Swaps users mull ‘big bang’ for SOFR discounting

Cleared and bilateral US dollar swaps could move to SOFR discounting on the same day in 2020

The idea of a co-ordinated move to SOFR discounting in 2020 is gaining traction in the industry

Clearing houses and industry groups tasked with moving US interest rate derivatives to new discount curves are considering a so-called big bang implementation – an overnight switch to using the secured overnight financing rate (SOFR) to value future cashflows and the interest paid on collateral posted for contracts notionally worth $169 trillion.  

The plan under discussion would see all cleared and bilateral rates trades switch to SOFR discounting on a single day in the second half of 2020.