Global clearinghouses are considering whether to shift trillions of dollars of interest-rate derivatives away from the London interbank offered rate weeks before the benchmark expires.
LCH Ltd. is consulting clients about an exit strategy for swaps before the possible retirement of multiple LIBOR benchmarks at year-end, according to Phil Whitehurst, head of service development, rates at SwapClear, which is part of the firm. CME Group opened a similar consultation Thursday.
The proposals could address limited progress to replacement rates in the derivatives industry. LCH alone has about $150 trillion outstanding of swaps, basis swaps and forward rate agreements still referencing LIBOR. As clients make their own transition plans those numbers may fall, yet there's no guarantee it will happen without a push.
"It's an event we would be using to sweep up the population of outstanding LIBOR trades," LCH's Mr. Whitehurst said in an interview.
LCH could carry out a switchover in late November or early December for some LIBORs, Mr. Whitehurst said. Key dollar LIBOR tenors could run on until mid-2023, yet competing constraints on swap market liquidity might mean LCH has to act sooner, according to a person familiar with the matter, who declined to be named.