The survey also found that some challenges do exist, relating to operations, selection of alternative rates and re-papering of existing contracts – with 50% of respondents noting they are facing challenges related to systems and operational readiness.
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28% of firms said they were “not sure” how to address these derivatives before the cessation date, while an addition 13% said they were still formulating a transition strategy.Įlsewhere, 20% said they are planning a mixture of re-papering to RFR equivalents and ISDA fallbacks, while 11% said they plan to let these derivatives run to maturity via the ISDA fallbacks.
In respect to how non-centrally cleared derivatives are handled, firms are split on strategy. Transition decisions around instruments such as non-centrally cleared USD LIBOR derivatives and tough legacy contracts have been able to be made due to firms being given additional time because of the delayed cessation for key USD LIBOR tenors until June 2023. “The US dollar markets are the biggest financial markets in the world, and everyone will be impacted by the June 2023 deadline whether you are a multi-national firm with exposure in many currencies or a smaller company that only focuses on dollar investments, you will be significantly impacted,” said Steffan Tsilimos, global head of interest rate derivatives products, speaking to The TRADE. The survey found that more than 50% of firms no longer trade USD LIBOR-indexed products including floating-rate notes, cross-currency swaps and Eurodollar futures – suggesting that the transition away from USD LIBOR is well underway. The survey was conducted last month and polled 130 executives from financial services firms and corporations worldwide. According to a new survey from Bloomberg, financial services firms are on track for a successful transition following the cessation or non-representation designation of Sterling, Swiss and Japanese Yen LIBORs at the end of 2021.
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