CME Group is proposing to convert all outstanding cleared CDOR swaps that contain fixings beyond the cessation date of June 28, 2024. Having considered relevant holidays across jurisdictions and keeping this cessation date in mind, CME Group would run a primary conversion on June 7, 2024, as shown in the below timeline: 

It is important to note a few details as they relate to this timeline of events:

• CME Group began supporting the clearing of CORRA overnight index swaps in October 2016, which has allowed industry participants to move activity on their own accord ahead of any mandatory CCP conversion events if desired.
• The proposed June 7, 2024, primary conversion event would encompass all legacy cleared CDOR swaps that contain fixings beyond the June 28, 2024, cessation date.
• Following the primary conversion event, CME Group would continue accepting CDOR swaps for clearing.
• On the first good business day following the cessation (accounting for Canada Day), July 2, 2024, CME Group will run a secondary conversion to convert any outstanding CDOR swaps. This should be viewed as the beginning of daily conversion cycles to support the clearing of any CDOR swaps that are the result of bilateral swaption expiries, as well as a cleanup exercise for any CDOR swaps cleared between the primary conversion and the cessation date. 

As outlined in the above visual, CME Group proposes the following conversion methodology, whereby any legacy cleared CDOR swaps that have fixings beyond June 28, 2024, would be terminated and replaced with the following:

1. A short-dated CDOR replacement swap that is designed to capture any CDOR fixings scheduled to occur prior to the cessation date (the legacy swap’s economics would carry over).
2. A forward-starting CORRA replacement overnight index swap (OIS) that would maintain the legacy swap’s fixed rate, replace the CDOR floating rate with daily compounding CORRA plus the ISDA fallback spread (32.138bps for 3M CDOR) and would apply a 1D payment offset to both the fixed and floating legs. This swap would become effective once the short-dated CDOR replacement swap expires and its maturity would match the original legacy swap.
3. A cash adjustment in the form of an upfront fee would be included on the forward starting CORRA replacement OIS to account for any differences between the legacy CDOR swap valued under ISDA fallbacks and the corresponding replacement swaps booked by CME Group at the point of conversion.

• This proposal will be made publicly available, and CME Group intends to accept commentary and feedback through November 15, 2023.
• CME Group will then formalize its official transition plan and release more detailed operational resources (including information on dress rehearsal dates). 

Please contact us at ClearedSwapConversion@cmegroup.com by November 15, 2023, if you would like to raise any questions or provide feedback on the following key considerations:

1. Is your firm supportive of the approach outlined in this proposal?
2. Is Friday, June 7, 2024, a reasonable date to run the primary conversion?
3. Conversion methodology for CDOR compounding swaps: 

As demonstrated in the above visual, for compounding swaps, CME Group intends to respect representative CDOR fixings and calculation periods and in certain instances will be breaking payment frequencies on the fixed and floating payments. Specifically, when a CDOR swap contains a compounding period consisting of a combination of representative and non-representative fixings, CME Group will break both the fixed and floating payment. This would result in a single period fixed-float CDOR swap as well as a short initial stub on the forward starting CORRA replacement OIS. All periods beyond this initial compounding period will remain unchanged. Note, this is consistent with the logic applied during the USD LIBOR conversion events.

4. Are you comfortable with this approach for CDOR compounding swaps?
5. Conversion methodology for CDOR swaps containing the IMM CAD roll convention: 

As demonstrated in the above visual, CME Group proposes to utilize the following conversion methodology, which involves adjustments to the replacement swap economics required to account for the IMM CAD roll convention changes post cessation. In-scope CDOR swaps that follow this roll convention would be terminated and replaced with: 

I. A short-dated CDOR replacement swap that is designed to capture any CDOR fixings scheduled to occur prior to the cessation date. The maturity date will be set as the third Wednesday of the month corresponding to the last cash flow in the short-dated replacement swap. 

II. A forward starting CORRA replacement overnight index swap (OIS) that would maintain the legacy swap’s fixed rate, replace the CDOR floating rate with daily compounding CORRA plus the ISDA fallback spread (32.138bps for 3M CDOR), and would apply a 1D payment offset to both the fixed and floating legs. This swap would become effective once the short-dated CDOR replacement swap expires, and its maturity would be updated to the third Wednesday of the month corresponding to the original maturity date. 

III. A cash adjustment in the form of an upfront fee would be included on the forward starting CORRA replacement OIS to account for any differences between the legacy CDOR swap valued under ISDA fallbacks and the corresponding replacement swaps booked by CME Group at the point of conversion. 

6. Are you comfortable with this approach for CDOR swaps containing the IMM CAD roll convention?
7. Are there any additional items your firm would like to comment on or request further clarity on?