Statement on LCH’s Solution for USD LIBOR® Contracts submitted for registration at LCH subsequent to the completion of LCH’s Conversion Processes

LCH Group (“LCH”), and its SwapClear business, remains strongly supportive of industry-wide efforts to transition from existing benchmarks to risk-free rates (“RFRs”), while also being keen to minimise market disruption associated with these events. 

In line with the conversion processes delivered successfully for swaps linked to non-USD LIBORs, LCH has announced its plans for conversion of SwapClear Contracts linked to USD LIBOR (“SwapClear USD LIBOR Swaps”) in two tranches during Q2 2023¹.

This circular provides further detail for SwapClear participants regarding our approach to SwapClear USD LIBOR Swaps which are submitted to LCH for clearing after we have conducted our conversion processes, whether before or after USD LIBOR’s cessation date of 30 June 2023.

LCH can confirm that we intend to support continued time-limited eligibility for legacy swaps² submitted to LCH SwapClear for registration provided that: (i) ISDA’s Supplement 70 fallbacks³ apply to the submitted transaction; (ii) the original trade date of the swap or the transaction giving rise to the swap is no later than 30 June 23; and (iii) the submitting parties were acting in compliance with the regulation applicable to them at the point of bilateral trade execution. We expect to make this capability available up to and including 30 June 2025, after which all USD LIBOR trades submitted to SwapClear would be automatically rejected.

The central features of LCH’s service will be the same as those offered in support of the already-discontinued non-USD LIBORs except that the scope of eligible swaps will be extended to include Variable Notional Swaps.

Further technical specifications associated with this service will be made available shortly, including an update to the dedicated Legacy LIBOR Product Characteristics Matrix. Provision of this service remains subject to legal and regulatory review.

Should you have any questions about this statement, or if you require further information, please do not hesitate to contactRatesClientServices@lch.com.
 

  ¹https://www.lch.com/membership/ltd-membership/ltd-member-updates/lchs-c… 
  ²“legacy swaps” mean those transactions executed prior to 1st July 2023
  ³https://www.isda.org/a/6t4TE/ISDA-IBOR-Fallbacks-Supplement.pdf