CME Sets Eurodollar/SOFR Conversion Date

CME Group has announced that based on initial client feedback, it is proposing to convert Eurodollar futures and options open interest into corresponding SOFR contracts on April 14, 2023, under the company’s previously adopted fallbacks plan. Eurodollar futures and options contracts that expire before June 30, 2023 are excluded from this proposal and will continue to trade until their expiry.  

In August, CME reported record average daily volume of nearly 2.5 million contracts and record open interest of approximately 19 million contracts for SOFR futures and options contracts. SOFR options also had record volume and open interest in August and SOFR futures had record open interest during the same period.

Ahead of the final conversion under fallbacks, liquid standard and reduced-tick Inter-Commodity Spread instruments are available to facilitate the voluntary conversion of Eurodollar open interest via the SED Spread for futures and the LS Spread for options. Additionally, to further support the deepening of SOFR markets, CME says it plans to add SOFR options to its portfolio margining solution for cleared products in December 2022, subject to regulatory approval. Portfolio margining enables clients to reduce margin requirements by offsetting their exposure on cleared swaps versus interest rate futures and options.

“Our proposed conversion date will help our clients complete their operational work as early as possible in the transition process, while closely aligning with the recently published industry timelines for over-the-counter interest rate swaps,” says Agha Mirza, CME Group global head of rates and OTC products. “SOFR futures and options are now the leading liquidity pool, as open interest has reached approximately 19 million contracts and volume has significantly outpaced Eurodollars. Based on this growth, today’s announcement provides a practical timeline by which clients can bring remaining Eurodollar contracts into the SOFR market.”