CME Group Announces Launch of CME Term SOFR Reference Rates

Rhea-AI Summary

CME Group has launched CME Term SOFR Reference Rates for 1-month, 3-month, and 6-month tenors, responding to client demand. These rates are based on CME's SOFR futures and comply with ARRC principles. Licensing will be limited to cash market transactions until June 30, 2023, at no charge. In Q1 2021, SOFR futures averaged $232 billion in daily notional value, with a record average daily volume of 112,000 contracts. The Term SOFR Rates align with the UK's Benchmark Regulations and IOSCO Principles, enhancing CME's market offerings.

Positive

• Launch of CME Term SOFR Reference Rates aligns with client demand and ARRC principles.
• SOFR futures average daily volume reached 112,000 contracts in Q1 2021.
• SOFR futures daily notional value averaged $232 billion.

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• None.

CHICAGO, April 21, 2021 /PRNewswire/ -- CME Group, the world's leading and most diverse derivatives marketplace, today announced it is publishing CME Term SOFR Reference Rates for 1-month, 3-month and 6-month tenors.

These benchmarks are based on CME Group's deep and liquid underlying SOFR futures, making them a robust and sustainable measure of forward-looking SOFR rates. They are aligned with the Alternative Reference Rates Committee's (ARRC) principles for recommended forward term rates. As ARRC criteria emphasizes, any forward term rate should have a limited scope of use so that the use does not materially impact volumes in the underlying SOFR-linked derivatives transactions that are relied upon to construct that rate, CME Group intends to limit the licensing of its SOFR Term Rates to cash market transactions initially until June 30, 2023. The Term SOFR rate will be available for license at no charge during this period.

"Our introduction of CME SOFR Term Rates responds directly to client demand and builds on continued liquidity growth across the SOFR ecosystem," said Sean Tully, CME Group Global Head of Financial and OTC Products. "We are supportive of the ARRC's forward term rate principles and believe our SOFR Term Rates comply with and advance the ARRC's criteria, rooting these new tools in CME SOFR futures."   

CME Group SOFR futures are bolstered by a deep and diverse pool of market participants. During Q1 2021, SOFR futures averaged $232 billion in daily representative notional value and reached a new, quarterly average daily volume (ADV) record of 112,000 contracts. In addition, SOFR futures ADV grew 82% year on year to 113,000 contracts in March 2021.

Based on industry best practices, CME Term SOFR Rates also are compliant with the UK Benchmark Regulations and aligned to the IOSCO Principles for Financial Benchmarks. CME Group Benchmark Administration Limited (CBA) is the benchmark administrator for CME Term SOFR with Chicago Mercantile Exchange Inc. (CME Inc.) providing Calculation Agent services.

CME Term SOFR Reference Rates can be accessed from CME Group directly via its website, the CME Market Data Platform or various licensed data vendors. For more information on CME Term SOFR Reference Rates, please visit www.cmegroup.com/termsofr.

As a leading and diverse derivatives market operator, CME Group is the parent of four U.S.-based designated contract markets ("DCMs"): Chicago Mercantile Exchange Inc. ("CME"), Board of Trade of the City of Chicago, Inc. ("CBOT"), New York Mercantile Exchange, Inc. ("NYMEX"), and the Commodity Exchange, Inc. ("COMEX") (collectively, the "CME Group Exchanges"). These exchanges offer a wide range of products available across all major asset classes, including futures and options based on interest rates, equity indexes, foreign exchange, energy, metals and agricultural commodities. CME Group offers futures trading through the CME Globex® electronic trading platform ("Globex"), fixed income trading via BrokerTec, foreign exchange trading on the EBS platform, and central counterparty clearing services through CME Clearing, a division of CME. With a range of pre- and post-trade products and services underpinning the entire lifecycle of a trade, CME Group also offers optimization services through TriOptima and trade processing and reconciliation services through Traiana and RESET. CBA capitalizes on CME Group's wealth of electronic transaction-based data in the calculation of its indices and benchmarks.

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SOURCE CME Group

FAQ

What are the CME Term SOFR Reference Rates?

CME Term SOFR Reference Rates are benchmarks for 1-month, 3-month, and 6-month tenors based on CME Group's SOFR futures.

When will CME Term SOFR Rates be available for licensing?

CME Term SOFR Rates will be available for licensing at no charge until June 30, 2023.

How much did SOFR futures average in daily notional value in Q1 2021?

SOFR futures averaged $232 billion in daily notional value in Q1 2021.

What was the average daily volume of SOFR futures in March 2021?

In March 2021, SOFR futures had an average daily volume of 113,000 contracts, reflecting an 82% year-on-year growth.