Signing the Libor fallback protocol: a cautionary tale

As Orwell’s Room 101 beckons for Libor publication, muRisQ Advisory’s Marc Henrard warns of a potential pitfall in the fallback protocol

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There is general consensus that Libor publication will be discontinued in the coming years. The option of last resort for existing Libor-linked derivatives is to rely on so-called fallback language, which provides alternative benchmark options, should the primary rate be unavailable.

The majority of the derivatives market is governed by International Swaps and Derivatives Association master agreements or by central counterparty (CCP) rule books inspired by the same. But the existing fallback