation of 

default management procedures under 

Eurex’s Clearing Conditions, would be 

governed by German law, with the 

exception of certain FCM Regulations 

and Clearing Conditions that relate to 

cleared swaps customer collateral that 

are governed by U.S. law.121

Finally, as exempt DCOs, JSCC and 

HKEX demonstrate they are subject to 

ongoing comparable, comprehensive 

supervision by their home country 

regulator with regard to legal certainty 

in the event of insolvency.122 Both 

exempt DCOs maintain disclosures 

discussing the ways in which they 

comply with the PFMI, including 

principles related to legal certainty in 

the event of insolvency.123 Principle 1 

of the PFMI provides that a CCP should 

have a well-founded, clear, transparent, 

and enforceable legal basis for each 

material aspect of its activities, in all 

relevant jurisdictions.124 Among other 

key considerations for this factor, ‘‘[t]he 

legal basis should provide a high degree 

of certainty for each material aspect of 

an FMI’s activities in all relevant 

jurisdictions.’’ 125 The PFMI also 

provide that a CCP should have effective 

and clearly defined rules and 

procedures to manage a participant 

default.126 JSCC’s and HKEX’s PFMI 

disclosures provide, among other 

information, a discussion of the 

applicable law and legal basis for their 

clearing activities, as well as the way in 

which their rules address insolvency 

events.127

Lastly, JSCC has provided information 

regarding how it would address a 

default by a clearing member under its 

rules,128 including information 

regarding the treatment of certain RFR 

swaps for default management 

purposes. Specifically, in its responses 

to the RFI, JSCC described the process 

by which it offered TIBOR–TONA basis 

swaps as a way to transition away from 

IBOR swaps without incident.129

Request for Comment 

The Commission requests comment 

regarding all aspects of this factor, 

including whether there is reasonable 

legal certainty, in the event of an 

insolvency of CME, LCH, Eurex, or one 

or more of any of these DCOs’ clearing 

members, with regard to the treatment 

of customer and swap counterparty 

positions, funds, and property. 

The Commission requests comment 

on whether U.S. swap counterparties 

have concerns about the applicability of 

any non-U.S. jurisdiction’s law to U.S. 

persons clearing swaps at DCOs located 

outside of the United States. 

The Commission requests comment 

regarding legal certainty with respect to 

an event of an insolvency for an exempt 

DCO, such as JSCC or HKEX, 

particularly with regard to the treatment 

of swap counterparty positions, funds, 

and property. 

VI. Proposed Implementation Schedule 

and Compliance Dates 

The Commission phased in 

compliance with the First 

Determination according to the schedule 

contained in regulation § 50.25.130

Under this schedule, compliance was 

phased in by the type of market 

participant entering into a swap subject 

to the First Determination. The phase-in 

occurred over a 270-day period 

following publication of the final rule in 

the Federal Register. The Commission 

also phased in compliance with the 

Second Determination according to the 

schedule contained in regulation 

§ 50.26. However, the Commission 

decided to adopt one compliance date 

for all market participant types, because 

many market participants were already 

clearing the products subject to the 

determination and the Commission had 

already adopted a clearing requirement 

determination for the interest rate swap 

class.131 The Commission decided to tie 

the compliance date for each product to 

the first compliance date for a market 

participant in a non-U.S. jurisdiction.132

Importantly, DCOs have largely 

completed IBOR swap conversions. 

Many market participants already clear 

the RFR OIS subject to this proposed 

determination. Several other 

jurisdictions are requiring, or are 

anticipated to soon require, clearing of 

these swaps. While some responses to 

the RFI recommended that the 

Commission proceed through an interim 

final rule process,133 other responses 

asked for longer periods of time for 

market participants to comment on 

proposed rules, and come into 

compliance with proposed rule 

changes.134 LSEG recommended that the 

effective date be set ‘‘not too far from 

the completion of the Commission’s 

review’’ in order to ‘‘reduce uncertainty 

in the market and limit the risk of 

bifurcation of liquidity between the 

cleared and uncleared market for the 

LIBOR rates that ceased on December 

31, 2021 and their respective 

replacement rates.’’ 135

Recognizing all these factors, the 

Commission proposes to adopt one 

compliance date for all market 

participant types and amend regulation 

§ 50.26 to reflect that the compliance 

date shall be 30 days after publication 

of the final rule in the Federal Register. 


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136Second Determination, 81 FR at 71210; BIS, 

‘‘Statistical release: OTC derivatives at endDecember 2020,’’ May 12, 2021, at 4, Graph 4, 

available at https://www.bis.org/publ/otc_

hy2105.pdf (charting central clearing rates for 

interest rate swaps from 2012 to 2020 and noting 

a particularly significant rise during the 2012–2015 

period). See also CMEG Letter (discussing adoption 

of central clearing); CCP12 Letter (same). 

137 It is possible that some market participants 

would respond to the requirement that RFR OIS be 

cleared by decreasing their use of such swaps, 

particularly if the cost of clearing increases in the 

future relative to the cost of not clearing. Thus, 

there is some uncertainty regarding how the 

proposed rule will affect the quantity of swaps that 

are cleared. 

138 7 U.S.C. 19(a). 

If the clearing requirement compliance 

date falls on a Saturday, Sunday, or U.S. 

Federal public holiday, the compliance 

date will be the next available business 

day. No compliance date will be set on 

a day when markets are not open in the 

United States. 

As a technical amendment, because 

the Commission is proposing to remove 

certain interest rate swaps from 

regulation § 50.4, it is also proposing to 

remove those same swaps from 

regulation § 50.26. The Commission is 

proposing this change for consistency 

and to eliminate any confusion that 

might arise if different swap products 

are included in §§ 50.4 and 50.26. 

Additionally, the Commission proposes 

technical revisions related to the 

formatting of the table of compliance 

dates for required clearing of credit 

default swaps in regulation § 50.26. 

Request for Comment 

The Commission requests comment 

on whether setting a compliance date 30 

days after publication of the final rule 

in the Federal Register provides market 

participants with sufficient notice and 

opportunity to comply with this 

proposed determination. 

VII. Cost Benefit Considerations 

A. Statutory and Regulatory Background 

Proposed revised regulation § 50.4(a) 

identifies certain swaps that would be 

required to be cleared under section 

2(h)(1)(A) of the CEA in addition to 

those currently required to be cleared by 

existing regulations §§ 50.2 and 50.4(a), 

and removes certain other swaps 

currently required to be cleared from the 

clearing requirement. The proposed 

clearing requirement amendments are 

designed to update the Commission’s 

regulations in light of the interest rate 

swap market’s move away from use of 

swaps referencing IBORs to swaps 

referencing RFRs. At the current time, 

most RFR OIS are being cleared 

voluntarily so the proposed regulation 

largely serves to ensure that the swap 

market under the Commission’s 

jurisdiction continues to clear all RFR 

OIS subject to this proposal. The 

continued central clearing of RFR OIS 

may limit the counterparty risk 

associated with such swaps, thereby 

mitigating the possibility of such risks 

having a systemic impact, which might 

cause or exacerbate instability in the 

financial system. In addition, required 

clearing of RFR OIS would reflect the 

global effort to rely on benchmark rates 

that are less susceptible to 

manipulation. 

The Commission believes this 

proposal is consistent with the principle 

that the use of central clearing can 

reduce systemic risk, which was one of 

the fundamental premises of the DoddFrank Act and the 2009 commitments 

by the G20 nations. The following 

discussion is a consideration of the 

costs and benefits of the Commission’s 

proposed actions pursuant to the 

regulatory requirements discussed 

above. 

B. Overview of Swap Clearing 

. How Clearing Reduces Risk 

When a bilateral swap is cleared, the 

DCO becomes the counterparty to each 

original swap counterparty. This 

arrangement mitigates counterparty risk 

to the extent that the DCO may be a 

more creditworthy counterparty than 

the original swap counterparties. 

Central clearing reduces the 

interconnectedness of market 

participants’ swap positions because the 

DCO, an independent third party that 

takes no market risk, guarantees the 

collateralization of swap counterparties’ 

exposures. DCOs have demonstrated 

resilience in the face of past market 

stress. 

The Commission anticipates that 

DCOs will continue to be some of the 

most creditworthy swap counterparties 

because, among other things, they are 

able to monitor and manage 

counterparty risk effectively through (1) 

collection of initial and variation margin 

associated with outstanding swap 

positions; (2) marking positions to 

market regularly, usually multiple times 

per day, and issuing margin calls when 

the margin in a customer’s account has 

dropped below predetermined levels 

that the DCO sets; (3) adjusting the 

amount of margin that is required to be 

held against swap positions in light of 

changing market circumstances, such as 

increased volatility in the underlying 

product; and (4) closing out swap 

positions if margin calls are not met 

within a specified period of time. 

2. The Clearing Requirement and Role of 

the Commission 

With the passage of the Dodd-Frank 

Act, Congress gave the Commission the 

responsibility for determining which 

swaps would be required to be cleared 

pursuant to section 2(h)(1)(A) of the 

CEA. Since 2012, there is ample 

evidence that the interest rate swap 

market has been moving toward 

increased use of central clearing in 

response to both market incentives and 

clearing requirements.136 Now with the 

IBOR transition completed for most 

LIBOR rates and with most RFR OIS 

already being voluntarily cleared, as 

discussed further below, it is possible 

that the effect of this proposal will be 

limited to ensuring that market 

participants continue to clear the RFR 

OIS subject to the proposal.137 The 

Commission has preliminarily 

determined that the costs and benefits 

related to the required clearing of the 

RFR OIS to be added under this 

proposal are attributable, in part to (1) 

Congress’s stated goal of reducing 

systemic risk by, among other things, 

requiring clearing of swaps; and (2) the 

Commission’s exercise of its discretion 

in selecting swaps or classes of swaps to 

achieve those ends. 

C. Consideration of the Costs and 

Benefits of the Commission’s Actions 

1. CEA Section 15(a) 

Section 15(a) of the CEA requires the 

Commission to ‘‘consider the costs and 

benefits’’ of its actions before 

promulgating a regulation under the 

CEA or issuing certain orders.138

Section 15(a) further specifies that the 

costs and benefits shall be evaluated in 

light of five broad areas of market and 

public concern: (1) Protection of market 

participants and the public; (2) 

efficiency, competitiveness and 

financial integrity; (3) price discovery; 

(4) sound risk management practices; 

and (5) other public interest 

considerations (collectively referred to 

herein as the Section 15(a) Factors). 

