01.05.2021

CFTC Permits FCMS To Use SOFR Investments

The Commodity Futures Trading Commission’s Market Participants Division issued temporary no-action relief to permit futures commission merchants to invest customer funds in investments that have adjustable rates of interest that correlate closely with, or are determined solely by reference to, a benchmark of the Secured Overnight Financing Rate (SOFR).

The relief recognizes the increasing use of SOFR as an alternative reference rate to LIBOR in financial markets, and is consistent with previous CFTC staff relief issued to facilitate transition by market participants away from LIBOR.

CFTC Regulation 1.25 provides that the adjustable rate of interest on permitted investments must be benchmarked to the Federal Funds target or effective rate, the prime rate, the three-month Treasury Bill rate, the one-month or three-month LIBOR rate, or the interest rate of any fixed rate instrument that is a permitted investment.  With this no-action relief, permitted investments may have SOFR-based adjustable rates of interest.

The no-action relief expires on December 31, 2022.

Source: CFTC

Related articles

  1. The exchange's derivatives segment will close for trading on Friday 28 January 2022.

  2. The offering makes it simple for firms to track their sustainable derivatives positions.

  3. MarketAxess Expands in Asia

    Phase 5 of the uncleared margin rules (UMR) took effect from September 2021.

  4. Basel Committee Consults on Interest-Rate Risk

    A number of Libor rates will cease to exist at the end of this year.

  5. S3 Launches Canada Best-Execution Suite

    Pension funds in Asia have significantly increased their international exposure.