LCH Is Not In Line With Bi-Lateral Swaps

  • LCH announced the specific conventions for converting LIBOR swaps to RFR. The interesting thing is that it seems the fallback/conversion swap conventions do not follow the bi-lateral ISDA recommended conventions.
  • Here is the text from LCH:
    • In light of our user-backed decision to carry the spread adjustment on the RFR leg of the converted contract, LCH wish to confirm that we also intend to retain the roll dates & accrual periods of the original LIBOR contract, to use compounded RFRs as applicable over those periods and therefore to apply currency-specific payment lags to these legs in line with current market conventions for RFR-based swaps.
  • This differs from ISDA as the bi-lateral fallback has specific conventions that follow the LIBOR swap (payment dates stay the same) but not the new RFR-based swaps.
  • https://www.lch.com/membership/ltd-membership/ltd-member-updates/supplementary-statement-lchs-solution-outstanding