On Tuesday, November 12, officials at CME Group Inc. proposed a plan to convert eurodollar futures and options to other derivatives linked to an alternative benchmark called the Secured Overnight Financing Rate (SOFR). Eurodollar futures are the most-traded interest-rate derivatives tracked by the Futures Industry Association and LIBOR is used to settle $67 trillion in products including Eurodollar futures and options. In the event LIBOR disappears in 2021, CME officials Sunil Cutinho and Agha Mirza have announced a contingency plan called a “fallback trigger”. In this plan, “the eurodollar futures would be turned into SOFR futures, converted to the same month’s expiration at a price determined by the pre-fallback eurodollar price plus a spread adjustment.” Starting January 6, CME plans to support customers in converting their eurodollar options to SOFR.
Read more via Bloomberg.