ARRC relaxes limits on trading term SOFR derivatives

Updated usage guidelines allow hedge funds and fixed rate issuers to hedge with forward rate

Federal reserve

In a surprise move, the US Alternative Reference Rates Committee (ARRC) will allow buy-side participation and two-sided trading in derivatives that reference a term version of the secured overnight financing rate, or SOFR.

Updated usage guidelines released earlier today (April 21) permit end-users to enter into term SOFR versus SOFR basis swaps regardless of whether they are hedging cash assets linked to the rate.

“This offers an additional channel through which dealers will be able to lay off

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