General
  1. What is CME Term SOFR?
  2. What input data is used in the calculation of CME Term SOFR Reference Rates?
  3. How are CME Term SOFR Reference Rates calculated?
  4. When are CME Term SOFR Rates published and how do they operate during market holidays?
  5. How can I access the CME Term SOFR data?
  6. Will a 12-month tenor be available?
  7. Are CME Term SOFR Reference Rates supported by the Alternative Reference Rate Committee (ARRC)?
PERMISSIBLE USE AND LICENSING
  1. Do I require a License to access and/or use CME Term SOFR Reference Rates?
  2. How may CME Term SOFR be used today?
  3. What constitutes an End-User under CME Term SOFR Licensing?
  4. What OTC Derivative Products may reference CME Term SOFR under a license?
  5. Why is use of CME Term SOFR in derivatives required to be “linked or tied to” Cash Market Financial Products?
  6. Will I need more than one license if I am engaged in multiple applications or uses of CME Term SOFR Reference Rates?
  7. Do all participants in a loan need to retain a license for use of CME Term SOFR?
  8. Is a license required if I access CME Term SOFR Reference Rates on the CME Group website?
  9. How can I access historical CME Term SOFR data for review or testing?
  10. What are the fees for licensing CME Term SOFR Reference Rates?
  11. What are my reporting obligations for use of CME Term SOFR with respect to a Category 1 and Category 2 Use License?
  12. What are the reporting obligations for accessing and using CME Term SOFR?

      a. What are the standard reporting obligations for accessing CME Term SOFR?
      b. How should my firm submit the report for display devices to CME?
      c. What are my reporting obligations for use categories 1, 2, and 3?

  13. What type of information does CME collect when onboarding a licensee and is that information considered Personally Identifiable Information (PII)?
  14. How does the Use License of CME Term SOFR relate to ARRC’s Best Practices?
  15. Is a license required to use CME Term SOFR in an application, machine, algorithm or any non-viewable solution?
  16. Is a license required to view CME Term SOFR on a screen or display device? If so, how should I acquire that license?
Regulatory status and trade association guidance
  1. Are CME Term SOFR Reference Rates available for use under Benchmark Regulation (BMR)?
  2. What happens when the Third Country transition period ends in Dec 2023?
  3. Are Term SOFR Reference Rates IOSCO compliant?
  4. Who is the Benchmark Administrator for CME Term SOFR?
  5. What is the role of the Term SOFR Oversight Committee?
  6. Is CME Term SOFR an available Floating Rate option in the ISDA Definitions?
GENERAL

1. What is CME Term SOFR?

The CME Term SOFR Reference Rates benchmark is a daily set of forward-looking interest rate estimates, calculated and published for 1-month, 3-month, 6-month and 12-month tenors


2. What input data is used in the calculation of CME Term SOFR Reference Rates?

Currently, we use transaction data from thirteen consecutive SR1 futures (1-month CME SOFR futures contracts) and five SR3 futures (3-month CME SOFR futures contracts). The 3-month, 6-month and 12-month tenors are underpinned by SR3 contracts with additional volumes from SR1 helping where available, as SR3 are the replacement contracts for Eurodollar futures.


3. How are CME Term SOFR Reference Rates calculated?

A set of Volume Weighted Average Prices (VWAP) are calculated using transaction prices observed during several observation intervals throughout the trading day. These are then used in a projection model to determine CME Term SOFR Reference Rates. Full details of the calculation methodology are available on the CBA webpages.


4. When are CME Term SOFR Rates published and how do they operate during market holidays?

CME Term SOFR Reference Rates will be calculated for each day the New York Federal Reserve calculates and publishes SOFR. Publication will occur at 5:00 am CT (US Central Standard Time).

