Rates Reform - SGD SOR and THB THBFIX Fallback and Conversion Fees

Dear SwapClear User,

This circular details the timeline and the amounts payable for SGD SOR and THB THBFIX Fallback and Conversion Fees[1]. This follows our announcements of the outcomes of our consultations related to the conversion processes for SGD SOR and THB THBFIX.

In line with regulatory guidance, LCH strongly recommends that participants consider proactively transitioning away from fallen-back benchmark rates.

The Fallback Fee applies to cleared contracts for which an index cessation event has occurred. It aims to encourage early transition before the LCH conversion processes are run, thereby mitigating LCH’s concerns in relation to a) ongoing risk and default management, as well as b) the operational and technological risks associated with the conversion process.

The Conversion Fee applies to cleared contracts for which a rate will cease and where LCH converts the cleared contract to one referencing a risk-free rate. The conversion process is designed as a last resort for those participants who are otherwise unable to transition away from fallen back rates. The fee will allow LCH to recover the costs of designing, building and running the conversion process and should also discourage over-reliance on the conversion tool.

As previously stated, other tools and processes are available to market participants to discontinue their reliance on rates that have fallen back. 

SGD SOR and THB THBFIX Fallback Fees

Effective 31^st March 2023, LCH will apply a monthly Fallback Fee for outstanding SGD SOR and THB THBFIX contracts which have a maturity date after the benchmarks’ cessation date of 30th June 2023, as of the last good business day of that month.

The following charges will apply to cleared contracts in both SwapClear Clearing Member House and Client accounts; 30-days’ notice will be provided for any amendment to these fee amounts.

Conversion Fees

LCH will apply a conversion fee to SwapClear Clearing Member House and Client contracts[2] which are not otherwise converted and will therefore require conversion by LCH. The conversion processes in 2023 will encompass SGD SOR and THB IBOR contracts. LCH has announced the following dates:

For SGD SOR and THB THBFIX, conversion would apply to SwapClear contracts outstanding at COB on Friday 9th June 2023 and be conducted over that weekend.

Fee Amount per Contract:

An annual Conversion Fee Cap will apply in 2023 for all SwapClear Clearing Member House accounts as follows. Note, this cap applies to Conversion Fees only and is not applicable for Fallback Fees.

For the avoidance of doubt, USD LIBOR, SGD SOR and THB THBFIX will contribute to the 2023 Conversion Fee Cap.

Should you have any questions, or if you require further information, please do not hesitate to contact RatesClientServices@lch.com or LCHSales@lseg.com.

[1] Subject to regulatory review

[2] ‘SwapClear Contract’ includes an ‘FCM SwapClear Contract’