On October 23, the International Swaps and Derivatives Association, Inc. (ISDA) published two important documents that give swap market participants a convenient way to modify their swap agreements to account for the expected discontinuation of the London Inter-bank Offered Rate (LIBOR) and other interbank offered rates (collectively, IBORs). The two documents are the IBOR Fallbacks Supplement to the 2006 ISDA Definitions (Supplement) and the 2020 IBOR Fallbacks Protocol (Protocol). The effective date for both the Supplement and the Protocol is January 25, 2021.
Continue Reading ISDA Publishes IBOR Fall Back Supplement and Related Protocol

On October 1, the United States Department of Justice (DOJ) issued a favorable business review letter to the International Swaps and Derivatives Association (ISDA) that clears the way for ISDA to complete its work on developing standard amendments to swap documents to account for the discontinuation of LIBOR and other interbank offered rates (collectively, IBORs).
Continue Reading ISDA Efforts to Help Markets Deal With LIBOR Replacement Clear DOJ Hurdle

On August 31, the Commodity Futures Trading Commission’s (CFTC) Division of Swap Dealer and Intermediary Oversight (DSIO) issued a no-action letter (No-Action Letter 20-23) providing additional relief to swap dealers (SDs) and other market participants related to the industry-wide initiative to transition from swaps that reference the London Interbank Offered Rate (LIBOR) and other interbank offered rates (IBORs) to swaps that reference alternative benchmarks.
Continue Reading CFTC No-Action Letter 20-23: CFTC Provides Additional Relief to Market Participants Transitioning from LIBOR

On August 31, the Commodity Futures Trading Commission’s (CFTC) Division of Market Oversight (DMO) issued a no-action letter (No-Action Letter 20-24) providing time-limited relief from the trade execution requirement for certain swaps.
Continue Reading CFTC No-Action Letter 20-24: CFTC Provides Relief from the Trade Execution Requirement

On August 31, the Commodity Futures Trading Commission’s (CFTC) Division of Clearing and Risk (DCR) issued a no-action letter (No-Action Letter 20-25) relating to the swap clearing requirement promulgated pursuant to section 2(h)(1)(A) of the Commodity Exchange Act (CEA) and codified in Part 50 of the CFTC’s regulations (Clearing Requirement).
Continue Reading CFTC No-Action Letter 20-25: CFTC Provides Time-Limited Relief from the Swap Clearing Requirement

The International Swaps and Derivatives Association, Inc. (ISDA) has launched a new webpage containing information about interest rate benchmark reform and the transition away from the use of interbank offered rates (IBORs, including LIBOR) as floating rates in swap transactions. The page and subsequent materials are available to everyone, not just ISDA members.
Continue Reading ISDA Launches Benchmark Reform Information Source

On December 18, the Division of Swap Dealer and Intermediary Oversight (DSIO), the Division of Market Oversight (DMO) and the Division of Clearing and Risk (DCR) each issued a no-action letter providing relief to market participants in preparation for the transition away from the London Interbank Offered Rate (LIBOR) and other interbank offered rates (collectively with LIBOR, IBORs). The letters identify the terms and conditions pursuant to which counterparties may be eligible for relief in connection with amending swaps to replace provisions referencing discontinued IBORs with alternative benchmarks.
Continue Reading CFTC Grants Market Participants LIBOR-Transition Relief

On October 9, the Internal Revenue Service (IRS) proposed regulations to eliminate tax issues that might otherwise arise due to the modification of instruments and transactions as a result of discontinuation of interbank offered rates (IBORs) used in debt instruments and non-debt contracts (such as derivatives). Under current rules, material alteration of the terms of instruments and contracts can result in tax events, including the realization of gain or loss for income tax purposes.

Continue Reading Proposed IRS Regulations on Modifications of Debt Instruments and Swaps to Replace LIBOR

On September 9, the Market Risk Advisory Committee of the Commodity Futures Trading Commission (CFTC) approved some “plain” English disclosures concerning the risks of executing new derivative transactions involving interbank offered rates (IBORs) that will be replaced by new benchmark rates in the relatively near future. The disclosures, which are not mandatory, are intended as “helpful examples” of the information that market participants should share, as appropriate, with all clients and counterparties with whom they continue to transact derivatives referencing London Interbank Offered Rate (LIBOR) and other IBORs. They are drafted for use on a transaction-by-transaction basis, but alternatively can be delivered as part of general risk disclosures. The disclosures will be submitted to the CFTC for consideration.
Continue Reading CFTC Market Risk Advisory Committee Approves Plain English IBOR Risk Disclosures