Accordingly, the Commission considers 

the costs and benefits associated with 

the proposed determination in light of 

the Section 15(a) Factors. In the sections 

that follow, the Commission considers: 

(1) The costs and benefits of required 

clearing for the RFR OIS to be added 

under this proposed rule as well as the 

costs and benefits of removing certain 

swaps from required clearing; (2) the 

alternatives contemplated by the 

Commission and their costs and 

benefits; and (3) the impact of required 

clearing for the proposed swaps on the 

Section 15(a) Factors. 

The Commission is considering these 

costs and benefits against a baseline of 


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Federal Register / Vol. 87, No. 104 / Tuesday, May 31, 2022 / Proposed Rules 32927 

139Pursuant to section 2(i) of the CEA, activities 

outside of the United States are not subject to the 

swap provisions of the CEA, including any rules 

prescribed or regulations promulgated thereunder, 

unless those activities either ‘‘have a direct and 

significant connection with activities in, or effect 

on, commerce of the United States’’; or contravene 

any rule or regulation established to prevent 

evasion of a CEA provision enacted under the 

Dodd-Frank Act. 7 U.S.C. 2(i). 

140These per-entity costs would vary widely 

depending on the needs of such market 

participants. Costs likely would be lower for market 

participants who already clear interest rate swaps 

covered by the Commission’s prior clearing 

requirement determinations. The opposite would be 

true for market participants that start clearing 

because of the proposed determination. However, 

given the high rates of voluntary clearing, there are 

likely to be few, if any, new participants. 

141The Commission’s margin requirements for 

uncleared swaps are codified in subpart E of part 

23 of the Commission’s regulations. 

142 Indeed, as noted above, regulators in the 

United States have called on market participants to 

cease new USD LIBOR activity. 143As noted above, while the Commission 

proposes to require clearing of USD SOFR and SGD 

SORA swaps effective 30 days after publication of 

the final rule in the Federal Register, the 

Commission proposes to remove USD LIBOR and 

SGD SOR–VWAP clearing requirements on a 

delayed basis, effective July 1, 2023. 

144See section V.C above. 

the current set of interest rates swaps 

subject to the clearing requirement 

adopted under regulation § 50.4. This 

proposed determination would add 

certain RFR OIS to the clearing 

requirement and it would remove 

certain swaps referencing IBORs from 

the clearing requirement. In most cases, 

this would be a simultaneous exchange: 

As an IBOR swap is withdrawn from the 

clearing requirement, an RFR swap is 

added. However, in a few cases, there 

may be a delay, or even an overlap 

during which products referencing the 

IBOR rate and the RFR are both subject 

to the clearing requirement (e.g., if the 

Commission adopts a clearing 

requirement for USD SOFR swaps 30 

days after the publication of the final 

rule in the Federal Register and does 

not remove the clearing requirement for 

USD LIBOR swaps until July 1, 2023, 

then requirements to clear USD LIBOR 

swaps, including USD LIBOR fixed-tofloating swaps, would for a period of 

time coexist with requirements to clear 

USD SOFR OIS). As seen in Table 6 

above, almost all transactions in interest 

rate swaps that would be subject to the 

proposed clearing requirement are 

cleared voluntarily today, so that the 

percentage of such swaps that would be 

cleared following implementation of the 

rule is unlikely to increase materially. 

The Commission’s analysis below 

compares amendments in this proposed 

determination to the clearing 

requirement in effect today. The costs 

discussed recognize the current industry 

practice of high levels of RFR OIS 

clearing. 

The Commission understands that the 

swap market functions internationally 

with (i) transactions that involve U.S. 

firms and DCOs occurring across 

different international jurisdictions; (ii) 

some entities organized outside of the 

United States that are, or may become, 

Commission registrants or registered 

entities; and (iii) some entities that 

typically operate both within and 

outside the United States and that 

follow substantially similar business 

practices wherever located. Where the 

Commission does not specifically refer 

to matters of location, this discussion of 

costs and benefits refers to the effects of 

the proposed regulations on all relevant 

swaps activity, whether based on their 

actual occurrence in the United States 

or on their connection with activities in, 

or effect on, commerce of the United 

States, pursuant to section 2(i) of the 

CEA.139

2. Costs and Benefits of Required 

Clearing Under the Proposed 

Determination 

Market participants may incur certain 

costs in order to clear the RFR OIS to 

be added to the clearing requirement in 

the proposed rule. For example, to the 

extent that there are market participants 

entering into RFR OIS that are not 

already clearing interest rate swaps 

voluntarily or pursuant to the 

Commission’s prior clearing 

requirement determinations, such 

market participants may incur certain 

startup and ongoing costs related to 

developing technology and 

infrastructure, updating or creating new 

legal agreements, service provider fees, 

and collateralization of the cleared 

positions.140 The costs of 

collateralization, on the other hand, are 

likely to vary depending on whether an 

entity is subject to the margin 

requirements for uncleared swaps 141

and capital requirements, and the 

differential between the cost of capital 

for the assets they use as collateral and 

the returns realized on those assets. 

As noted in Table 6 above, almost all 

RFR OIS subject to this proposed 

determination are already cleared 

voluntarily, and market participants 

currently clearing RFR OIS already 

realize the benefits of clearing. 

Adoption of the proposed determination 

would ensure that the percentage of RFR 

OIS that are cleared would remain high 

in the future and that these benefits 

would continue to be realized. These 

benefits include reduced and 

standardized counterparty credit risk, 

increased transparency, and easier swap 

market access for market participants 

who are required to clear. Together, 

these benefits contribute significantly to 

the stability and efficiency of the 

financial system, but they are difficult to 

quantify with any degree of precision. 

While there may be a benefit to 

removing certain swaps from required 

clearing, such as fewer costs to market 

participants who no longer have to 

submit such swaps to clearinghouses, in 

this instance, the reason the 

Commission is removing certain swaps 

referencing IBORs from the clearing 

requirement is because they are, with 

limited exceptions, no longer offered for 

clearing. The swap rates that the 

Commission is proposing to remove 

from the clearing requirement, other 

than USD LIBOR and SGD SOR–VWAP, 

should no longer be available or used by 

market participants, pursuant to broad 

international consensus and industry 

progress, as described above.142

Therefore, the Commission 

preliminarily believes that removing 

these swaps referencing IBORs from the 

clearing requirement would not impose 

additional costs on market participants 

and would result in the benefit of 

market and regulatory certainty. There 

may be no meaningful benefit to market 

participants from this removal because 

they generally cannot clear these swaps 

today. However, there may be benefits 

associated with the effort to reach broad 

consensus around the transition away 

from IBORs. 

The Commission notes that any 

potential costs associated with the 

proposed determination should be 

viewed in light of the fact that each new 

swap that would be required to be 

cleared would stand in the place of a 

swap that is already subject to required 

clearing and that almost all of these 

swaps are cleared voluntarily.143

Liquidity tied to IBORs has shifted, and 

will continue to shift, to RFRs as those 

IBORs are discontinued or become 

nonrepresentative. That shift has 

occurred, and continues to occur, as a 

result of numerous market events, 

including DCO conversions of IBOR 

swaps to RFR swaps, the operation of 

contractual fallbacks, and new use of 

RFRs in parallel with declining liquidity 

in IBOR swaps. The RFR OIS subject to 

this proposal are already widely cleared 

so that the costs associated with clearing 

these swaps are already being 

incurred.144 Accordingly, the 

Commission anticipates that the 

additional cost of compliance for market 

participants would be de minimis. 

Request for Comment 

The Commission requests comment 

concerning the costs of clearing 


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145The Commission does not have the 

information necessary to determine either the costs 

associated with entities that need to establish 

relationships with one or more FCMs or the costs 

associated with entities that already have 

relationships with one or more FCMs but need to 

revise their agreements. Commenters are requested 

to provide the necessary data where available. 

146E.g., Tradeweb Letter (‘‘In effect, the CFTC is 

not expanding the existing clearing determinations, 

rather it will be applying the existing IBOR 

determinations to contracts based on the new 

RFRs.’’); Citadel Letter (‘‘As noted above, OTC 

derivatives referencing SOFR are currently being 

cleared by DCOs in material volumes, 

demonstrating that the rule frameworks and 

operational infrastructure already exist to support a 

clearing requirement. Significant voluntary clearing 

demonstrates the confidence market participants 

have in the current DCO offerings.’’); Eurex Letter 

(‘‘Eurex Clearing does not believe that adopting a 

clearing requirement for swaps referencing SOFR 

would be any hindrance to trading activity in those 

swaps. Any such clearing requirements for the 

RFRs, if adopted, were already in effect for the 

IBOR-based rates being replaced.’’). 

147 In responding to the RFI, TD Bank noted that 

the implementation of new clearing requirements to 

address the transition from IBORs to RFRs ‘‘should 

not materially increase costs’’ (but should be 

‘‘forecasted appropriately to allow firms to become 

operationally ready’’). TD Bank Letter. JSCC noted 

that ‘‘DCOs and market participants have already 

incurred significant costs to transition LIBOR swaps 

denominated in non-USD currencies to alternative 

reference rates’’ and stated that JSCC ‘‘[does] not 

believe there would be any additional costs to be 

borne by DCOs and market participants if the CFTC 

includes alternative reference rates, such as TONA 

OIS, in the Clearing Requirement.’’ JSCC Letter. 

ISDA stated that ‘‘[w]hile the changes in [the 

clearing requirement] will have a cost attached . . . 

these costs are part of the overall cost of LIBOR 

transition and spread across multiple jurisdictions.’’ 

ISDA Letter. ISDA noted that for institutional 

clients, additional costs ‘‘will be incremental as 

opposed to something completely new and 

potentially prohibitive,’’ but also noted that ‘‘[f]or 

smaller less sophisticated counterparties who do 

not have to currently clear, [a new clearing 

requirement] could be a significant cost that could 

deter them from hedging using swaps.’’ Id. ISDA 

requested that the Commission ‘‘not enact a 

[clearing requirement] . . . in a way that increases 

cost, for instance by providing [a] short notice 

period that would require the implementation of 

tactical solutions to meet short deadlines.’’ Id. ACLI 

encouraged the Commission to ‘‘consider whether 

the marginal risk mitigation benefits of an expanded 

clearing requirement outweigh the costs of 

compliance’’ in light of uncleared swap margin 

rules. ACLI Letter. 