As described in the calculation methodology, publication of CME Term SOFR takes place on day T based on the data sampling on T-1. The start date of the reference period for the Term SOFR rates is T+2, as illustrated below:

 

Data sampling and publication will only take place on a Business Day, in accordance with the recommended SIFMA US Holiday Schedule. There will be no publication or data sampling that takes place on a SIFMA US Holiday.


5. How can I access the CME Term SOFR data?

CME Term SOFR Reference Rates can be viewed on the CBA webpages each day along with the tickers that can be used to access the rates via other services. In addition, the benchmark is available to license via CME DataMine, CME’s Market Data Platform.


6. Will a 12-month tenor be available

The 12-month tenor was launched on September 21, 2021 and is published alongside the existing 1-month, 3-month, and 6-month tenors. Historical data for the 12-month tenor is also available.


7. Are CME Term SOFR Reference Rates supported by the Alternative Reference Rate Committee (ARRC)?

The ARRC formally announced its endorsement of 1-month, 3-month and 6-month CME Term SOFR Reference Rates on July 29, 2021. CME expects that the new 12-month benchmark will be evaluated by ARRC for endorsement at a time determined by the ARRC. Our 12-month benchmark is aligned with our 1-month, 3-month and 6-month benchmark Term SOFR rates in meeting IOSCO and BMR standards.


PERMISSIBLE USE AND LICENSING

8. Do I require a License to access and/or use CME Term SOFR Reference Rates?

  • A Use License must be obtained directly with CME Group under the Information License Agreement (ILA), by any institution that uses CME Term SOFR Reference Rates as a data input or reference in valuation, pricing, transactional or benchmarking activities, including those categories of use specified below.
    • For the avoidance of doubt, merely because you access and view CME Term SOFR Reference Rates on a Bloomberg or Eikon terminal does not also grant the rights to use CME Term SOFR in a Cash Market Financial Product or OTC Derivative Product – a separate Use License direct with CME is required for such use.
    • An end user does not need a Use License for CME Term SOFR simply to enter into a transaction, e.g. a corporate borrower does not need a license for Term SOFR based borrowing, however if the end user/borrower wishes to use Term SOFR in a system for purposes of valuation, analysis risk/collateral management, among other things, a license would be required.
  • Use of CME Term SOFR in a Display Device for internal business purposes may be licensed directly with CME Group or an authorized distributor/vendor, by means of a standard internal use subscriber agreement.
  • Non-Display use of CME Term SOFR must be licensed directly with CME Group.
  • A Distribution License is required for any party that distributes CME Term SOFR Reference Rates to third parties.
  • A license is further required for any party wishing to access historical CME Term SOFR Reference Rates data via CME DataMine.

Please contact CME Group Data Sales to discuss and arrange appropriate data licensing.


9. How may CME Term SOFR be used today?

Currently CME Term SOFR Reference Rates are available to license directly under three specific Use Licenses:

Use License Category

Category Descriptions

1

Cash Market Financial Products

2

OTC Derivative Products

3

Treasury, Risk & Transaction Administration Services

 

 

 

Termination Of Use In Cash Market And OTC Derivative Financial Products

 

The licensing Terms and Conditions that apply to each of these use categories can be found in the Appendix A to Schedule 7 document on our Market Data Policy webpage. The associated Fee List for each of these categories is also posted on the same webpage. We provide an explanation of these use categories below:

Category 1 – Use in the origination of Cash Market Financial Products. Use of CME Term SOFR Reference Rates:

  • as a reference in Cash Market Financial Products (e.g. loans, mortgages, notes, money market instruments);
  • as a primary reference rate or fallback reference rate in Cash Market Financial Products, including in connection with interest amount, default rate and close-out calculations;
  • lenders may also use CME Term SOFR in valuation and pricing activities, including, but not limited to, collateral calculations, interest rate calculations and the creation of pricing, discount and forward curves;
  • with respect to such Cash Market Financial Products, in communications and disclosures to third parties in connection with performance measurement, benchmarking, strategy outcome measurements and money market and other return calculations; and
  • for purposes of converting or transitioning Cash Market Financial Products referencing, directly or indirectly, an IBOR to another rate as a conversion factor or price adjustment.

