The Alternative Reference Rates Committee (ARRC) recently published a white paper suggesting a fallback formula for the USD LIBOR ICE swap rate. The paper describes a formula that was developed by the ARRC Market Structure and Paced Transition Working Group to calculate a fallback from the USD LIBOR ICE Swap Rate to a spread-adjusted Secured Overnight Financing Rate (SOFR) Swap Rate. The ARRC Chairman stated that the paper “aims to aid market participants as they consider how to address the impact that the end of representative USD LIBOR will have for contracts referencing the USD LIBOR ICE Swap Rates.”
The paper takes a similar approach to a paper recently published by the Working Group on Sterling Risk-Free Rates on a formula that can be used as fallback for the British Pound Sterling LIBOR ICE Swap Rate.
For more information on the ARRC and on the LIBOR-SOFR transition, please see WBK’s prior articles available here, here, here, and here.