FCA: Libor contract changes shouldn’t trigger margin rules

Moving from Libor to an RFR shouldn’t force margin requirement on legacy non-cleared trades, says UK regulator

London skyline at sunset

Legacy swap contracts shifting from Libor to a new reference rate will not fall into scope of new margining requirements, the UK’s financial regulator has indicated, bringing relief to dealers that feared an unwelcome hike in costs.

With Libor set to wind down after 2021, regulators and market participants are examining ways to transition existing Libor-referencing swaps to instead refer to other risk-free rates (RFRs) such as Sonia and the new US secured overnight financing rate.

Concerns had

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