ARRC Updates LIBOR Transition Best Practices on Fallback Protocol
The Alternative Reference Rates Committee ("ARRC") updated its LIBOR transition "Best Practices" in anticipation of the publication of the ISDA IBOR Fallback Protocol ("Protocol").
In the update, ARRC encouraged "dealers and other firms with significant derivatives exposures" to adhere to the Protocol during the "escrow period" prior to publication in order to promote market-wide adoption on a timely basis. In addition, ARRC recommended that other derivatives market participants should adhere to the Protocol in the three-to-four month period after it is published, but before the contractual amendments become effective.
Commentary
The "escrow period" will be a two-week period following an announcement by ISDA before the Protocol is launched. As described by ISDA, the escrow period is intended, in part, to promote early market-wide adoption in the absence of a specific legal compulsion to agree to the terms of the Protocol.