Category 2 – Use in OTC Derivative Products:

Use of CME Term SOFR Reference Rates only as a reference in an OTC Derivative Product (e.g. structured products, swaps, security-based swaps, forwards, warrants, options and other similar derivative instruments) that is tied or linked to a licensee and End User hedging against exposure from one or more Cash Market Financial Products that references the same CME Term SOFR Reference Rate.

Category 3 – Use in Treasury, Risk & Transaction Administration Services:

Use of CME Term SOFR Reference Rates in products and/ or services that are developed by specialist providers and then licensed to external clients to help with treasury and risk management activities and/or provide transaction administration services.

The specialist providers must hold a license directly with CME for Category 3 Use of CME Term SOFR. And, while a client of such a service does not require a license with CME to use the service, they may require a Category 1 or Category 2 license, as use of this type of service is often in support of Cash Market Financial Products (Category 1 Use) and OTC Derivative Products (Category 2 Use).

Where a Category 1 or Category 2 Licensee provides clients valuations, interest rates, pricing information or similar calculations related to the Category 1 or Category 2 Products executed with the client, this activity does not require a separate Category 3 license Only where such a service is provided by an independent business unit or entity, to external clients that are not directly tied to any Category 1 or Category 2 activity of the provider (where it exists), does a Category 3 use license then become necessary.

Termination Of Use In Cash Market And OTC Derivative Financial Products:

If a use license expires or is terminated, CME Term SOFR may still be used in existing Cash Market (Category 1) or OTC Derivative (Category 2) Financial Products during an ongoing maintenance period, provided that the Licensee notifies CME in writing. This maintenance period will cover the furthest expiry date of the financial products using CME Term SOFR at the effective date of the license expiration or termination. We do not allow for any extensions or amendments.

License fees for use of CME Term SOFR during the maintenance period will be 75% of the prevailing fees at the time of license expiration or termination.


10. What constitutes an End-User under CME Term SOFR Licensing?

An End User is an individual or entity that is a counterparty or guarantor to the applicable Cash Market Financial Product or OTC Derivative Product with the Licensee of CME Term SOFR. Both sides holding a cash market exposure on CME Term SOFR may execute a corresponding derivatives hedge with a derivatives dealer desk.

We recognize that some lending arms of an institutions may have a practice of facing an internal derivatives book which is not structured to make markets or warehouse the risk of offering derivatives products to end users. In this instance, provided that the internal derivatives book does not make two-way prices in interest rate derivatives and is not a market maker in the interdealer market, hedging with another derivatives dealer desk is permitted under the Category 2 use of CME Term SOFR. For the avoidance of doubt, this exception does not apply if the lending arm executes the permitted derivatives hedge with an internal trading book or desk that is active in the inter-dealer market.


11. What OTC Derivative Products may reference CME Term SOFR under a license?

CME Term SOFR Reference Rates may only be used as a reference in an OTC Derivative Product that is tied or linked to Licensee and End User hedging against exposure from one or more Cash Market Financial Products that references the same CME Term SOFR Reference Rates. For the avoidance of doubt, CME Term SOFR Reference Rates may not be licensed for use in any other financial product that is not a Cash Market Financial Product, that is listed on an exchange, trading facility, or other trading venue in the creation of any derived work. The intention of this requirement is not to restrict the trading of cash market financial products.


12. Why is use of CME Term SOFR in derivatives required to be “linked or tied to” Cash Market Financial Products?

As stated in CME Group’s announcement of its CME Term SOFR Reference Rates benchmark, the use of CME Term SOFR in derivatives should be limited to avoid overly detracting from volumes in the underlying SOFR-linked derivatives that are relied upon to construct CME Term SOFR rates. Our policy is aimed toward this objective. Further, users should make their own choices for alignment with additional detail in industry guidance such as the Best Practices Recommendations Related to Scope of Use of the Term Rate.


