CME Group has confirmed plans to convert its giant Eurodollar pool to SOFR equivalents by 14 April, 2023 – a good two months ahead of the 30 June deadline for the final death of Libor, reflecting industry preference for an early (and orderly) exit.
The 14 April deadline was not unexpected, but has now been confirmed by client validation, with all eligible Eurodollar futures and options to be converted to SOFR equivalent contracts.
April 2023 (serial), May 2023 (serial) and June 2023 (quarterly) Eurodollar futures and options will be excluded from the conversion and will stop trading on their standard expiration dates.
From 1 November this year, CME Group will also waive all trading fees for SED spreads and LS spreads to reduce frictional costs for clients who want to move their positions to SOFR in advance of conversion, yet another step to encourage a smooth transition.
All Eurodollar options already have an equivalent three-month SOFR option listed, with inter-commodity spreads (ICE) including SED and LS (reduced tick size) available to encourage market-led switching. The exchange also offers a lower block threshold for SOFR vs Eurodollar options spreads, providing that each leg of the spread meets the smaller of the two threshold requirements.
The conversion plan remains subject to regulatory review.