The CFTC Market Risk Advisory Committee ("MRAC") considered issues related to LIBOR reform initiatives and efforts to develop the Secured Overnight Financing Rate ("SOFR") as a viable alternative rate.

At the meeting, panels composed of regulators and industry members:

  • reviewed LIBOR reform efforts, including actions taken by the Financial Stability Oversight Council and the Alternative Reference Rates Committee ("ARRC");
  • discussed reference rate improvements, including efforts to develop SOFR and SOFR derivatives; and
  • discussed the effect that reform efforts may have on derivatives contracts.

CFTC Chair J. Christopher Giancarlo asserted that the "discontinuation of LIBOR is not a possibility. It is a certainty." As a result, he argued, regulators must "anticipate it . . . accommodate it and . . . adapt to it." Mr. Giancarlo emphasized that active preparation and coordination among regulatory agencies is essential to ensure a successful transition away from LIBOR. He highlighted a recent meeting that he had with officials from the Federal Reserve Board and the UK Financial Conduct Authority as indicative of a commitment to regulatory cooperation.

CFTC Commissioner Brian Quintenz called attention to efforts that must be undertaken by market participants. CFTC Commissioner Rostin Behnam said that MRAC should function as a "solutions-oriented body that sheds light on the challenges ahead, identifies the potential risks for financial markets and individual Americans, and seeks to support the ongoing work of the ARRC through deliverables that both recognize the critical importance of benchmarks, but also demand integrity and reliability."

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.