ISDA finds market participants prefer historical mean/median spread adjustment for LIBOR replacements

ISDA received feedback from 85 entities to the Supplemental Consultation on Spread and Term Adjustments for Fallbacks in Derivatives Referencing USD LIBOR, CDOR and HIBOR and Certain Aspects of Fallbacks for Derivatives Referencing SOR. A variety of market participants, including banks, asset managers, pension funds, insurance companies, clearinghouses and government entities from a variety of jurisdictions submitted responses.

Consistent with last year’s Consultation on Certain Aspects of Fallbacks for Derivatives Referencing GBP LIBOR, CHF LIBOR, JPY LIBOR, TIBOR, Euroyen TIBOR and BBSW, the overwhelming majority of respondents preferred the “compounded setting in arrears rate” for the adjusted risk-free rate (RFR)1 and the “historical mean/median approach” for the spread adjustment. Respondents cited both support for the substance of these approaches and a strong desire to use the same adjusted RFR and spread adjustment across all benchmarks covered by the supplemental consultation and last year’s consultation (as well as potentially other benchmarks such as EUR LIBOR and EURIBOR, for which ISDA expects to launch a supplemental consultation at the end of 2019 or in early 2020).

Based on the foregoing and subject to the ongoing work and ultimate decision of the ISDA Board Benchmark Committee, ISDA expects to proceed with developing fallbacks for inclusion in its standard definitions based on the compounded setting in arrears rate and the historical mean/median approach to the spread adjustment for USD LIBOR, CDOR and HIBOR.

The full documentation is available at

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