Based on an informational release published Sept. 7, 2021 by the CME Group, a license will be required to use and access Term SOFR, though licensing for cash financial products will be available at no cost through December 2026. The Alternative Reference Rates Committee (“ARRC”) formally recommended forward-looking term rates based on the secured overnight financing rate (“SOFR”) published by CME Group (“Term SOFR”) on July 29, 2021. Currently, 1-month, 3-month, 6-month and 12-month Term SOFR rates may be found at: “Term SOFR - CME Group.”
A license will be required for use of Term SOFR as a data input or reference in valuation, pricing, transactional or benchmarking activities. Though an end user (defined as a counterparty or guarantor) does not need a license simply to enter into a transaction using Term SOFR, a license would be required for purposes of valuation, analysis risk and collateral management, among other things. A license would also be required for a party wishing to access historical CME Term SOFR reference rate data as well as for parties which distribute Term SOFR reference rates to third parties.
There are two specific categories of use license. “Category 1” covers use in cash market financial products, including as references in the products, as a primary reference rate or fallback reference rate, in valuation and pricing activities and in communications and disclosures to third parties. “Category 2” covers use of Term SOFR reference rates only as a reference in a OTC derivative products (including under structured products, swaps and other derivative products). The license is part of the CME Group “Informational License Agreement.” The fee schedule may be found at: CME Group Benchmark Fee List.