Swaps users mull ‘big bang’ for SOFR discounting

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

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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

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