04.22.2021

CME Launches Term SOFR Reference Rates

04.22.2021
Shanny Basar
Basel Committee Consults on Interest-Rate Risk

CME Group, the world’s leading and most diverse derivatives marketplace, today announced it is publishing CME Term SOFR Reference Rates for 1-month, 3-month and 6-month tenors.

These benchmarks are based on CME Group’s deep and liquid underlying SOFR futures, making them a robust and sustainable measure of forward-looking SOFR rates. They are aligned with the Alternative Reference Rates Committee’s (ARRC) principles for recommended forward term rates. As ARRC criteria emphasizes, any forward term rate should have a limited scope of use so that the use does not materially impact volumes in the underlying SOFR-linked derivatives transactions that are relied upon to construct that rate, CME Group intends to limit the licensing of its SOFR Term Rates to cash market transactions initially until June 30, 2023. The Term SOFR rate will be available for license at no charge during this period.

“Our introduction of CME SOFR Term Rates responds directly to client demand and builds on continued liquidity growth across the SOFR ecosystem,” said Sean Tully, CME Group Global Head of Financial and OTC Products. “We are supportive of the ARRC’s forward term rate principles and believe our SOFR Term Rates comply with and advance the ARRC’s criteria, rooting these new tools in CME SOFR futures.”

CME Group SOFR futures are bolstered by a deep and diverse pool of market participants. During Q1 2021, SOFR futures averaged $232 billion in daily representative notional value and reached a new, quarterly average daily volume (ADV) record of 112,000 contracts. In addition, SOFR futures ADV grew 82% year on year to 113,000 contracts in March 2021.

Based on industry best practices, CME Term SOFR Rates also are compliant with the UK Benchmark Regulations and aligned to the IOSCO Principles for Financial Benchmarks. CME Group Benchmark Administration Limited (CBA) is the benchmark administrator for CME Term SOFR with Chicago Mercantile Exchange Inc. (CME Inc.) providing Calculation Agent services.

CME Term SOFR Reference Rates can be accessed from CME Group directly via its website, the CME Market Data Platform or various licensed data vendors. For more information on CME Term SOFR Reference Rates, please visit www.cmegroup.com/termsofr.

Source: CME

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