148The Commission does not have current 

information regarding such fees; commenters are 

requested to provide the necessary data where 

available. 

149This estimate is based on swaps transacted 

after the most recent revisions to subpart C of part 

50 went into effect (on or after December 30, 2020) 

so it captures all applicable exemptions from the 

swap clearing requirement. 

described above for various market 

participants and the extent to which 

they are already being incurred. The 

Commission requests comment from 

both U.S. and non-U.S. swap 

counterparties that may be affected by 

the proposed determination. 

a. Technology, Infrastructure, and Legal 

Costs 

Market participants already clearing 

swaps may incur costs in making 

necessary changes to technology 

systems to support the clearing required 

by the proposed rule if they are not yet 

clearing RFR OIS. To the extent that 

there are market participants who are 

not currently clearing RFR OIS, such 

market participants may incur costs if 

they need to implement technology to 

connect to FCMs that will clear their 

transactions.145 The costs are likely to 

depend on the specific business needs 

of each entity and therefore would vary 

widely among market participants. As a 

general matter, given that most market 

participants already will have 

undertaken the steps necessary to move 

away from the use of IBOR swaps in the 

cleared interest rate swap market, the 

burden associated with required 

clearing of RFR OIS should be 

minimal.146

With regard to costs, market 

participants who do not currently have 

established clearing relationships with 

an FCM will have to set up and 

maintain such a relationship in order to 

clear swaps that are required to be 

cleared. Market participants who 

transact a limited number of swaps per 

year likely will be required to pay 

monthly or annual fees that FCMs 

charge to maintain both the relationship 

and outstanding swap positions 

belonging to the customer. In addition, 

the FCM is likely to pass along fees 

charged by the DCO for establishing and 

maintaining open positions. It is likely 

that most market participants already 

will have had experience complying 

with prior clearing requirements and 

that the incremental burdens associated 

with clearing any of the new RFR OIS 

should be minimal, especially given that 

these products are intended to replace 

already widely cleared products.147

Request for Comment 

The Commission requests comment, 

including any quantifiable data and 

analysis, on the changes that market 

participants will have to make to their 

technological and legal infrastructures 

in order to clear the RFR OIS that are 

subject to the proposed determination. 

In particular, the Commission requests 

comment concerning how many market 

participants, if any, may have to 

establish new relationships with FCMs, 

or significantly upgrade those 

relationships based on the inclusion of 

these new products to the clearing 

requirement. 

b. Ongoing Costs Related to FCMs and 

Other Service Providers 

In addition to costs associated with 

technological and legal infrastructures, 

market participants transacting in RFR 

OIS subject to the proposed 

determination will face ongoing costs 

associated with fees charged by FCMs. 

DCOs typically charge FCMs an initial 

transaction fee for each cleared interest 

rate swap its customers enter, as well as 

an annual maintenance fee for each 

open position. The Commission 

understands that customers that 

occasionally transact in swaps are 

typically required to pay a monthly or 

annual fee to each FCM.148 As noted, 

most RFR OIS transactions are already 

cleared, so that these costs are largely 

being incurred by market participants. 

As discussed above, it is difficult to 

predict precisely how the proposed 

requirement to clear RFR OIS will 

promote the use of swap clearing, as 

compared to the use of clearing that 

would occur in the absence of the 

requirement. However, as presented in 

the data above, the use of voluntary 

clearing is so high that the percentage of 

swaps that would be cleared following 

adoption of the rule is unlikely to 

increase materially. Some RFR OIS will 

continue to be uncleared pursuant the 

exceptions and exemptions set out in 

subpart C of part 50 of the Commission’s 

regulations. According to Table 6, the 

percentage of swaps that are cleared in 

USD SOFR is about 95 to 96 percent. 

The Commission estimates that about 96 

percent of non-inter-affiliate trades in 

USD LIBOR fixed-to-floating IRS were 

cleared as of January 2022.149 The 

Commission anticipates that a similar 

percentage of RFR OIS subject to this 

proposal would continue to be cleared 

following the determination given that 

subpart C of part 50 has not changed. 

Because the clearing percentages in 

Table 6 for non-USD RFR OIS are even 

higher than for SOFR OIS, the increase 

in clearing as a result of this rule also 

will likely be de minimis. Any increase 

in the use of clearing due to the 

proposed determination would lead in 

most cases to an incremental increase in 

the transaction costs noted above. 

However, because most market 

participants already will have 

undertaken the steps necessary to 

accommodate the clearing of swaps 

subject to required clearing, the 

Commission anticipates that the burden 

associated with clearing RFR OIS 

should be minimal. 

Request for Comment 

The Commission requests comment 

regarding the fee structures of FCMs in 

general, and in particular as they relate 

to the clearing of the types of RFR OIS 

covered by the proposed rule. 


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150E.g., under the terms of a credit support annex. 

151Margin Requirements for Uncleared Swaps for 

Swap Dealers and Major Swap Participants, 81 FR 

636 (Jan. 6, 2016); Margin Requirements for 

Uncleared Swaps for Swap Dealers and Major Swap 

Participants, 85 FR 71246 (Nov. 9, 2020). 

152For example, if such swaps do not meet the 

specifications set forth in proposed revised 

regulation § 50.4(a). 

153See subpart C of part 50 (Exceptions and 

Exemptions to the Clearing Requirement). 

154Certain entities, such as pension funds and 

asset managers, may use as initial margin assets that 

they already own. In such cases, market 

participants would not incur funding costs in order 

to post initial margin. 

155See generally subpart E of part 23 of the 

Commission’s regulations. Swap clearing 

requirements under part 50 of the Commission’s 

regulations apply to a broader scope of market 

participants than the uncleared swap margin 

regulations. For example, under subpart E of part 

23, a ‘‘financial end-user’’ that does not have 

‘‘material swaps exposure’’ (as defined by 

regulation § 23.151) is not required to post initial 

margin, but such an entity may be subject to the 

swap clearing requirement. 17 CFR 23.151. 

156Commission regulation § 39.13(g)(2)(ii)(c), 17 

CFR 39.13(g)(2)(ii)(c). 

157Commission regulations §§ 23.154(b)(2)(i) and 

23.159. See generally Margin and Capital 

Requirements for Covered Swap Entities, 80 FR 

77840 (Nov. 3, 2015). 

158 It has been argued that the cash flows of an 

uncollateralized swap (i.e., a swap with an implicit 

line of credit) are over time substantially equivalent 

to the cash flows of a collateralized swap with an 

explicit line of credit. See generally Antonio S. 

Mello & John E. Parsons, Margins, Liquidity, and 

the Cost of Hedging, MIT Center for Energy and 

Environmental Policy Research, May 2012, 

available at http://dspace.mit.edu/bitstream/ 

handle/1721.1/70896/2012-005.pdf?sequence=1. 

159 Id. Mello and Parsons state, ‘‘[h]edging is 

costly. But the real source of the cost is not the 

margin posted, but the underlying credit risk that 

motivates counterparties to demand that margin be 

posted.’’ Id. at 12. They also note that, ‘‘[t]o a first 

approximation, the cost charged for the nonmargined swap must be equal to the cost of funding 

the margin account. This follows from the fact that 

the non-margined swap just includes funding of the 

margin account as an embedded feature of the 

package.’’ Id. at 15–16. 

160But note that the cost may be greater for 

uncleared swaps as the initial margin is computed 

on a counterparty by counterparty basis, whereas in 

the clearing context, there is most likely greater 

opportunity for netting exposures at the DCO. 

c. Costs Related to Collateralization of 

Cleared Swap Positions 

Market participants that enter into 

RFR OIS subject to the proposed rule 

will be required to post initial margin at 

a DCO. The Commission understands 

that the RFR OIS subject to this proposal 

are already being widely cleared on a 

voluntary basis, and so any additional 

amounts of initial margin that market 

participants would be required to post 

to a DCO as a result of the proposed 

determination likely would be relatively 

small. In reaching this preliminary 

view, the Commission considered 

situations where (1) uncleared RFR OIS 

may be otherwise collateralized; 150 (2) 

uncleared RFR OIS between certain SDs 

and ‘‘financial end-users’’ are, or will 

be, subject to initial and variation 

margin requirements under the 

Commission’s margin regulations for 

uncleared swaps; 151 (3) the pricing of 

certain uncleared swaps may account 

for implicit contingent liabilities and 

counterparty risk; (4) not all RFR OIS 

will necessarily be eligible for clearing 

if they have terms that prevent them 

from being cleared; 152 and (5) certain 

entities may elect an exception or 

exemption from the clearing 

requirement.153

The Commission acknowledges that 

market participants who are not clearing 

voluntarily and not otherwise required 

to post margin or collateral may incur 

costs related to funding collateral once 

they are required to clear. The greater 

the funding cost relative to the rate of 

return on the asset used as initial 

margin, the greater the cost of procuring 

collateral.154 Quantifying this cost with 

any precision is challenging because 

different entities may have different 

funding costs and may choose assets 

with different rates of return. 

Request for Comment 

The Commission requests comments 

on all aspects of quantifying the cost of 

funding initial margin that would be 

required to be posted to a DCO pursuant 

to this proposed rule. In particular, the 

Commission requests comment on 

funding costs that market participants 

may face due to interest rates on bonds 

issued by a sovereign nation that also 

issues the currency in which the RFR 

OIS subject to this proposed 

determination is denominated. CME, 

LCH, and Eurex accept as initial margin 

bonds issued by several sovereigns, and 

market participants may post such 

bonds as initial margin if the 

Commission adopts this proposed rule. 

The Commission recognizes further 

that the new initial margin amounts that 

would be required to be posted to DCOs 

for cleared RFR OIS will, for entities 

required to post initial margin under the 

uncleared swap margin regulations, 

replace the initial margin amount that 

has been, or will be, required to be 

posted to their swap counterparties, 

pursuant to the uncleared swap margin 

regulations. The uncleared swap margin 

regulations require SDs and certain 

‘‘financial end-users’’ to post and collect 

initial and variation margin for 

uncleared swaps, subject to various 

conditions and limitations.155

The Commission anticipates that the 

initial margin that would be required to 

be posted for a cleared swap to be added 

under this proposed determination 

would typically be less than the initial 

margin that would be required to be 

posted for uncleared swaps pursuant to 

the uncleared swap margin regulations. 

