May 7, 2018 / 11:11 PM / 2 months ago

CME's SOFR futures debut with more than 50 participants

May 7 (Reuters) - The CME Group Inc on Monday saw more than 50 global firms participate in its new futures contracts backed by the Secured Overnight Financing Rate (SOFR), a U.S. alternative to the benchmark Libor interest rate.

More than 3,000 one-month and three-month contracts based on the new benchmark interest rate traded in the launch, according to the CME.

Though that is well below volumes in the CME’s other rate futures, trading on SOFR-based contracts has been expected to begin slowly as investors familiarize themselves with the new rate. The New York Federal Reserve only began publishing SOFR on April 3.

“We saw more than 3,000 contracts traded and very strong participation for a new interest rate contract,” said Agha Mirza, CME’s global head of interest rate products in Chicago. “This is a testament that market participants appreciate the importance of building a derivatives marketplace on the SOFR index.”

The CME’s launch of the contracts is part of a multi-year effort to move around $200 trillion in U.S.-dollar based derivatives and loans away from the use of the London interbank offered rate (Libor), which is what large banks charge each other for short-term loans. Cleared interest rate swaps based on SOFR are also slated for this year.

Regulators including Federal Reserve Chairman Jerome Powell have warned that Libor could pose systemic risks in the event it stops being published due to the sheer size of markets based on the rate.

Reporting by Karen Brettell in New York Editing by Lisa Shumaker

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