The International Swaps and Derivatives Association has announced the preliminary results of its consultation on pre-cessation fallbacks for LIBOR-referencing derivatives. The consultation was launched in February 2020, and sought industry responses on ISDA’s proposals to add a pre-cessation trigger to the LIBOR cessation fallbacks ISDA is proposing to implement in its standard documentation. The trigger would cause LIBOR-based derivative contracts to fall back to an alternative reference rate in the event that the U.K. Financial Conduct Authority deemed LIBOR to be no longer representative.
The preliminary announcement of results suggests the majority of respondents are in favor of including the pre-cessation fallbacks in ISDA documentation via either an amended version of the ISDA 2006 definitions (for new contracts) or a protocol (for legacy contracts). ISDA plans to publish a final report on the results of the consultation and its intended next steps in the coming weeks.