MFA Submits Comment Letter to the CFTC on its Swap Clearing Requirements Amendments

On January 24, 2022, MFA submitted a comment letter to the Commodity Futures Trading Commission in response to its request for information and comment on how the Commission could amend its swap clearing requirements to address the cessation of certain interbank offered rates (IBOR) used as benchmark reference rates and the market adoption of alternative reference rates; namely, overnight, nearly risk-free reference rates (RFR).

  • MFA supports the Dodd-Frank Wall Street Reform and Consumer Protection Act’s swap clearing reforms and the Commission’s continued efforts to ensure a smooth and timely transition away from the Lindon Interbank Offered Rate (LIBOR).  There is a need for the standard benchmark reference rate for the USD interest rate derivatives market to be set forth in Commission regulation 50.4.
  • MFA strongly recommends that the Commission modify its Swap Clearing Requirement under Commission regulation 50.4 by adding a clearing obligation to the OIS class for SOFR swaps with a maturity range of 7 days to 50 years as soon as practicable. USD LIBOR should not be removed from the Swap Clearing Requirement until such time as the rate is not available.
  • MFA recommends that the Commission bring SOFR swaps within the Swap Clearing Requirement to establish a template for non-U.S. regulatory authorities seeking to update their clearing obligations by adding SOFR swaps and eventually eliminating USD LIBOR swaps.
  • MFA is supportive of the Commission’s goal of ensuring that the globally interconnected interest rate swaps market is not negatively affected by the transition away from LIBOR and the other IBORs to alternative reference rates, and we believe that consistent international standards for clearing are both necessary for a smooth transition away from USD LIBOR to SOFR and mandated by the Dodd-Frank Act.