Whereas the initial margin requirement 

for cleared swaps must be established 

according to a margin period of risk of 

at least five days,156 under the 

uncleared swap margin regulations, the 

minimum initial margin requirement is 

set with a margin period of risk of 10 

days or, under certain circumstances, 

less or no initial margin for interaffiliate transactions.157 Phase-in of the 

initial margin requirements for 

uncleared swaps began on September 1, 

2016, and will be fully implemented by 

September 1, 2022. The requirement for 

entities subject to uncleared swap 

margin regulations to exchange 

variation margin was fully implemented 

on March 1, 2017. 

With respect to swaps that would be 

added to the clearing requirement under 

this proposed determination, but not 

subject to the uncleared swap margin 

regulations, the Commission believes 

that the new initial margin amounts to 

be deposited would displace costs that 

are currently embedded in the prices 

and fees for transacting the swaps on an 

uncleared and uncollateralized basis, 

rather than add a new cost. Entering 

into a swap is costly for any market 

participant because of the default risk 

posed by its counterparty. When a 

market participant faces a DCO, the 

DCO accounts for that counterparty 

credit risk by requiring the market 

participant to post collateral, and the 

cost of capital for the collateral is part 

of the cost that is necessary to maintain 

the swap position. When a market 

participant faces an SD or other 

counterparty in an uncleared swap, 

however, the uncleared swap contains 

an implicit line of credit upon which 

the market participant effectively draws 

when its swap position is out of the 

money. Typically, counterparties charge 

for this implicit line of credit in the 

spread they offer on uncollateralized, 

uncleared swaps.158 Additionally, 

because the counterparty credit risk that 

the implicit line of credit creates is the 

same as the counterparty risk that 

would result from an explicit line of 

credit provided to the same market 

participant, to a first order 

approximation, the charge for each 

should be the same as well.159 This 

means that the cost of capital for 

additional collateral posted as a 

consequence of requiring 

uncollateralized swaps to be cleared 

takes a cost that is implicit in an 

uncleared, uncollateralized swap and 

makes it explicit.160 This observation 


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161Among other things, the Commission’s part 23 

regulations set forth material swap exposure 

thresholds above which the exchange of variation 

margin is no longer voluntary. 17 CFR 23.151 and 

23.153. 

162However, exchange of variation margin will 

lower the build-up of current exposure. 163As discussed in section IV.A above. 

applies to capital costs associated with 

both initial margin and variation 

margin. 

The proposed rule also may result in 

added operational costs for those few 

market participants who are not already 

clearing these swaps voluntarily. With 

uncleared swaps, counterparties may 

agree not to collect variation margin 

until certain thresholds of material 

swaps exposure are reached, thus 

reducing or eliminating the need to 

exchange variation margin as exposure 

changes.161 However, DCOs collect and 

pay variation margin daily, and 

sometimes more frequently. Increased 

required clearing therefore may increase 

certain operational costs associated with 

paying variation margin to the DCO.162

The proposed rule may result in slight 

additional costs for clearing members in 

the form of guaranty fund contributions 

that are held by the DCO. However, it 

also could decrease guaranty fund 

contributions for certain clearing 

members. Once the proposed 

determination takes effect, there may be 

market participants that currently 

transact swaps bilaterally who would 

have to either become clearing members 

of a DCO or submit such swaps for 

clearing through an existing clearing 

member. A market participant that 

becomes a direct clearing member must 

make a guaranty fund contribution, 

while a market participant that clears its 

swaps through a clearing member may 

pay higher fees if the clearing member 

passes the costs of the guaranty fund 

contribution to its customers. While the 

addition of new clearing members and 

new customers for existing clearing 

members may result in an increase in 

guaranty fund requirements, it should 

be noted that if (1) new clearing 

members are not among the two clearing 

members used to calculate the guaranty 

fund and (2) any new customers trading 

through a clearing member do not 

increase the size of uncollateralized 

risks at either of the two clearing 

members used to calculate the guaranty 

fund, all else held constant, existing 

clearing members may experience a 

decrease in their guaranty fund 

requirement. 

Request for Comment 

The Commission requests comment 

regarding the total amount of additional 

collateral that would be posted due to 

required clearing of the RFR OIS 

covered by this proposed determination. 

The Commission also invites comment 

regarding (1) the cost of capital and 

returns on capital for that collateral, (2) 

the effects of required clearing on the 

capital requirements for financial 

institutions, and (3) the costs and 

benefits associated with operational 

differences related to the 

collateralization of uncleared versus 

cleared swaps. Please supply 

quantifiable data and analysis regarding 

these subjects, if possible. 

3. Benefits of Clearing 

As noted above, there are significant 

benefits to central clearing of swaps. 

These benefits include reducing and 

standardizing counterparty credit risk, 

improving market transparency, and 

promoting access to clearing services. 

Specifically, there are important risk 

mitigation benefits of clearing RFR OIS 

that replace IBOR swaps (which would 

be removed from the clearing 

requirement under the proposal). In 

addition, requiring the central clearing 

of RFR OIS would promote regulatory 

continuity and cross-border 

harmonization of clearing requirements. 

The Commission believes that while 

the requirement to margin uncleared 

swaps mitigates counterparty credit risk, 

such risk is mitigated further for swaps 

that are cleared through a central 

counterparty. Moreover, the proposed 

determination would apply to a larger 

set of market participants than the 

uncleared swaps margin requirements. 

Thus, to the extent that the proposed 

determination to add RFR OIS to the 

clearing requirement leads to increased 

clearing overall, these benefits are likely 

to result. As is the case for the costs 

noted above, it is likely that the use of 

clearing will not increase materially as 

a result of the proposed rule, but 

implementing a clearing requirement 

would help ensure the benefits of the 

proposed rule would continue to be 

realized as market participants continue 

to clear RFR OIS. 

The proposed rule’s requirement that 

certain swaps be cleared is intended to 

ensure that market participants will face 

a DCO, and therefore, will face a highly 

creditworthy counterparty. As discussed 

above, DCOs are some of the most 

creditworthy counterparties in the swap 

market because of the risk management 

tools they have available. The 

Commission recognizes that the 

beneficial value of the proposal to add 

RFR OIS to the clearing requirement 

may be lessened, in part, because the 

swap volumes that will be subject to a 

new clearing requirement are expected 

to be shifting from one set of swaps 

(IBORs) to another (RFRs) rather than a 

straightforward addition of new swap 

products to the clearing requirement.163

Moreover, as noted, these benefits are 

already being realized for the large 

majority of these swaps that are cleared 

voluntarily. 

Request for Comment 

The Commission requests comment 

on whether benefits will result from the 

proposed rule, and, if so, the expected 

magnitude of such benefits. The 

Commission also requests comment on 

whether the proposed rule would 

provide benefits by furthering 

international harmonization of clearing 

requirements. 

D. Costs and Benefits of the Proposed 

Rule as Compared to Alternatives 

The proposed rule is a function of 

both the market importance of these 

products and the fact that they already 

are widely cleared. The Commission 

believes that these interest rate swaps 

should be required to be cleared because 

they are widely used and infrastructure 

for clearing and risk management of 

these swaps already exists. 

Given the Commission’s prior clearing 

requirement determinations, and the 

widespread use of clearing for RFR OIS 

to be added under this proposal, DCOs, 

FCMs, and market participants already 

have experience clearing the types of 

swaps proposed for required clearing. 

Because of the wide use of these swaps 

and their importance to the market, and 

because these swaps are already 

successfully being cleared, the 

Commission is proposing to include 

RFR OIS in the interest rate swap 

clearing requirement. 

The Commission believes that RFR 

OIS should be added to the swap 

clearing requirement under this 

proposed determination after analyzing 

the factors under section 2(h)(2)(D) of 

the CEA, in order to promote 

consistency with its regulatory 

counterparts in other jurisdictions and 

to ensure that the benefits of required 

clearing accrue to the RFR OIS that 

replace IBOR swaps no longer offered 

for clearing. 

The Commission could consider 

alternative implementation scenarios for 

its proposed RFR OIS clearing 

requirements, as discussed above. 

Specifically, the Commission could 

consider: 

i. Whether to remove existing 

requirements to clear USD LIBOR and 

SGD SOR–VWAP swaps 30 days after 

publication of the final rule in the 

Federal Register instead of on July 1, 

2023. The Commission notes that 


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164 It is possible that the level of clearing overall 

may remain similar if the use of swaps referencing 

RFRs replaces the use of swaps referencing IBORs. 

165See CMEG Letter (‘‘CME Clearing currently 

accepts OIS referencing SOFR, SARON, ÖSTR, 

SONIA and TONA . . . . CME Clearing is therefore 

already in a position to support a Clearing 

Requirement in relation to these swaps.’’); LSEG 

(noting RFR OIS that LCH already clears and 

discussing significant recent increases in liquidity 

in certain swaps, particularly JPY TONA and USD 

SOFR); Eurex Letter (‘‘Eurex Clearing has a welldeveloped rule framework, compliance process and 

procedures, and support infrastructure to support 

clearing of swaps referencing the RFRs and already 

offers clearing of these swaps. Eurex Clearing has 

leveraged and will continue to leverage this 

operational capacity for the clearing of swaps 

referencing the RFRs and has the appropriate risk 

management, operations, technology, and 

compliance capabilities in place to continue to 

provide for compliance with all CEA core 

principles for DCOs.’’). See also JSCC Letter (noting 

that JSCC has been clearing JPY TONA OIS since 

2014 and that because ‘‘JPY swap market liquidity 

has already fully transitioned from IRS referencing 

LIBOR to TONA OIS,’’ there is ‘‘no concern for 

DCOs to accept [JPY TONA OIS] for clearing.’’). 166See section V above. 

liquidity in USD LIBOR swaps may 

decline sufficiently over the coming 

months to support removing such swaps 

from the clearing requirement on a date 

earlier than July 1, 2023. 

ii. Whether to delay implementation 

of the proposed requirement to clear 

USD SOFR and SGD SORA OIS until 

July 1, 2023 (or phase-in the compliance 

date) rather than to require compliance 

beginning 30 days after publication of 

the final rule in the Federal Register. 

The Commission is considering this 

alternative in the event that market 

participants have significant concerns 

regarding sufficiency of outstanding 

notional and liquidity (or pricing data) 

to support requiring clearing of USD 

SOFR swaps out to 50 years, and SGD 

SORA swaps out to 10 years, at an 

earlier time. 

The Commission requests comment 

on these implementation alternatives. 

