Swaps users shun cash compensation in LCH Libor switch

Members push for spread adjustment to maintain risk profiles, ignoring warnings of market bifurcation

LCH and dragon

Swaps users have rejected a proposal from LCH to pay cash compensation to those who lose out when Libor-referencing swaps are converted to reference their corresponding risk-free rates (RFRs), opting instead for a spread adjustment on the floating leg.   

Members were consulted about LCH’s plans to automatically switch Libor-linked swaps to directly reference compounded-in-arrears versions of their respective RFRs when the benchmark ends, with the winners from the change compensating the losers

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