USD BSBY Cessation

Report date

Circular No.

LCH Circular No 4284


12 December 2023


All SwapClear Users


On 15 November 2023, Bloomberg Index Services Limited (“BISL”) issued a statement announcing the cessation of the Bloomberg Short-Term Bank Yield Index (“BSBY”) following a final publication on 15 November 20241. At the same time, on 20 November 2024, ISDA confirmed that BISL’s announcement constitutes an “Index Cessation Event” for purposes of the 2021 ISDA Interest Rate Derivatives Definitions, the 2006 ISDA Definitions and the 2018 ISDA Benchmarks Supplement2.

These announcements are relevant to LCH Ltd (“LCH”) since its SwapClear service provides clearing for USD BSBY swaps3 and the provisions in the 2021 ISDA Interest Rate Derivatives Definitions relating to fallbacks (section 8) and bespoke triggers and fallbacks (section 9) are incorporated into SwapClear Contracts.

As part of their statement, BISL confirmed that they will not be recommending a fallback replacement rate for BSBY. While LCH has not yet finalised its approach to the management of outstanding USD BSBY SwapClear Contracts upon cessation, the absence of a recommended fallback significantly complicates any plan to convert outstanding BSBY trades into contracts referring to an alternative reference rate.

In light of this, all SwapClear users with outstanding positions in USD BSBY swaps are strongly encouraged to actively reduce and/or close out their exposures at their earliest convenience, for example by trading out of them. Similarly, whilst we note that SwapClear’s immediate ability to risk-manage outstanding BSBY positions is not impacted by BISL’s announcement, SwapClear users are discouraged from increasing their risk profile in relation to BSBY positions cleared at LCH.

LCH intends to issue a further communication to provide greater detail of our approach towards USD BSBY SwapClear Contracts that could remain open at the point of the index cessation.

Our approach will be subject to risk governance and legal review or non-objection.

Should you have any comments or questions, or if you require further information, please do not hesitate to contact