LCH discounting switch tipped to help SOFR swap market

Isda AGM: Using SOFR discounting for Libor swaps will help build liquidity, say market participants

SOFR drip

Read all our Isda AGM coverage here.

LCH’s plan to adopt the US secured overnight financing rate (SOFR) as the benchmark to value cleared swaps and pay interest on cash collateral will boost SOFR swap use, but clarity on fallback language is needed for the market to prosper, market participants say.

The UK-based clearing house announced in February that it would begin using SOFR as the interest rate to calculate price alignment interest (PAI) – the interest rate paid on posted cash variation

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