‘SOFR First’ Initiative Kicks Off

Today marked the start of the first phase of the Commodity Futures Trading Commission’s “SOFR First” initiative, which it recommended for switching trading conventions from Libor to the Secured Overnight Financing Rate, the Alternative Reference Rates Committee’s preferred Libor alternative, and by some measures, SOFR swaps accounted for 50% of total activity.

“Most importantly, we saw sustained SOFR activity throughout the trading day,” noted a blog post from Clarus Financial Technology that tracked SOFR and Libor trading activity throughout the day. “There was trading across the whole curve in a number of different products. Spreadovers versus SOFR can be considered particularly successful with 28 different trades. There were ‘only’ 22 spreadovers versus Libor.”

ARRC Chairman Tom Wipf, who is also vice chairman at Morgan Stanley, noted that “in our initial outreach to inter-dealer brokers today, the ARRC is hearing that the forward-looking projection for SOFR activity appears to be positive. This should provide strong momentum for the ARRC to recommend the CME SOFR Term Rates.” He added that “If signs continue to trend as they currently are progressing,” the ARRC will likely make its formal recommendation of those rates “very soon.”