Finally, the Commission may 

consider an alternative scenario in 

which it does not adopt any new 

clearing requirement for RFR OIS. 

Under that alternative, the cost to the 

market would be an increased risk of 

uncleared swaps (and the associated 

financial stability risks) should market 

participants decide to clear less in the 

future. The cost may be significant in 

this instance because of the potential 

effect on the market-wide effort to 

replace IBOR swaps with RFR swaps, 

but may be mitigated given the current 

high level of clearing. The benefit of not 

adopting any new clearing requirements 

would be a savings experienced by 

market participants that would not be 

required to clear new swaps referencing 

an RFR and did not otherwise find it 

beneficial to do so. However, given the 

high rate of voluntary clearing, any cost 

savings may be de minimis. In light of 

this, the Commission may be less likely 

to pursue this alternative without some 

type of significant change in the interest 

rate swap markets. 

E. Section 15(a) Factors 

The Commission anticipates that the 

proposed amendments to add and 

remove certain swaps from the clearing 

requirement will result in a slight 

increase in the already high use of 

clearing, although it is impossible to 

quantify with certainty the extent of that 

increase.164 This section discusses the 

expected results from an overall 

increase, or maintenance at high levels, 

in the use of swap clearing in terms of 

the factors set forth in section 15(a) of 

the CEA. 

1. Protection of Market Participants and 

the Public 

The required clearing of the RFR OIS 

to be added under this proposed rule 

should ensure the reduction of 

counterparty risk for market participants 

that clear those swaps, because they will 

be required to face the DCO rather than 

another market participant that lacks the 

full set of risk management tools that 

the DCO possesses. This also should 

reduce uncertainty in times of market 

stress because, for cleared trades, market 

participants facing a DCO would not be 

concerned with the impact of such 

stress on the solvency of their original 

counterparty. By proposing to require 

clearing of RFR OIS, all of which are 

already available for clearing and 

predominantly cleared voluntarily, the 

Commission aims to further encourage a 

smooth transition away from IBORs. 

More specifically, the registered DCOs 

currently clearing these RFR OIS would 

clear a slightly increased volume of 

swaps that they already understand and 

have experience managing.165 Similarly, 

FCMs may realize slightly increased 

customer and transaction volume as the 

result of the requirement, but would not 

have to simultaneously learn how to 

operationalize clearing for the covered 

interest rate swaps. 

In addition, uncleared swaps subject 

to collateral agreements can be the 

subject of valuation disputes, which 

sometimes require several months or 

longer to resolve. Potential future 

exposures can grow significantly and 

even beyond the amount of initial 

margin posted during that time, leaving 

one of the two counterparties exposed to 

counterparty credit risk. DCOs virtually 

eliminate valuation disputes for cleared 

swaps, as well as the risk that 

uncollateralized exposure can develop 

and accumulate during the time when 

such a dispute would have otherwise 

occurred, thus providing additional 

protection to market participants who 

transact in swaps that are cleared. 

Because most RFR OIS are cleared 

voluntarily, these protections are 

currently being realized. Requiring 

clearing under part 50 of the 

Commission’s regulations would ensure 

that they continue to be realized. 

2. Efficiency, Competitiveness, and 

Financial Integrity of Swap Markets 

Swap clearing, in general, reduces 

uncertainty regarding counterparty risk 

in times of market stress and promotes 

liquidity and efficiency during those 

times. Increased liquidity promotes the 

ability of market participants to limit 

losses by exiting positions effectively 

and efficiently when necessary in order 

to manage risk during a time of market 

stress. In addition, to the extent that 

positions move from facing multiple 

counterparties in the bilateral market to 

being cleared through a smaller number 

of clearinghouses, clearing facilitates 

increased netting. This reduces the 

amount of collateral that a party must 

post in margin accounts. As discussed 

above, in formulating this proposed 

determination, the Commission 

considered a number of specific factors 

that relate to the financial integrity of 

the swap markets. Specifically, as 

discussed above, the Commission 

assessed whether the registered DCOs 

that clear the RFR OIS that are the 

subject of this proposal have the rule 

framework, capacity, operational 

expertise and resources, and credit 

support infrastructure to clear these 

swaps on terms that are consistent with 

the material terms and trading 

conventions on which the contract is 

then traded.166 The Commission also 

considered the resources of DCOs to 

handle additional clearing during 

stressed and non-stressed market 

conditions, as well as the existence of 

reasonable legal certainty in the event of 

a clearing member or DCO insolvency. 

Also, as discussed above, bilateral 

swaps create counterparty risk that may 

lead market participants to discriminate 

among potential counterparties based on 

their creditworthiness. Such 

discrimination is expensive and time 

consuming insofar as market 

participants must conduct due diligence 

in order to evaluate a potential 

counterparty’s creditworthiness. 

Requiring certain types of swaps to be 

cleared reduces the number of 

transactions for which such due 


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167 Issues related to competition also are 

considered in sections V and VIII. 

168For example, there is a small risk of a sudden 

price move so large that a counterparty would be 

unable to post sufficient variation margin to cover 

the loss, which may exceed the amount of initial 

margin posted, and could be forced into default. 

169Sound risk management practices are critical 

for all DCOs, especially those offering clearing for 

interest rate swaps given the size and 

interconnectedness of the global interest rate swap 

market, as presented throughout this proposal. The 

Commission considered whether each regulation 

§ 39.5(b) submission under review was consistent 

with the DCO core principles. In particular, the 

Commission considered the DCO submissions in 

light of Core Principle D, which relates to risk 

management. See also section V.C above for a 

discussion of the effect on the mitigation of 

systemic risk in the interest rate swap market, as 

well as the protection of market participants during 

insolvency events at either the clearing member or 

DCO level. 

170The G20 Leaders Statement made in 

Pittsburgh is available at http://www.g20.

utoronto.ca/2009/2009communique0925.html. 

171See Dietrich Domanski, et al., ‘‘Central 

clearing: Trends and current issues,’’ BIS Quarterly 

Review, Dec. 2015, available at https://www.bis.org/ 

publ/qtrpdf/r_qt1512g.pdf; U.S. Department of the 

Treasury, Office of Financial Research, Financial 

Stability Report, at 35 (Nov. 2018), available at 

https://www.federalreserve.gov/publications/files/ 

financial-stability-report-201811.pdf; Umar 

Faruqui, et al., ‘‘Clearing risks in OTC derivatives 

markets: the CCP-bank nexus,’’ at 77–79 (2018), 

available at https://www.bis.org/publ/qtrpdf/r_

qt1812h.pdf. 

172The G20 Leaders Statement made in 

Pittsburgh is available at http://

www.g20.utoronto.ca/2009/2009communique0925.

html. 

173 5 U.S.C. 601 et seq. 

174Section 2(e) of the CEA, 7 U.S.C. 2(e). 

175Opting Out of Segregation, 66 FR 20740, 20743 

(Apr. 25, 2001). 

176 44 U.S.C. 3507(d). 

diligence is necessary, thereby 

contributing to the efficiency of the 

swap markets. In proposing a clearing 

requirement for RFR OIS, the 

Commission must consider the effect on 

competition, including appropriate fees 

and charges applied to clearing. There 

are a number of potential outcomes that 

may result from required clearing. Some 

of these outcomes may impose costs, 

such as if a DCO possessed market 

power and exercised that power in an 

anticompetitive manner, and some of 

the outcomes would be positive, such as 

if the clearing requirement facilitated a 

stronger entry opportunity for 

competitors.167 Because most of these 

swaps are cleared voluntarily, these 

effects on efficiency, competitiveness, 

and financial integrity are, to a large 

degree, currently being realized. 

Requiring clearing would ensure that 

they continue to be realized. 

3. Price Discovery 

Clearing, in general, encourages better 

price discovery because it eliminates the 

importance of counterparty 

creditworthiness in pricing swaps 

cleared through a given DCO. By making 

the counterparty creditworthiness of all 

swaps of a certain type essentially the 

same, prices should reflect factors 

related to the terms of the swap, rather 

than the idiosyncratic risk posed by the 

entities trading it. Because most of these 

swaps are cleared voluntarily, these 

effects on price discovery are currently 

being realized. Requiring clearing would 

ensure that they continue to be realized. 

4. Sound Risk Management Practices 

If a firm enters into uncleared and 

uncollateralized swaps to hedge certain 

positions and then the counterparty to 

those swaps defaults unexpectedly, the 

firm could be left with large outstanding 

exposures. Even for uncleared swaps 

that are subject to the Commission’s 

uncleared swap margin regulations, 

some counterparty credit risk 

remains.168 As stated above, when a 

swap is cleared the DCO becomes the 

counterparty facing each of the two 

original participants in the swap. This 

standardizes and reduces counterparty 

risk for each of the two original 

participants. To the extent that a market 

participant’s hedges comprise swaps 

that are required to be cleared and 

would not be cleared voluntarily, the 

requirement enhances their risk 

management practices by reducing their 

counterparty risk. 

In addition, to the extent that required 

clearing reduces or deters a potential 

increase in bilateral trading, it reduces 

the complexity of unwinding or 

transferring swap positions from large 

entities that default. Procedures for 

transfer of swap positions and 

mutualization of losses among DCO 

members are already in place, and the 

Commission anticipates that they are 

much more likely to function in a 

manner that enables rapid transfer of 

defaulted positions than legal processes 

that would surround the enforcement of 

bilateral contracts for uncleared 

swaps.169

Central clearing has evolved since the 

2009 G20 Pittsburgh Summit, when G20 

leaders committed to central clearing of 

all standardized swaps.170 The 

percentage of the swap market that is 

centrally cleared has increased 

significantly, clearinghouses have 

expanded their offerings, and the range 

of banks and other financial institutions 

that submit swaps to clearinghouses has 

broadened. At the same time, the 

numbers of swap clearinghouses and 

swap clearing members has remained 

highly concentrated. This has created 

concerns about a concentration of credit 

and liquidity risk at clearinghouses that 

could have systemic implications.171

However, the Commission believes 

that DCOs are capable of risk managing 

the swaps that are the subject of this 

proposed determination. Moreover, 

because most of the RFR OIS to be 

added to the clearing requirement under 

this proposed determination are already 

cleared voluntarily, the Commission 

anticipates that the extent to which this 

proposed determination would increase 

the credit risk and liquidity risk that is 

concentrated at DCOs would be 

relatively small. The Commission 

requests comments on this issue. 

