CME Group has converted 7.5 million contracts of Eurodollar futures and options open interest and $4 trillion in cleared USD LIBOR swaps to corresponding SOFR derivatives in April.
“With the successful completion of these conversion milestones, we are taking a major step forward in completing the industry’s adoption of SOFR as the leading U.S. dollar interest rate benchmark,” said Agha Mirza, CME Group Global Head of Rates and OTC Products.
“The path ahead for short-term interest rate risk management is stronger than ever, as open interest for SOFR derivatives is now 48 million contracts, and clients are significantly benefitting from our portfolio margining solution between cleared OTC interest rate swaps and listed futures,” he said.
Both listed and OTC derivatives conversions were executed in alignment with industry fallback plans to help participants optimize their operational work and timelines ahead of USD LIBOR cessation.
Only the May 2023 and June 2023 contracts, excluded from this transition, remain for Eurodollar futures and options, and will trade until their natural expiry prior to USD LIBOR cessation on June 30, 2023.
CME Group launched SOFR futures in May 2018, followed by SOFR options in January 2020. The average daily volume (ADV) of SOFR futures and options in 2023 has reached nearly 6 million contracts, which is 34% higher than the highest annual ADV that Eurodollar futures and options reached in their four-decade history.
Cleared SOFR swaps averaged a record $22B notional per day at CME Group in March, representing over 80% of the cleared USD trade count. The secondary conversion of USD swaps is scheduled for July 3, 2023, when zero coupon swaps and remaining USD LIBOR swaps will be converted.
In addition, CME Term SOFR has been widely adopted to replace USD LIBOR for new business loans, credit facilities and as a fallback rate for legacy LIBOR loans. The benchmark rate has now been referenced in more than $3.7 trillion in loans and $1 trillion in derivatives hedges, and is licensed by over 2,400 firms.
As the leading tools for hedging short-term interest rates, SOFR futures and options have deep liquidity pools and broad participation from global banks, hedge funds, asset managers, principal trading firms and other types of traders.
The CME Group portfolio margining solution enables clients to reduce initial margin requirements by offsetting their exposures in cleared swaps versus correlated interest rate futures and options.
SOFR futures and options are listed with and subject to the rules of CME.
