Capitolis Migrates Legacy Libor Swaptions for its Dealer Network

Financial technology firm Capitolis has completed its run of multilateral exercises to transition legacy USD Libor-referenced swaptions to vanilla SOFR replacements for 17 global dealers, eliminating the operational burden associated with the expiry of legacy swaptions.

Concerns about pricing legacy USD Libor swaptions emerged in 2020, when clearing houses transitioned to SOFR discounting for swaps, moving away from Fed Funds, leading to a bifurcation in the USD swaps market. This led to new complexity and increased time demands for rates volatility desks, especially since major clearing houses stopped support for clearing exercised legacy Libor swaptions on June 30 this year.

In response to client demand, Capitolis and Capitalab facilitated the multilateral switching of over 17,000 legacy Libor swaptions for nine dealers on its network. As a result, market participants are left with significantly lower operational risks and complexity and a cleaner and simpler book of vanilla SOFR swaptions.

The few remaining Libor swaptions in the market can be tackled by ad hoc cycles based on demand, Capitolis says

“This initiative demonstrates the strength of collaboration across the industry and the power of innovation to solve real-world problems,” says Gavin Jackson, co-head of portfolio optimisation, Capitolis.

Yashodeep Honmane, head of US Rates options, Barclays, adds, “[Capitolis’] multilateral solution delivered immediate operational relief, streamlined our swaptions portfolio ahead of the June 2025 clearinghouse cut-off, and drove meaningful efficiency gains. The process was collaborative, risk-reducing, and a clear demonstration of Capitolis’ leadership in this space.”