CME Claims Libor Transition “Key Milestone”

CME Group says it has completed a key milestone in its programme to convert its Eurodollar contracts from Libor to SOFR-based derivatives.

CME says it successfully converted 7.5 million contracts of Eurodollar futures and options open interest and $4 trillion in cleared USD Libor swaps to corresponding SOFR derivatives in April. It says both listed and OTC derivatives conversions were executed in alignment with industry fallback plans to help participants optimise their operational work and timelines ahead of USD Libor cessation. Only the May 2023 and June 2023 contracts, excluded from this transition, remain for Eurodollar futures and options, and will trade until their natural expiry prior to USD Libor cessation on June 30, 2023.

“With the successful completion of these conversion milestones, we are taking a major step forward in completing the industry’s adoption of SOFR as the leading US dollar interest rate benchmark,” says Agha Mirza, CME Group global head of rates and OTC products. “The path ahead for short-term interest rate risk management is stronger than ever, as open interest for SOFR derivatives is now 48 million contracts, and clients are significantly benefitting from our portfolio margining solution between cleared OTC interest rate swaps and listed futures.”

CME says the average daily volume of SOFR futures and options in 2023 has reached nearly 6 million contracts, which is 34% higher than the highest annual ADV that Eurodollar futures and options reached in their four-decade history.

Cleared SOFR swaps averaged a record $22B notional per day at CME Group in March, representing over 80% of the cleared USD trade count. The secondary conversion of USD swaps is scheduled for July 3, 2023, when zero coupon swaps and remaining USD Libor swaps will be converted.