CME Group Completes Key Milestones in Conversion of Eurodollar Futures, Options and Cleared Swaps to SOFR-Based Derivatives

Rhea-AI Summary

CME Group has successfully converted 7.5 million Eurodollar futures and options contracts and $4 trillion in cleared USD LIBOR swaps to SOFR derivatives as of April 2023. This conversion represents a major step towards adopting SOFR as the leading U.S. dollar interest rate benchmark. The open interest for SOFR futures and options has now reached 48 million contracts, with an average daily volume of nearly 6 million contracts in 2023, marking a 34% increase compared to Eurodollar contracts. Additionally, SOFR is referenced in over $3.7 trillion in loans and $1 trillion in derivatives. The transition is in line with plans for USD LIBOR cessation scheduled for June 30, 2023, with further conversions set for July 3, 2023.

Positive

• Successful conversion of 7.5 million Eurodollar contracts and $4 trillion in cleared USD LIBOR swaps to SOFR derivatives.
• SOFR futures and options open interest reaching 48 million contracts.
• Average daily volume of SOFR futures and options in 2023 is nearly 6 million contracts, 34% higher than Eurodollar's best annual average.
• CME Term SOFR is referenced in over $3.7 trillion in loans and $1 trillion in derivatives.
• Broad adoption of the SOFR benchmark among over 2,400 licensed firms.

Negative

• None.

• 7.5 million contracts in Eurodollar OI and $4 trillion in cleared USD LIBOR swaps successfully converted to SOFR in April
• SOFR futures and options open interest reaches 48 million contracts
• CME Term SOFR use exceeds $3.7 trillion in loans, 2,400 licensed firms

CHICAGO, April 24, 2023 /PRNewswire/ -- CME Group, the world's leading derivatives marketplace, today announced that it successfully 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."

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. For more information, please visit www.cmegroup.com/sofr.  

About CME Group

As the world's leading derivatives marketplace, CME Group (www.cmegroup.com) enables clients to trade futures, options, cash and OTC markets, optimize portfolios, and analyze data – empowering market participants worldwide to efficiently manage risk and capture opportunities. CME Group exchanges offer the widest range of global benchmark products across all major asset classes based on interest rates, equity indexes, foreign exchange, energy, agricultural products and metals. The company offers futures and options on futures trading through the CME Globex platform, fixed income trading via BrokerTec and foreign exchange trading on the EBS platform. In addition, it operates one of the world's leading central counterparty clearing providers, CME Clearing.

CME Group, the Globe logo, CME, Chicago Mercantile Exchange, Globex, and, E-mini are trademarks of Chicago Mercantile Exchange Inc. CBOT and Chicago Board of Trade are trademarks of Board of Trade of the City of Chicago, Inc. NYMEX, New York Mercantile Exchange and ClearPort are trademarks of New York Mercantile Exchange, Inc. COMEX is a trademark of Commodity Exchange, Inc. BrokerTec and EBS are trademarks of BrokerTec Europe LTD and EBS Group LTD, respectively. The S&P 500 Index is a product of S&P Dow Jones Indices LLC ("S&P DJI"). "S&P®", "S&P 500®", "SPY®", "SPX®", US 500 and The 500 are trademarks of Standard & Poor's Financial Services LLC; Dow Jones®, DJIA® and Dow Jones Industrial Average are service and/or trademarks of Dow Jones Trademark Holdings LLC. These trademarks have been licensed for use by Chicago Mercantile Exchange Inc. Futures contracts based on the S&P 500 Index are not sponsored, endorsed, marketed, or promoted by S&P DJI, and S&P DJI makes no representation regarding the advisability of investing in such products. All other trademarks are the property of their respective owners.

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SOURCE CME Group

FAQ

What were the recent milestones achieved by CME in April 2023 regarding SOFR derivatives?

CME Group converted 7.5 million Eurodollar contracts and $4 trillion in cleared USD LIBOR swaps to SOFR derivatives in April 2023.

How much open interest do SOFR futures and options have as of April 2023?

As of April 2023, the open interest for SOFR futures and options reached 48 million contracts.

What is the average daily trading volume of SOFR contracts in 2023?

The average daily volume of SOFR futures and options in 2023 is nearly 6 million contracts, a 34% increase from Eurodollar contracts.

When is the cessation of USD LIBOR scheduled?

The cessation of USD LIBOR is scheduled for June 30, 2023.

How much is CME Term SOFR referenced in loans and derivatives?

CME Term SOFR is referenced in over $3.7 trillion in loans and $1 trillion in derivatives.