Refinitiv to Launch Forward Looking ARRC Fallback Rates

Refinitiv says it intends to launch forward looking term rate versions of its ARRC recommended fallback rates – USD Ibor Cash Fallbacks – in September 2022.

This follows the Alternative Reference Rates Committee’s (ARRC) March 2021 announcement that it had selected Refinitiv to publish its recommended fallback rates for cash products and Refinitiv’s November 2021 announcement that it had released production fallback rates based upon various SOFR conventions.

On March 5, 2021, the UK’s Financial Conduct Authority (FCA) announced that immediately following June 30, 2023, overnight, one, three, six and 12-month US dollar Libor settings will cease or be no longer representative, meaning trillions of dollars of cash products such as loans, bonds and securitised products that reference Libor and mature after that date, will have to use the ARRC’s recommended fallback rates through use of appropriate fallback language.

Refinitiv says the USD Ibor Cash Fallbacks will help these legacy USD Libor contracts to smoothly transition away and provide market participants with an industry standard agreed rate, which can clearly be referenced in contracts.

The forward-looking rates will be based upon CME Term SOFR plus the ARRC’s recommended spread adjustments. There are two versions of the Fallbacks: one for institutional cash products, the other for consumer cash products. The term rate versions of both will be available as all-in spread adjusted rates in one, three, six and 12-month tenors.

The Institutional Cash Fallbacks will be launched as production benchmarks and Consumer Cash Fallbacks will initially be launched as prototype rates with the intention that these rates will enter production immediately following June 30, 2023, when the ARRC’s recommended spread-adjustments for consumer products will be officially set.