5. Other Public Interest Considerations 

In September 2009, the President and 

other leaders of the G20 nations met in 

Pittsburgh and committed to a program 

of action that includes, among other 

things, central clearing of all 

standardized swaps.172 The Commission 

believes that this clearing requirement 

proposal would be consistent with the 

G20’s commitment and would reflect 

the Commission’s ongoing confidence in 

central clearing for swaps and other 

derivatives. As discussed throughout 

this proposal, central clearing of 

derivatives by DCOs can serve the 

public interest in numerous ways. 

VIII. Related Matters 

A. Regulatory Flexibility Act 

The Regulatory Flexibility Act (RFA) 

requires agencies to consider whether 

the rules they propose will have a 

significant economic impact on a 

substantial number of small entities 

and, if so, provide a regulatory 

flexibility analysis with respect to such 

impact.173 This proposed determination 

will not affect any small entities, as the 

RFA uses that term. Only eligible 

contract participants (ECPs) may enter 

into swaps, unless the swap is listed on 

a designated contract market (DCM),174

and the Commission has determined 

that ECPs are not small entities for 

purposes of the RFA.175 This proposed 

determination would affect only ECPs 

because all persons that are not ECPs are 

required to execute their swaps on a 

DCM, and all contracts executed on a 

DCM must be cleared by a DCO, as 

required by statute and regulation, not 

the operation of any clearing 

requirement determination. Therefore, 

the Chairman, on behalf of the 

Commission, hereby certifies pursuant 

to 5 U.S.C. 605(b) that this proposed 

rulemaking will not have a significant 

economic impact on a substantial 

number of small entities. 

B. Paperwork Reduction Act 

The Paperwork Reduction Act 

(PRA) 176 imposes certain requirements 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
Federal Register / Vol. 87, No. 104 / Tuesday, May 31, 2022 / Proposed Rules 32933 

177Section 15(b) of the CEA, 7 U.S.C. 15(b). 

on Federal agencies, including the 

Commission, in connection with 

conducting or sponsoring any collection 

of information as defined by the PRA. 

This rulemaking will not require a new 

collection of information from any 

persons or entities, and there are no 

existing information collections related 

to this proposal. 

C. Antitrust Considerations 

Section 15(b) of the Act requires the 

Commission to take into consideration 

the public interest to be protected by the 

antitrust laws and endeavor to take the 

least anticompetitive means of 

achieving the objectives of the Act, as 

well as the policies and purposes of the 

Act, in issuing any order or adopting 

any Commission rule or regulation 

(including any exemption under section 

4(c) or 4c(b)), or in requiring or 

approving any bylaw, rule, or regulation 

of a contract market or registered futures 

association established pursuant to 

section 17 of the Act.177 The 

Commission believes that the public 

interest to be protected by the antitrust 

laws is generally to protect competition. 

The Commission requests comment on 

whether the proposal implicates any 

other specific public interest to be 

protected by the antitrust laws. 

The Commission has considered the 

proposal to determine whether it is 

anticompetitive and has preliminarily 

identified no anticompetitive effects. 

The Commission requests comment on 

whether the proposal is anticompetitive 

and, if it is, what the anticompetitive 

effects are. 

Because the Commission has 

preliminarily determined that the 

proposal is not anticompetitive and has 

no anticompetitive effects, the 

Commission has not identified any less 

anticompetitive means of achieving the 

purposes of the Act. The Commission 

requests comment on whether there are 

less anticompetitive means of achieving 

the relevant purposes of the Act. 

List of Subjects in 17 CFR Part 50 

Business and industry, Clearing, 

Swaps. 

For the reasons set forth in the 

preamble, the Commodity Futures 

Trading Commission proposes to amend 

17 CFR part 50 as follows: 

PART 50—CLEARING REQUIREMENT 

AND RELATED RULES 

■ 1. The authority citation for part 50 

continues to read as follows: 

Authority: 7 U.S.C. 2(h), 6(c), and 7a–1, 

as amended by Pub. L. 111–203, 124 Stat. 

1376. 

[The following amendments would be 

effective 30 days after publication of the 

final rule.] 

■ 2. In § 50.4, revise paragraph (a) to 

read as follows: 

§ 50.4 Classes of swaps required to be 

cleared. 

(a) Interest rate swaps. Swaps that 

have the following specifications are 

required to be cleared under section 

2(h)(1) of the Act, and shall be cleared 

pursuant to the rules of any derivatives 

clearing organization eligible to clear 

such swaps under § 39.5(a) of this 

chapter. 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
32934 Federal Register / Vol. 87, No. 104 / Tuesday, May 31, 2022 / Proposed Rules 

TABLE 1 TO

PARAGRAPH (a) 

Specification Fixed-to-floating swap class 

1. Currency .................. Australian Dollar 

(AUD).

Canadian Dollar 

(CAD).

Euro (EUR) ....... Hong Kong Dollar (HKD). Mexican Peso (MXN). Norwegian Krone (NOK). Polish Zloty (PLN). Singapore Dollar (SGD). Swedish Krona (SEK). U.S. Dollar (USD). 

2. Floating Rate Indexes. BBSW ............... CDOR ............... EURIBOR ......... HIBOR .............. TIIE–BANXICO NIBOR .............. WIBOR ............. SOR–VWAP ..... STIBOR ............ LIBOR. 3. Stated Termination 

Date Range.

28 days to 30 

years.

28 days to 30 

years.

28 days to 50 

years.

28 days to 10 

years.

28 days to 21 

years.

28 days to 10 

years.

28 days to 10 

years.

28 days to 10 

years.

28 days to 15 

years.

28 days to 50 

years. 

4. Optionality ............... No ..................... No ..................... No ..................... No ..................... No ..................... No ..................... No ..................... No ..................... No ..................... No. 5. Dual Currencies ....... No ..................... No ..................... No ..................... No ..................... No ..................... No ..................... No ..................... No ..................... No ..................... No. 6. Conditional Notional 

Amounts.

No ..................... No ..................... No ..................... No ..................... No ..................... No ..................... No ..................... No ..................... No ..................... No. 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
Federal Register / Vol. 87, No. 104 / Tuesday, May 31, 2022 / Proposed Rules 32935 

TABLE 2 TO PARAGRAPH (a) 

Specification Basis swap class 

1. Currency .................................... Australian Dollar (AUD) ................ Euro (EUR) ................................... U.S. Dollar (USD). 

2. Floating Rate Indexes ................ BBSW ........................................... EURIBOR ..................................... LIBOR. 

3. Stated Termination Date Range 28 days to 30 years ...................... 28 days to 50 years ...................... 28 days to 50 years. 

4. Optionality .................................. No ................................................. No ................................................. No. 

5. Dual Currencies ......................... No ................................................. No ................................................. No. 

6. Conditional Notional Amounts ... No ................................................. No ................................................. No. 

TABLE 3 TO PARAGRAPH (a) 

Specification Forward rate agreement class 

1. Currency ................. Euro (EUR) ............... Polish Zloty (PLN) ..... Norwegian Krone 

(NOK).

Swedish Krona (SEK) U.S. Dollar (USD). 

2. Floating Rate Indexes.EURIBOR .................. WIBOR ...................... NIBOR ....................... STIBOR ..................... LIBOR. 

3. Stated Termination 

Date Range.

3 days to 3 years ...... 3 days to 2 years ...... 3 days to 2 years ...... 3 days to 3 years ...... 3 days to 3 years. 

4. Optionality .............. No ............................. No ............................. No ............................. No ............................. No. 

5. Dual Currencies ..... No ............................. No ............................. No ............................. No ............................. No. 

6. Conditional Notional 

Amounts.

No ............................. No ............................. No ............................. No ............................. No. 

TABLE 4 TO PARAGRAPH (a) 

Specification Overnight index swap class 

1. Currency ..................... Australian Dollar 

(AUD).

Canadian 

Dollar 

(CAD).

Euro (EUR) Singapore 

Dollar 

(SGD).

Sterling 

(GBP).

Swiss Franc 

(CHF).

U.S. Dollar 

(USD).

U.S. Dollar 

(USD).

Yen (JPY). 

2. Floating Rate Indexes AONIA–OIS ........ CORRA– 

OIS.

ÖSTR ......... SORA ......... SONIA ........ SARON ...... FedFunds ... SOFR ......... TONA. 

3. Stated Termination 

Date Range.

7 days to 2 years 7 days to 2 

years.

7 days to 3 

years.

7 days to 10 

years.

7 days to 50 

years.

7 days to 30 

years.

7 days to 3 

years.

7 days to 50 

years.

7 days to 30 

years. 

4. Optionality .................. No ...................... No .............. No .............. No .............. No .............. No .............. No .............. No .............. No. 

5. Dual Currencies ......... No ...................... No .............. No .............. No .............. No .............. No .............. No .............. No .............. No. 

6. Conditional Notional 

Amounts.

No ...................... No .............. No .............. No .............. No .............. No .............. No .............. No .............. No. 

* * * * * 

■ 3. Revise § 50.26 to read as follows: 

§ 50.26 Swap clearing requirement 

compliance dates. 

(a) Compliance dates for interest rate 

swap classes. The compliance dates for 

swaps that are required to be cleared 

under § 50.4(a) are specified in the 

following table. 

TABLE 1 TO PARAGRAPH (a) 

Swap asset class Swap class subtype Currency and floating 

rate index 

Stated termination 

date range Clearing requirement compliance date 

Interest Rate Swap .... Fixed-to-Floating ........ Euro (EUR) EURIBOR 28 days to 50 years ... Category 1 entities March 11, 2013. All nonCategory 2 entities June 10, 2013. Category 2 entities September 9, 2013. 

Interest Rate Swap .... Fixed-to-Floating ........ U.S. Dollar (USD) 

LIBOR.

28 days to 50 years ... Category 1 entities March 11, 2013. All nonCategory 2 entities June 10, 2013. Category 2 entities September 9, 2013. 

Interest Rate Swap .... Fixed-to-Floating ........ Australian Dollar 

(AUD) BBSW.

28 days to 30 years ... All entities December 13, 2016. 

Interest Rate Swap .... Fixed-to-Floating ........ Canadian Dollar 

(CAD) CDOR.

28 days to 30 years ... All entities July 10, 2017. 

Interest Rate Swap .... Fixed-to-Floating ........ Hong Kong Dollar 

(HKD) HIBOR.

28 days to 10 years ... All entities August 30, 2017. 

Interest Rate Swap .... Fixed-to-Floating ........ Mexican Peso (MXN) 

TIIE–BANXICO.

