MNI POLICY: Fed's Quarles: To Speed Up SOFR Market Development

By Jean Yung

     WASHINGTON (MNI) - Federal Reserve Governor Randy Quarles on Wednesday

urged financial institutes to accelerate their transition toward alternative

risk-free rates including the Secured Overnight Funding Rate and away from

LIBOR, warning LIBOR use could end in two and a half years. 

     Speaking on the one-year anniversary of the New York Fed's publication of

SOFR and other new risk-free rates, Quarles noted substantial progress in the

adaptation of the new rates. 

     SOFR futures saw more than $7 trillion in cumulative notional volumes since

they were created, a crucial development for market liquidity that's spurring

the growth of SOFR swaps and other derivative markets, he said. Over the past

year, $81 billion in SOFR-linked debt were also issued. 

     These alternative rates, structured to accurately represent well-defined

underlying market transactions, were created to shore up stability in the

financial system and replace LIBOR by 2021. The Fed has also raised the

possibility, though far in the future, that rates like SOFR could replace the

fed funds rate as its benchmark rate. 

--MNI Washington Bureau; +1 202-371-2121; email: jean.yung@marketnews.com

[TOPICS: MMUFE$,M$U$$$]