Refinitiv, the vendor selected by the Alternative References Rates Committee ("ARRC") to publish spread-adjusted rates for cash products, launched production-ready fallback rates that are available for immediate use on institutional cash products.

Refinitiv's fallback rates work in conjunction with the ARRC's recommended fallback language and provide market participants with fallback rates that can be clearly and easily incorporated into legacy LIBOR contracts. Refinitiv will publish two sets of these cash fallbacks - one covering institutional cash products and the other covering consumer cash products - which will be published in a variety of different versions and tenors. The firm's institutional cash fallbacks are currently active and available for use in financial contracts and nonfinancial corporate contracts as benchmarks. The firm's consumer cash fallbacks are slated to launch on January 3, 2022, and are awaiting final approval.

In a statement on the announcement, ARRC Chair Tom Wipf emphasized that the launch "gives market participants another important tool to ensure the stability of legacy contracts."

Commentary

For parties to LIBOR contracts that will be transitioned to a Secured Overnight Financing Rate-based rate, one question often arises: where do we go to get SOFR? LIBOR contracts usually provide for LIBOR to be retrieved from a designated source, like a newspaper or the screen of a data vendor. The Federal Reserve Bank of New York publishes the daily SOFR on its site, but many LIBOR contracts rely on a LIBOR quotation for a longer term, like one month or three months. Methods have emerged to translate SOFR into LIBOR-equivalent terms, but for parties used to retrieving LIBOR from a designated source, having to translate daily SOFR into LIBOR-equivalent terms could impose new operational demands. Enter Refinitiv, which was tapped by the ARRC to publish various versions of SOFR that correspond to the outgoing LIBOR terms. These Refinitiv fallbacks supply the missing link for parties used to using LIBOR: ready-to-use, LIBOR-term-equivalent, SOFR-based replacement rates.

Primary Sources

1. Refinitiv Press Release: Refinitiv Launches USD IBOR Institutional Cash Fallbacks in Production to Facilitate Industry Transition from USD LIBOR

2. ARRC Press Release: ARRC Welcomes Refinitiv's USD IBOR Institutional and Consumer Cash Fallbacks