28 days to 21 years ... All entities December 13, 2016. 

Interest Rate Swap .... Fixed-to-Floating ........ Norwegian Krone 

(NOK) NIBOR.

28 days to 10 years ... All entities April 10, 2017. 

Interest Rate Swap .... Fixed-to-Floating ........ Polish Zloty (PLN) 

WIBOR.

28 days to 10 years ... All entities April 10, 2017. 

Interest Rate Swap .... Fixed-to-Floating ........ Singapore Dollar 

(SGD) SOR–VWAP.

28 days to 10 years ... All entities October 15, 2018. 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
32936 Federal Register / Vol. 87, No. 104 / Tuesday, May 31, 2022 / Proposed Rules 

TABLE 1 TO PARAGRAPH (a)—Continued 

Swap asset class Swap class subtype Currency and floating 

rate index 

Stated termination 

date range Clearing requirement compliance date 

Interest Rate Swap .... Fixed-to-Floating ........ Swedish Krona (SEK) 

STIBOR.

28 days to 15 years ... All entities April 10, 2017. 

Interest Rate Swap .... Basis .......................... Euro (EUR) EURIBOR 28 days to 50 years ... Category 1 entities March 11, 2013. All nonCategory 2 entities June 10, 2013. Category 2 entities September 9, 2013. 

Interest Rate Swap .... Basis .......................... U.S. Dollar (USD) 

LIBOR.

28 days to 50 years ... Category 1 entities March 11, 2013. All nonCategory 2 entities June 10, 2013. Category 2 entities September 9, 2013. 

Interest Rate Swap .... Basis .......................... Australian Dollar 

(AUD) BBSW.

28 days to 30 years ... All entities December 13, 2016. 

Interest Rate Swap .... Forward Rate Agreement.Euro (EUR) EURIBOR 3 days to 3 years ....... Category 1 entities March 11, 2013. All nonCategory 2 entities June 10, 2013. Category 2 entities September 9, 2013. 

Interest Rate Swap .... Forward Rate Agreement.U.S. Dollar (USD) 

LIBOR.

3 days to 3 years ....... Category 1 entities March 11, 2013. All nonCategory 2 entities June 10, 2013. Category 2 entities September 9, 2013. 

Interest Rate Swap .... Forward Rate Agreement.Polish Zloty (PLN) 

WIBOR.

3 days to 2 years ....... All entities April 10, 2017. 

Interest Rate Swap .... Forward Rate Agreement.Norwegian Krone 

(NOK) NIBOR.

3 days to 2 years ....... All entities April 10, 2017. 

Interest Rate Swap .... Forward Rate Agreement.Swedish Krona (SEK) 

STIBOR.

3 days to 3 years ....... All entities April 10, 2017. 

Interest Rate Swap .... Overnight Index Swap Euro (EUR) ÖSTR ...... 7 days to 3 years ....... All entities [30 DAYS AFTER DATE OF 

PUBLICATION OF FINAL RULE IN THE 

Federal Register]. 

Interest Rate Swap .... Overnight Index Swap Singapore Dollar 

(SGD) SORA.

7 days to 10 years ..... All entities [30 DAYS AFTER DATE OF 

PUBLICATION OF FINAL RULE IN THE 

Federal Register]. 

Interest Rate Swap .... Overnight Index Swap Sterling (GBP) SONIA 7 days to 2 years ....... Category 1 entities March 11, 2013. All nonCategory 2 entities June 10, 2013. Category 2 entities September 9, 2013. 

2 years + 1 day to 3 

years.

All entities December 13, 2016. 

3 years + 1 day to 50 

years.

All entities [30 DAYS AFTER DATE OF 

PUBLICATION OF FINAL RULE IN THE 

Federal Register]. 

Interest Rate Swap .... Overnight Index Swap Swiss Franc (CHF) 

SARON.

7 days to 30 years ..... All entities [30 DAYS AFTER DATE OF 

PUBLICATION OF FINAL RULE IN THE 

Federal Register]. 

Interest Rate Swap .... Overnight Index Swap U.S. Dollar (USD) 

FedFunds.

7 days to 2 years ....... Category 1 entities March 11, 2013. All nonCategory 2 entities June 10, 2013. Category 2 entities September 9, 2013. 

2 years + 1 day to 3 

years.

All entities December 13, 2016. 

Interest Rate Swap .... Overnight Index Swap U.S. Dollar (USD) 

SOFR.

7 days to 50 years ..... All entities [30 DAYS AFTER DATE OF 

PUBLICATION OF FINAL RULE IN THE 

Federal Register]. 

Interest Rate Swap .... Overnight Index Swap Australian Dollar 

(AUD) AONIA–OIS.

7 days to 2 years ....... All entities December 13, 2016. 

Interest Rate Swap .... Overnight Index Swap Canadian Dollar 

(CAD) CORRA–OIS.

7 days to 2 years ....... All entities July 10, 2017. 

Interest Rate Swap .... Overnight Index Swap Yen (JPY) TONA ....... 7 days to 30 years ..... All entities [30 DAYS AFTER DATE OF 

PUBLICATION OF FINAL RULE IN THE 

Federal Register]. 

(b) Compliance dates for credit 

default swap classes. The compliance 

dates for swaps that are required to be 

cleared under § 50.4(b) are specified in 

the following table. 

TABLE 2 TO PARAGRAPH (b) 

Swap asset class Swap class subtype Indices Tenor Clearing requirement compliance date 

Credit Default Swap ....... North American 

untranched CDS indices.

CDX.NA.IG .................... 3Y, 5Y, 7Y, 

10Y.

Category 1 entities March 11, 2013. All non-Category 2 entities June 10, 2013. Category 2 entities September 9, 2013. 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
Federal Register / Vol. 87, No. 104 / Tuesday, May 31, 2022 / Proposed Rules 32937 

TABLE 2 TO PARAGRAPH (b)—Continued 

Swap asset class Swap class subtype Indices Tenor Clearing requirement compliance date 

Credit Default Swap ....... North American 

untranched CDS indices.

CDX.NA.HY .................. 5Y .............. Category 1 entities March 11, 2013. All non-Category 2 entities June 10, 2013. Category 2 entities September 9, 2013. 

Credit Default Swap ....... European untranched 

CSD indices.

iTraxx Europe ................ 5Y, 10Y ..... Category 1 entities April 26, 2013. Category 2 

entities July 25, 2013. All non-Category 2 entities October 23, 2013. 

Credit Default Swap ....... European untranched 

CSD indices.

iTraxx Europe Crossover.5Y .............. Category 1 entities April 26, 2013. Category 2 

entities July 25, 2013. All non-Category 2 entities October 23, 2013. 

Credit Default Swap ....... European untranched 

CSD indices.

iTraxx Europe HiVol ...... 5Y .............. Category 1 entities April 26, 2013. Category 2 

entities July 25, 2013. All non-Category 2 entities October 23, 2013. 

[The following amendments would be 

effective July 1, 2023.] 

■ 4. In § 50.4 revise paragraph (a) to read 

as follows: 

§ 50.4 Classes of swaps required to be 

cleared. 

(a) Interest rate swaps. Swaps that 

have the following specifications are 

required to be cleared under section 

2(h)(1) of the Act, and shall be cleared 

pursuant to the rules of any derivatives 

clearing organization eligible to clear 

such swaps under § 39.5(a) of this 

chapter. 

TABLE 1 TO PARAGRAPH (a) 

Specification Fixed-to-floating swap class 

1. Currency ............................ Australian 

Dollar 

(AUD).

Canadian Dollar (CAD).Euro (EUR) ... Hong Kong 

Dollar 

(HKD).

Mexican Peso 

(MXN).

Norwegian 

Krone 

(NOR).

Polish Zloty 

(PLN).

Swedish 

Krona 

(SEK). 

2. Floating Rate Indexes ........ BBSW ........... CDOR ........... EURIBOR ...... HIBOR ........... TIIE– 

BANXICO.

NIBOR ........... WIBOR .......... STIBOR. 

3. Stated Termination Date 

Range.

28 days to 30 

years.

28 days to 30 

years.

28 days to 50 

years.

28 days to 10 

years.

28 days to 21 

years.

28 days to 10 

years.

28 days to 10 

years.

28 days to 15 

years. 

4. Optionality .......................... No ................. No ................. No ................. No ................. No ................. No ................. No ................. No. 

5. Dual Currencies ................. No ................. No ................. No ................. No ................. No ................. No ................. No ................. No. 

6. Conditional Notional 

Amounts.

No ................. No ................. No ................. No ................. No ................. No ................. No ................. No. 

TABLE 2 TO PARAGRAPH (a) 

Specification Basis swap class 

1. Currency ........................................................ Australian Dollar (AUD) .................................... Euro (EUR). 

2. Floating Rate Indexes ................................... BBSW ............................................................... EURIBOR. 

3. Stated Termination Date Range ................... 28 days to 30 years ......................................... 28 days to 50 years. 

4. Optionality ...................................................... No ..................................................................... No. 

5. Dual Currencies ............................................. No ..................................................................... No. 

6. Conditional Notional Amounts ....................... No ..................................................................... No. 

TABLE 3 TO PARAGRAPH (a) 

Specification Forward rate agreement class 

1. Currency ........................ Euro (EUR) ....................... Polish Zloty (PLN) ............. Norwegian Krone (NOK) ... Swedish Krona (SEK). 

2. Floating Rate Indexes ... EURIBOR .......................... WIBOR .............................. NIBOR ............................... STIBOR. 

3. Stated Termination Date 

Range.

3 days to 3 years .............. 3 days to 2 years .............. 3 days to 2 years .............. 3 days to 3 years. 

4. Optionality ..................... No ...................................... No ...................................... No ...................................... No. 

5. Dual Currencies ............ No ...................................... No ...................................... No ...................................... No. 

6. Conditional Notional 

Amounts.

No ...................................... No ...................................... No ...................................... No. 

TABLE 4 TO PARAGRAPH (a) 

Specification Overnight index swap class 

1. Currency ...................... Australian Dollar (AUD).Canadian 

Dollar 

(CAD).

Euro (EUR) Singapore 

Dollar 

(SGD).

Sterling 

(GBP).

Swiss Franc 

(CHF).

U.S. Dollar 

(USD).

U.S. Dollar 

(USD).

Yen (JPY). 

2. Floating Rate Indexes .. AONIA–OIS .... CORRA– 

OIS.

