LCH and CME to start clearing SOFR swaps in third quarter

Scramble to offer clearing aimed at cutting clients’ margin and capital costs

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The two largest clearers of US dollar interest rate swaps will start clearing derivatives referencing the new secured overnight financing rate (SOFR) in the third quarter – ahead of the first quarter of 2019 targeted by the Alternative Reference Rates Committee.

LCH will clear outright SOFR swaps versus fixed and basis swaps versus Libor out to 50 years, and basis swaps versus the Effective Federal Funds Rate out to 30 years. CME will initially clear all three products out to at least five year