LIBOR® is in the process of being wound-down.
Users of ICE Swap Rate settings in respect of which LIBOR serves as the floating leg for the relevant interest rate swaps should review our LIBOR Webpage.
Cessation of GBP LIBOR ICE Swap Rate
After December 31, 2021, all GBP LIBOR ICE Swap Rate settings have ceased to be published, and 3-Month and 6-Month GBP LIBOR, now published by IBA using a “synthetic” methodology under compulsion from the FCA, are no longer representative of the underlying market or economic reality that those settings previously sought to represent.
IBA announced this cessation on August 4, 2021, following a consultation1. The consultation was undertaken following the FCA’s March 5 announcement, further to which IBA did not expect sufficient (or perhaps any) input data required to calculate GBP LIBOR ICE Swap Rate settings (i.e. eligible interest rate swaps referencing GBP LIBOR settings) to be available after December 31, 2021.
1IBA’s consultation was not a consultation on the potential for the cessation of any ICE Swap Rate settings other than GBP LIBOR ICE Swap Rate. Other than the above announcement regarding the cessation of the GBP LIBOR ICE Swap Rate, none of the consultation, feedback paper, or any related press release is, or should be taken to be or include, an announcement that IBA will cease or continue the publication of any other ICE Swap Rate settings.
Cessation of USD LIBOR ICE Swap Rate
Further to the FCA’s March 5, 2021 announcement, its Article 21A Notice and announcements2 from US authorities in relation to the use of USD LIBOR, IBA consulted3 in November 2022 on its intention to cease all USD LIBOR ICE Swap Rate benchmark “runs” (i.e. USD LIBOR Rates 1100, USD LIBOR Spreads 1100 and USD LIBOR 1500) for all tenors immediately after publication on June 30, 2023.
Based on the feedback received, IBA has announced that it will cease the publication of all USD LIBOR ICE Swap Rate benchmark “runs” (i.e. USD LIBOR Rates 1100, USD LIBOR Spreads 1100 and USD LIBOR 1500) for all tenors immediately after publication on June 30, 2023.
2 https://www.federalreserve.gov/supervisionreg/srletters/SR2027a1.pdf and https://www.federalreserve.gov/supervisionreg/srletters/SR2117a1.pdf
3 IBA’s consultation was not a consultation on the potential for the cessation of any ICE Swap Rate settings other than USD LIBOR ICE Swap Rate. Other than the above announcement regarding the cessation of the USD LIBOR ICE Swap Rate, none of the consultation, feedback paper, or any related press release is, or should be taken to be or include, an announcement that IBA will cease or continue the publication of any other ICE Swap Rate settings.
ISDA Consultation on the implementation of suggested fallbacks for GBP LIBOR ICE Swap Rate and USD LIBOR ICE Swap Rate
The Non-Linear Task Force (NLTF) of the Working Group on Sterling Risk-Free Reference Rates in the UK and the Alternative Reference Rates Committee (ARRC) in the US, have each published papers (“Transition in Sterling Non-Linear Derivatives referencing GBP LIBOR ICE Swap Rate (ISR)” and “Suggested Fallback Formula for the USD LIBOR ICE Swap Rate”) suggesting fallbacks that could apply for GBP LIBOR ICE Swap Rate and USD LIBOR ICE Swap Rate, respectively, in the event that those ICE Swap Rate benchmarks cease to be available and LIBOR in the relevant currencies and tenors ceases or becomes unrepresentative.
Following a consultation, ISDA has published provisions designed to implement the fallbacks for GBP LIBOR ICE Swap Rate proposed in the paper published by the NLTF and the fallbacks for USD LIBOR ICE Swap Rate suggested in the paper published by the ARRC, in each case in a scenario where those ICE Swap Rate benchmarks were unavailable and LIBOR in the relevant currency and tenor had permanently ceased or become unrepresentative.
“SOFR First” Initiative
On June 8, 2021, the Commodity and Futures Trading Commission’s (CFTC) Market Risk Advisory Committee (MRAC) Interest Rate Benchmark Reform Subcommittee voted to recommend a market best practice, referred to as “SOFR First”, for switching interdealer trading conventions from USD LIBOR to the Secured Overnight Financing Rate (SOFR) for USD linear interest rate swaps. The SOFR First initiative recommended that, from July 26, 2021, interdealer brokers replace trading of USD LIBOR-linked linear swaps with trading of SOFR-linked linear swaps. It suggested that interdealer broker screens for USD LIBOR-linked linear swaps should remain visible for informational purposes only after this date up until October 21, 2021, after which they should be turned off altogether.
As noted below, the methodology for USD LIBOR ICE Swap Rates uses input data consisting of quotes for prices and volumes of USD LIBOR-linked swaps, including quotes from interdealer broker screens at Level 1 of the Waterfall. To the extent that the SOFR First initiative results in interdealer broker screens ceasing to display quotes, or reducing the number of displayed quotes, for relevant USD LIBOR-linked swaps, this could result in a greater reliance on Levels 2 and 3 of the Waterfall in calculating USD LIBOR ICE Swap Rate. Insofar as the initiative results in a reduction of eligible input data at any level of the Waterfall, it might consequently impact IBA's ability to calculate and publish one or more USD LIBOR ICE Swap Rates.
Please see the MRAC’s FAQs on SOFR First for further information on this initiative.