ÖSTR .......... SORA ......... SONIA ........ SARON ...... FedFunds ... SOFR ......... TONA. 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
32938 Federal Register / Vol. 87, No. 104 / Tuesday, May 31, 2022 / Proposed Rules 

TABLE 4 TO PARAGRAPH (a)—Continued 

Specification 

3. Stated Termination 

Date Range.

7 days to 2 

years.

7 days to 2 

years.

7 days to 3 

years.

7 days to 10 

years.

7 days to 50 

years.

7 days to 30 

years.

7 days to 3 

years.

7 days to 50 

years.

7 days to 30 

years. 

4. Optionality .................... No ................... No .............. No ............... No ............... No .............. No ............... No ............... No .............. No. 

5. Dual Currencies ........... No ................... No ............... No ............... No .............. No ............... No ............... No .............. No ............... No. 

6. Conditional Notional 

Amounts.

No ................... No ............... No .............. No ............... No ............... No .............. No ............... No ............... No. 

* * * * * 

■ 5. In § 50.26, revise paragraph (a) to 

read as follows: 

§ 50.26 Swap clearing requirement 

compliance dates. 

(a) Compliance dates for interest rate 

swap classes. The compliance dates for 

swaps that are required to be cleared 

under § 50.4(a) are specified in the 

following table. 

TABLE 1 TO PARAGRAPH (a) 

Swap asset class Swap class subtype Currency and floating 

rate index 

Stated termination 

date range Clearing requirement compliance date 

Interest Rate Swap .... Fixed-to-Floating ........ Euro (EUR) EURIBOR 28 days to 50 years ... Category 1 entities March 11, 2013. All nonCategory 2 entities June 10, 2013. Category 2 entities September 9, 2013. 

Interest Rate Swap .... Fixed-to-Floating ........ Australian Dollar 

(AUD) BBSW.

28 days to 30 years ... All entities December 13, 2016. 

Interest Rate Swap .... Fixed-to-Floating ........ Canadian Dollar 

(CAD) CDOR.

28 days to 30 years ... All entities July 10, 2017. 

Interest Rate Swap .... Fixed-to-Floating ........ Hong Kong Dollar 

(HKD) HIBOR.

28 days to 10 years ... All entities August 30, 2017. 

Interest Rate Swap .... Fixed-to-Floating ........ Mexican Peso (MXN) 

TIIE–BANXICO.

28 days to 21 years ... All entities December 13, 2016. 

Interest Rate Swap .... Fixed-to-Floating ........ Norwegian Krone 

(NOK) NIBOR.

28 days to 10 years ... All entities April 10, 2017. 

Interest Rate Swap .... Fixed-to-Floating ........ Polish Zloty (PLN) 

WIBOR.

28 days to 10 years ... All entities April 10, 2017. 

Interest Rate Swap .... Fixed-to-Floating ........ Swedish Krona (SEK) 

STIBOR.

28 days to 15 years ... All entities April 10, 2017. 

Interest Rate Swap .... Basis .......................... Euro (EUR) EURIBOR 28 days to 50 years ... Category 1 entities March 11, 2013. All nonCategory 2 entities June 10, 2013. Category 2 entities September 9, 2013. 

Interest Rate Swap .... Basis .......................... Australian Dollar 

(AUD) BBSW.

28 days to 30 years ... All entities December 13, 2016. 

Interest Rate Swap .... Forward Rate Agreement.Euro (EUR) EURIBOR 3 days to 3 years ....... Category 1 entities March 11, 2013. All nonCategory 2 entities June 10, 2013. Category 2 entities September 9, 2013. 

Interest Rate Swap .... Forward Rate Agreement.Polish Zloty (PLN) 

WIBOR.

3 days to 2 years ....... All entities April 10, 2017. 

Interest Rate Swap .... Forward Rate Agreement.Norwegian Krone 

(NOK) NIBOR.

3 days to 2 years ....... All entities April 10, 2017. 

Interest Rate Swap .... Forward Rate Agreement.Swedish Krona (SEK) 

STIBOR.

3 days to 3 years ....... All entities April 10, 2017. 

Interest Rate Swap .... Overnight Index Swap Euro (EUR) ÖSTR ...... 7 days to 3 years ....... All entities [30 DAYS AFTER DATE OF 

PUBLICATION OF FINAL RULE IN THE 

Federal Register.] 

Interest Rate Swap .... Overnight Index Swap Singapore Dollar 

(SGD) SORA.

7 days to 10 years ..... All entities [30 DAYS AFTER DATE OF 

PUBLICATION OF FINAL RULE IN THE 

Federal Register.] 

Interest Rate Swap .... Overnight Index Swap Sterling (GBP) SONIA 7 days to 2 years ....... Category 1 entities March 11, 2013. All nonCategory 2 entities June 10, 2013. Category 2 entities September 9, 2013. 

.................................... .................................... .................................... 2 years + 1 day to 3 

years.

All entities December 13, 2016. 

.................................... .................................... .................................... 3 years + 1 day to 50 

years.

All entities [30 DAYS AFTER DATE OF 

PUBLICATION OF FINAL RULE IN THE 

Federal Register.] 

Interest Rate Swap .... Overnight Index Swap Swiss Franc (CHF) 

SARON.

7 days to 30 years ..... All entities [30 DAYS AFTER DATE OF 

PUBLICATION OF FINAL RULE IN THE 

Federal Register.] 

Interest Rate Swap .... Overnight Index Swap U.S. Dollar (USD) 

FedFunds.

7 days to 2 years ....... Category 1 entities March 11, 2013. All nonCategory 2 entities June 10, 2013. Category 2 entities September 9, 2013. 

.................................... .................................... .................................... 2 years + 1 day to 3 

years.

All entities December 13, 2016. 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
Federal Register / Vol. 87, No. 104 / Tuesday, May 31, 2022 / Proposed Rules 32939 

TABLE 1 TO PARAGRAPH (a)—Continued 

Swap asset class Swap class subtype Currency and floating 

rate index 

Stated termination 

date range Clearing requirement compliance date 

Interest Rate Swap .... Overnight Index Swap U.S. Dollar (USD) 

SOFR.

7 days to 50 years ..... All entities [30 DAYS AFTER DATE OF 

PUBLICATION OF FINAL RULE IN THE 

Federal Register.] 

Interest Rate Swap .... Overnight Index Swap Australian Dollar 

(AUD) AONIA–OIS.

7 days to 2 years ....... All entities December 13, 2016. 

Interest Rate Swap .... Overnight Index Swap Canadian Dollar 

(CAD) CORRA–OIS.

7 days to 2 years ....... All entities July 10, 2017. 

Interest Rate Swap .... Overnight Index Swap Yen (JPY) TONA ....... 7 days to 30 years ..... All entities [30 DAYS AFTER DATE OF 

PUBLICATION OF FINAL RULE IN THE 

Federal Register.] 

* * * * * 

Issued in Washington, DC, on May 11, 

2022, by the Commission. 

Christopher Kirkpatrick, 

Secretary of the Commission. 

Note: The following appendices will 

not appear in the Code of Federal 

Regulations. 

Appendices to Clearing Requirement 

Determination Under Section 2(h) of the 

Commodity Exchange Act for Interest 

Rate Swaps To Account for the 

Transition From LIBOR and Other 

IBORs to Alternative Reference Rates— 

Commission Voting Summary and 

Commissioner’s Statement 

Appendix 1—Commission Voting 

Summary 

On this matter, Chairman Behnam and 

Commissioners Johnson, Goldsmith Romero, 

Mersinger, and Pham voted in the 

affirmative. No Commissioner noted in the 

negative. 

Appendix 2—Statement of 

Commissioner Christy Goldsmith 

Romero 

The amendments the Commission 

proposes today support initiatives designed 

to reduce risk posed by reliance on the 

London Interbank Offered Rate (LIBOR), and 

other interbank offered rates (IBORs), as 

benchmark reference rates. A decade ago, 

allegations of manipulation of LIBOR led to 

government investigations. In the years since, 

regulators in the U.S. and abroad have 

recognized the need to replace LIBOR with 

benchmarks that promote market integrity 

and carry far less risk. However, it has always 

been recognized that this transition would be 

a complex and lengthy undertaking. As a 

result of significant coordinated efforts across 

the public and private sectors, great progress 

has been made in the transition to alternative 

reference rates that are less susceptible to 

manipulation. I commend Chairman Behnam 

for his steadfast leadership in pursuing a 

successful transition away from LIBOR. I 

commend the Commission’s staff for their 

steadfast efforts to be thoughtful, careful and 

comprehensive at each step of the transition, 

including the step that brings us here today. 

I will support the Notice of Proposed 

Rulemaking to amend the swap clearing 

requirement to account for the market shift 

to alternative reference rates that would 

significantly limit risk. This step would add 

to the successful progress in, and the 

Commission’s commitment to, a smooth 

transition away from LIBOR. 

Sound functioning benchmark rates 

promote the stability and integrity of 

derivatives markets. The Commission and its 

staff have worked closely with regulatory 

counterparts, in the U.S. and abroad, to 

support and harmonize initiatives to decrease 

reliance on IBORs and to encourage market 

adoption of overnight, nearly risk-free 

reference rates (RFRs). The Commission’s 

proposal recognizes that liquidity in IBORlinked interest rate swaps has continued to 

transition to RFRs, as IBORs are discontinued 

or become nonrepresentative. The proposal 

also recognizes that, in light of U.S.-led 

initiatives including SOFR First, there is 

decreasing market reliance on USD LIBOR— 

and significant liquidity in, and voluntary 

clearing of, overnight index swaps (OIS) 

referencing the Secured Overnight Financing 

Rate (SOFR). 

I support the objective of aligning the 

Commission’s approach with that of its 

regulatory counterparts in other jurisdictions 

who are similarly in the process of revisiting 

their clearing obligations to account for the 

transition away from LIBOR. International 

coordination is necessary for a successful 

transition to reduce benchmark-related risk. 

International coordination also will help to 

ensure that central clearing remains, globally, 

a pillar of post-crisis financial regulatory 

reform. 

I thank the Commission’s staff for all of 

their detailed and comprehensive work on 

the proposal, and look forward to reviewing 

the public comments provided in response. 

[FR Doc. 2022–10490 Filed 5–27–22; 8:45 am] 

BILLING CODE 6351–01–P 


khammond on DSKJM1Z7X2PROD with PROPOSALS2