ARRC Publishes Market Indicators to Support Recommendation for Forward-Looking Rate

The Alternative Reference Rates Committee—of which the American Bankers Association is a member—today published a set of market indicators it will consider in recommending a forward-looking Secured Overnight Financing Rate term rate, which it expects to do “relatively soon,” according to a press release from the committee today.

The ARRC will consider three indicators, including: continued growth in overnight SOFR-linked derivatives volumes; visible progress to deepen SOFR derivatives liquidity, consistent with ARRC best practices; and visible growth in offerings of cash products, including loans, linked to averages of SOFR, either in advance or in arrears.

Calling the market indicators “clear and achievable,” ARRC Chairman Tom Wipf, who is also vice chairman at Morgan Stanley, noted that “given recent market progress, I am optimistic that they can realistically be met as soon as market participants continue to accelerate their move away from Libor to SOFR derivatives.” While the ARRC has not yet recommended any forward-looking SOFR term rate or administrator, it will continue to consider the proposals to do so submitted to a recent RFP.