13. Will I need more than one license if I am engaged in multiple applications or uses of CME Term SOFR Reference Rates?

Clients may require more than one type of license to fully cover their needs. For example, a client that requires use of CME Term SOFR in a loan (Category 1) and also desires to use CME Term SOFR as a reference in a swap tied or linked to the client and End User for hedging against exposure from the same loan that references CME Term SOFR (Category 2), both a Category 1 and Category 2 license is required.


14. Do all participants in a loan need to retain a license for use of CME Term SOFR?

Any and all participants, whether a single lender or multiple (e.g. loan syndication) that are party to a loan on the lender side of a transaction require a Category 1 Use License to use CME Term SOFR as an input or reference to a loan.

However, an End User as defined does not require a Use License by merely being the borrower or counterparty to a loan transaction. It should be noted, other activities to manage investment portfolios with assets priced to CME Term SOFR may require additional licenses.

Intercompany lending, where a corporate borrower then references CME Term SOFR in a subsequent intercompany loan, would require a Category 1 license as the borrower has taken on the role of an intercompany lender.

We encourage loan participants to engage with CME Group Data Sales to help determine if a use license is required and if so, which type best fits their needs.


15. Is a license required if I access CME Term SOFR Reference Rates on the CME Group website?

Viewing CME Term SOFR Reference Rates on the CME Group website is governed by the Data Terms of Use. A separate license agreement is not required. Use of any data accessed on the CME Group website is limited to “view only” use. Any other use is strictly prohibited in accordance with CME Group’s Data Terms of Use.

Distribution of CME Term SOFR on a website is permitted once licensed directly with CME. Please contact CME Group Data Sales to discuss the licensing options.


16. How can I access historical CME Term SOFR data for review or testing?

CME Term SOFR historical data is available for licensing via CME Group’s DataMine platform.

CME Term SOFR historical data is also available from some vendor platforms that are licensed to distribute such data. Historical data made available for “view only” purposes on such platforms is licensed directly with the vendor. Historical data that is downloaded from these vendor platforms requires a direct license with CME. Please contact CME Group Data Sales for any questions on the licensing options for historical data.


17. What are the fees for licensing CME Term SOFR Reference Rates?

Please see CME Group’s standard fee schedule here.

Please contact CME Group Data Sales to discuss what Use License is most appropriate for you.


18. What are my reporting obligations for use of CME Term SOFR with respect to a Category 1 and Category 2 Use License?

CME Benchmark Administration, Ltd. is subject to UK Benchmark Regulation (UK BMR) that requires CBA to report to the regulator the outstanding notional of financial products that reference CME Term SOFR. This helps the regulator determine the use of and systemic importance of the benchmark.

CME therefore requires licensees to report the total outstanding notional of their financial products that reference CME Term SOFR. This can be reported as a single aggregated notional across Category 1 and Category 2 products combined, or as a separate notional for each category. The request, a point in time assessment, will come in January of each year and will be due in February. This requirement will be deferred for 2022 and will commence in 2023.

The CME Term SOFR reporting requirements are covered in more detail in our Reporting and Audit Guide, link here.


19. What are the reporting obligations for accessing and using CME Term SOFR?

CME standard reporting requirements vary according to how you access and use the data. Please refer to the following sub-sections;

Section

Contents

19a

Standard Reporting Obligations

19b

How Do I Submit My Reporting

19c

Reporting Obligations for Use Categories 1, 2 and 3

 

The CME Term SOFR reporting requirements are covered in more detail in our Reporting and Audit Guide, link here.

19a. What are the standard reporting obligations for accessing CME Term SOFR?

Display Devices - Reporting obligations for accessing CME Term SOFR in Display Devices will begin in January 2023.

