Clearing Requirement Determination Under Section 2(h) of the Commodity Exchange Act for Interest Rate Swaps to Account for CAD and MXN Interest Rate Benchmark Transitions
Key claim: The CFTC proposes to amend its interest rate swap clearing requirements to replace CDOR with CORRA for CAD-denominated swaps and TIIE with F-TIIE for MXN-denominated swaps, reflecting ongoing global benchmark rate transitions.
Abstract
(Proposed Rule · Commodity Futures Trading Commission) The Commodity Futures Trading Commission (Commission or CFTC) is proposing to amend its interest rate swap clearing requirement regulations adopted under applicable provisions of the Commodity Exchange Act (CEA) to address the transition from the Canadian Dollar Offered Rate (CDOR) to the Canadian Overnight Repo Rate Average (CORRA), and the transition from the Mexican Interbank Equilibrium Interest Rate (la Tasa de Inter[eacute]s Interbancaria de Equilibrio, or TIIE by its Spanish acronym) to the Overnight TIIE Funding Rate (TIIE de Fondeo or F-TIIE), as benchmark reference rates for interest rate swaps denominated, respectively, in Canadian dollars (CAD) and Mexican pesos (MXN). These transitions are part of an ongoing global effort by market participants, benchmark administrators, regulators, and others to shift away from reliance on certain interbank offered rates (IBORs) that are, or are expected to become, unavailable as benchmark reference rates, and increase adoption of alternative reference rates, which are predominantly overnight, nearly risk-free reference rates (RFRs). The proposed amendments would revise the set of interest rate swaps that are required to be submitted for clearing, pursuant to the CEA and the Commission’s regulations, to a derivatives clearing organization (DCO) that is registered under the CEA (registered DCO) or a DCO that has been exempted from such registration (exempt DCO). Among other things, the proposed amendments would modify the Commission’s interest rate swap clearing requirement to reflect the market transitions from CAD CDOR to CAD CORRA and from MXN TIIE to MXN F-TIIE.
Why this matters
Mandatory clearing determinations under CEA Section 2(h) directly affect which swaps market participants must route through CCPs, and updating them to track benchmark transitions preserves the clearing mandate’s coverage as legacy rates like CDOR and TIIE are retired. For banks and buy-side dealers active in CAD- and MXN-denominated rates markets, the proposal aligns U.S. clearing obligations with the reference rates now actually being traded, avoiding gaps or stranded legacy-benchmark exposures.