On Jun. 26, LCH LTD updated on conversion ILS TELBOR contracts.
LCH LTD issued circular on conversion of outstanding cleared ILS TELBOR contracts.
Follows ISR CB Apr. 2024 decided to stop publishing tenors of TELBOR, see #208740.
Overview
Supports continuing industry-wide efforts to transition from existing benchmarks to risk-free rates (RFRs), its SwapClear service has played active role in the transition.
The most recent example is conversion of SwapClear’s CAD CDOR Contracts into CORRA-equivalents, which was completed by SwapClear in Jun. 2024.
On Apr. 16, 2024, ISR CB announced that publication of all tenors of ILS TELBOR will permanently cease immediately following a final publication on Jun. 30, 2025.
Concurrently, ISDA confirmed that such announcement constituted an Index Cessation Event under ISDA IBOR Fallbacks Supplement and Fallback Protocol and BISL published fixed spread adjustments relevant within SHIR-based fallback arrangements.
Statements are relevant to SwapClear offering clearing services for ILS TELBOR swaps.
Circular articulates intended approach and timeline regarding treatment of outstanding cleared ILS TELBOR SwapClear Contracts at or around Index Cessation Effective Date.
Plus conversion into/replacement with corresponding SHIR-based SwapClear Contracts.
Key Aspects
Circular describes the ILS TELBOR conversion scope and the target design principles.
SwapClear will perform ILS TELBOR conversion in single event envisaged for May 17, 2025, based on population of TELBOR contracts outstanding on EOD May 16, 2025.
Prior to conversion event in production, conversion process will be tested via dress rehearsal event to take place in LCH member test environment expected Mar. 8 2025.
SwapClear Transactions referencing ILS TELBOR will no longer be eligible for clearing with SwapClear service from and including first Monday post conversion event date.
Will release further operational details, arrange briefing calls to allow SwapClear users to familiarize with process in preparation for key events around ILS TELBOR transition.
Similar to past RFR conversions, LCH LTD will apply charges in relation to conversion process described above and it will issue a separate communication in this regard.
Approach, process described subject to risk governance, legal and regulatory review.
In Sep. 2024, LCH LTD updated on ILS TELBOR to SHIR conversion, see #227365.
