September 2, 2022

IBA Publishes Consultation on Planned Cessation of USD LIBOR ICE Swap Rate

Nick Allen Commentary by Nick Allen

The ICE Benchmark Administration ("IBA") published a consultation on its intention to cease publication of the USD LIBOR ICE Swap Rate for all tenors after June 30, 2023.

IBA stated that after June 30, 2023, it does not expect to be able to continue publishing USD LIBOR ICE Swap Rate settings for which the USD LIBOR settings serve as the underlying rate for the floating leg of the relevant swap transaction. This is because IBA does not expect sufficient, if any, input data to be available based on eligible new interest rate swap transactions referencing USD LIBOR settings from this time. However, IBA stated that the USD LIBOR settings and, therefore, the USD LIBOR ICE Swap Rate, could remain available after that date if the UK Financial Conduct Authority grants relief from the cessation and allows IBA to continue publishing the USD LIBOR settings synthetically.

IBA explained that it will continue to publish the overnight, 1-, 3-, 6- and 12-month USD LIBOR ICE Swap Rate settings until the 2023 cessation date. To facilitate the transition, since November 2021 IBA has been publishing USD SOFR ICE Swap Rates for the same tenors and publishing at the same time as USD LIBOR ICE Swap Rates.

IBA is seeking feedback as to (i) whether market participants agree with IBA's intention to cease the publication of all USD LIBOR ICE Swap Rates for all tenors immediately after publication on June 30, 2023 and (ii) whether USD LIBOR ICE Swap Rates should be ceased as of either any earlier date or upon a particular set of circumstances. IBA included a questionnaire in its consultation and is accepting feedback from relevant market participants until October 7, 2022.

Commentary

For those who have been following the swap rate issue generally, or had exposure to the GBP LIBOR ICE Swap Rate, nothing in IBA's consultation will come as a surprise. That said, participants with USD LIBOR ICE Swap Rate exposure should consider whether simply waiting until June 30, 2023 is ideal, or if some earlier date tied to underlying volumes would be preferred to ensure that - as volumes shift to the SOFR-based rate - there are not extended periods of non-publication due to insufficient data (as was often the case for these rates before updates to the methodology waterfalls).

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