The Monticello team attended ISDA’s Benchmark Strategies Forum: A Post Libor World webinar last month. The conference included a wide-ranging panel of experts from the financial services industry, hailing from firms such as ISDA, CME Group, Goldman Sachs and the Federal Reserve Bank of New York, among others. The detailed discussion outlined the future of the market environment following the cessation of LIBOR, including steps that have already been taken to aid in the unwinding process itself as well as additional liquidity options for market participants around the world. The conference also detailed how various aspects of the transition of LIBOR have impacted the overall dynamic of cash products as well as derivatives. Apart from the main topic regarding the cessation of LIBOR, further analysis by the participants focused on other regional benchmarks affected by the transition, specifically swap rates. Particular emphasis among the panelists was placed on the fact that market participants would benefit from considering their existing risk management processes in the wake of the cessation as well as developing a plan of action to commit to transitioning sooner rather than later. To greater decrease risk, the speakers also demonstrated the important need for firms to educate themselves on the differences between SOFR and LIBOR in times of market stress, as trading the same instruments under either rate could potentially yield vastly different results. Overall, the panelists expressed optimism with respect to the progress made so far on a global scale during the transition but expressed caution regarding future volatility and exogenous factors as the market is still in the early stages of the cessation.
At Monticello, our consultants continue to participate in industry conferences and events to ensure our clients are advised on emerging trends and risks their organizations may face. We look forward to working with our clients to support their post LIBOR needs in 2022 and beyond.