Switch to RFRs Seen at LCH

Following the 21 September switchover from Libor to risk-free rates (RFRs) in cross currency swap markets, LCH’s SwapAgent says it has seen a “marked uplift” in the proportion of cross-currency swaps using RFRs.

Comparing new trade activity in the six business days period since go-live with RFRs, with that of the preceding four weeks, SwapAgent saw a sharp increase in the proportion of RFR trades processed on its service, representing a combined $31bn of notional.

All GBP/USD cross-currency swaps were Sonia vs Sofr trades (vs 32% prior to 21/9), as were USD/CHF cross-currency swaps – in this case Saron vs Sofr trades – compared to none in the previous period. Take up was not as strong in EUR/USD, where 25% of trades were EuroSTR vs Sofr, however this compares to just 7% prior.

“SwapAgent fully supports the RFR First initiative, and has worked with market participants and regulators to help the industry be ready for a Libor-free future in the bilateral OTC derivative market,” says Nathan Ondyak, head of SwapAgent, LCH. “We are very pleased that the switch to risk-free rates at SwapAgent went so smoothly and that our users could reap the benefits of SwapAgent for RFR vs. RFR cross currency swaps from day one. This validates SwapAgent’s market-led focus on the future of the cross-currency markets, and we are looking forward to continuing to support the industry in the changes ahead.”