The Alternative Reference Rates Committee ("ARRC") requested guidance regulatory treatment of (i) existing derivatives contracts that have been altered to include new fallbacks or reference alternative risk-free rate benchmarks ("RFRs"), and (ii) new derivatives contracts referencing RFRs. The ARRC submitted the request to eight U.S. regulators (the CFTC, SEC, FDIC, U.S. Treasury Department, OCC, Federal Reserve Board, Farm Credit Administration and Federal Housing Finance Agency).
In a letter, the ARRC highlighted ongoing industry efforts to transition to "risk free alternatives" from LIBOR and other interbank offered rates. It noted that facilitating an effective transition will require significant work and regulatory clarity and guidance.
To help facilitate the transition, the ARRC requested
clarification from U.S. regulators that the following regulations
should not apply to amendments to existing derivatives
transactions: (i) non-cleared swap margin rules, (ii) CFTC
mandatory clearing and trade execution requirements, (iii) CFTC
swap-dealer business conduct rules, (iv) CFTC swap-trading
relationship documentation and confirmation requirements
, and (v) CFTC real-time
reporting obligations. As to new derivatives transactions
referencing RFRs, the ARRC asked for clarification that - absent a
new CFTC clearing mandate determination - such transactions are not
subject to mandatory clearing.
The ARRC reaffirmed its support for the "global reform agenda to transition to alternative risk-free rate benchmarks," as well as its commitment to helping uphold the "safety and soundness" of the global derivatives markets.
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