ARRC Recommendations for Contracts Linked to the USD LIBOR ICE Swap Rate
In June 2022 the ARRC published certain recommendations for contracts linked to the USD LIBOR ICE Swap Rate, including:
- for market participants to inventory their contracts linked to USD LIBOR ICE Swap Rate and identify their fallback provisions; and
- that market participants should take proactive steps to address the impact of USD LIOR ICE Swap Rate cessation on legacy positions by either converting their positions to their SOFR or SOFR ICE Swap Rate equivalent, incorporating hardwired fallbacks consistent with the approach suggested by the ARRC, or considering calling or buying back debt instruments with problematic fallback provisions; and
- where a legacy position cannot be proactively converted and its fallback provisions cannot be amended, that calculation agents consider the fallback formula the ARRC has suggested in determining a successor rate.
GBP SONIA ICE Swap Rate Settings
In the UK, SONIA has been recommended as the preferred near risk free rate for use in Sterling derivatives and relevant financial contracts. IBA launched GBP SONIA ICE Swap Rate4 as a benchmark for use by licensees on December 14, 2020. The settings are provided for use by licensees on and subject to the terms of their existing GBP ICE Swap Rate licensing agreements.
GBP SONIA ICE Swap Rate settings are determined using the published ICE Swap Rate ‘Waterfall’ methodology using eligible input data in respect of SONIA-linked interest rate swaps, and are available for the tenors and at the times set out in the table below. The settings are available from IBA and licensed redistributors.
GBP SONIA ICE Swap Rate settings are available here.
4 IBA reserves all rights in the ICE Swap Rate methodology and in the GBP SONIA ICE Swap Rate settings. ICE, ICE Swap Rate and ICE Benchmark Administration are trademarks of IBA and/or its affiliates. The "SONIA" mark is used under licence from the Bank of England (the benchmark administrator of SONIA), and the use of such mark does not imply or express any approval or endorsement by the Bank of England. "Bank of England" and "SONIA" are registered trademarks of the Bank of England.
GBP SONIA Spread-Adjusted ICE Swap Rate Settings
IBA launched GBP SONIA Spread-Adjusted ICE Swap Rate5 settings from January 4, 2022, following a successful testing period running from May 5, 2021.
The settings are determined in line with the methodology proposed by the Non-Linear Task Force of the Working Group on Sterling Risk-Free Reference Rates in its paper “Transition in Sterling Non-Linear Derivatives referencing GBP LIBOR ICE Swap Rate (ISR)” and are being provided for use by licensees on and subject to the terms of their GBP ICE Swap Rate licensing agreements.
GBP SONIA Spread-Adjusted ICE Swap Rate settings are available here.
5 IBA reserves all rights in the ICE Swap Rate methodology and in the GBP SONIA Spread-Adjusted ICE Swap Rate settings. ICE, ICE Swap Rate and ICE Benchmark Administration are trademarks of IBA and/or its affiliates. The "SONIA" mark is used under licence from the Bank of England (the benchmark administrator of SONIA), and the use of such mark does not imply or express any approval or endorsement by the Bank of England. "Bank of England" and "SONIA" are registered trademarks of the Bank of England.
USD SOFR ICE Swap Rate Settings
In the US, SOFR has been recommended as the preferred near risk free rate for use in US Dollar derivatives and relevant financial contracts.
IBA launched USD SOFR ICE Swap Rate6 as a benchmark for use by licensees on November 8, 2021. The settings are provided for use by licensees on and subject to the terms of their existing USD ICE Swap Rate licensing agreements.
USD SOFR ICE Swap Rate settings are determined using the published ICE Swap Rate ‘Waterfall’ methodology using eligible input data in respect of SOFR-linked interest rate swaps, and are available for the same tenors and at the same time as the current USD LIBOR ICE Swap Rate.
USD SOFR ICE Swap Rate settings are available here.
6 IBA reserves all rights in the ICE Swap Rate methodology and in the USD SOFR ICE Swap Rate settings. ICE, ICE Swap Rate and ICE Benchmark Administration are trademarks of IBA and/or its affiliates. IBA is not affiliated with the New York Fed. The New York Fed does not sanction, endorse, or recommend any products or services offered by IBA.
USD SOFR Spread-Adjusted ICE Swap Rate ‘Beta’ Settings
IBA started publishing indicative USD SOFR Spread-Adjusted ICE Swap Rate7 ‘Beta’ settings from October 1, 2021 for an initial testing period.
The ‘Beta’ settings are determined in line with the methodology suggested by the Alternative Reference Rates Committee (ARRC) in its white paper “Suggested Fallback Formula for the USD LIBOR ICE Swap Rate”
During the initial testing period, the settings are being provided solely for information and illustration purposes in order to enable recipients to evaluate and provide feedback on the USD SOFR Spread-Adjusted ICE SWAP® Rate ‘Beta’ settings. They are not intended for, and IBA expressly prohibits their use for, any other purpose, including as a reference, index or benchmark in financial instruments, financial contracts, or investment funds.
USD SOFR Spread-Adjusted ICE Swap Rate ‘Beta’ settings are available here.
7 IBA reserves all rights in the ICE Swap Rate methodology and in the USD SOFR Spread-Adjusted ICE Swap Rate ‘Beta’ settings. ICE, ICE Swap Rate and ICE Benchmark Administration are trademarks of IBA and/or its affiliates. IBA is not affiliated with the New York Fed. The New York Fed does not sanction, endorse, or recommend any products or services offered by IBA.