Where CME Term SOFR is accessed for viewing on a screen provided by a licensed data distributor then,

  • the distributor alone will report directly to CME the total quantity of display devices with access to the data by your firm,
  • that total quantity of devices, in aggregate, is reported on a location basis each month,
  • for each location the report captures, Firm Name, Firm Address and total quantity of devices with access to the CME Term SOFR data,
  • No personal or user level detail is required to be reported.

Where CME Term SOFR is accessed for viewing on a screen, and the access to the display devices is managed by the license holder (licensee) then,

  • the licensee will be required to report directly to CME the total quantity of display devices with access to the data by your firm,
  • the total quantity of devices, in aggregate, is reported on a location basis each month,
  • for each location, the report captures Firm Name, Firm Address and total quantity of devices with access to the CME Term SOFR data,
  • no personal or user level information is required to be reported. 

Where CME Term SOFR is used for Non-Display Benchmark Use, Licensees have no reporting obligation for such use. 

19b. How should my firm submit the report for display devices to CME?

CME provides a reporting template in Excel format.  It can be downloaded from the CME Data Services Portal which can be accessed here.

A sample reporting template can also be found here.

Completed templates should be submitted using the same portal.  Your firm will be provided a unique access point to this portal to enable you to submit these reports each month.  Here is a screenshot of where you will be asked to submit your report.

 

For additional information about reporting , please refer to our Device Reporting Fact Sheet. You can also reach out to your dedicated Global Account Manager or contact marketdata@cmegroup.com.

19c. What are my reporting obligations for use categories 1, 2, and 3?

The reporting requirements for use category 1 (cash market financial products) and use category 2 (OTC Derivatives) are covered in FAQ #18.

For use category 3, reporting obligations will begin in July 2022, as follows:

  • reporting is required where CME Term SOFR is used for the creation of one or more Products for use in the Category 3 Services, by Clients,
  • such services are owned and operated by a Licensee Group entity and provided to Clients (“Category 3 Service”),
  • licensees will be asked to report the total number of clients that use each Category 3 service.  No personal user level information is required.  Only the aggregate number of clients must be reported, for each Category 3 Service,
  • reporting of this information is required on a monthly basis,
  • reporting will be administered through the Data Services Portal.

A sample of the reporting interface is depicted in the screenshot below.


20. What type of information does CME collect when onboarding a licensee and is that information considered Personally Identifiable Information (PII)?

To administer the license agreement, including notifications, communication and billing, CME requires the following information concerning your firm; firm name, firm address, an email address to which you would like all communications to be sent and a phone number for us to contact you in respect of the agreement. Such information is confidential and used only by CME Group in the carrying out of its obligations under the agreement.


21. How does the Use License of CME Term SOFR relate to ARRC’s Best Practices?

We recommend all users of CME Term SOFR observe the ARCC’s Best Practices Recommendations Related to Scope of Use of the Term Rate, nonetheless CME determines its own licensing policies. The licensing of rights to use CME Term SOFR is a commercial agreement between CME and a licensee with standard terms and conditions that apply equally to all clients.


22. Is a license required to use CME Term SOFR in an application, machine, algorithm or any non-viewable solution?

Yes, CME Term SOFR may be used in non-viewable systems, processes, programs, machines, applications or calculations under a Non-Display License directly with CME, for internal business purposes only.


23. Is a license required to view CME Term SOFR on a screen or display device? If so, how should I acquire that license?

Yes, a license is required to view CME Term SOFR on a display device. Licenses are made available to you by the vendor that provides the access to the display device. These licenses are limited to view only use.


REGULATORY STATUS AND TRADE ASSOCIATION GUIDANCE

24. Are CME Term SOFR Reference Rates available for use under Benchmark Regulation (BMR)?

The 1-month, 3-month, 6-month and 12-month CME Term SOFR Reference Rates are a family of benchmarks registered under BMR and available for use by EU/UK supervised entities. Under the Brexit transition arrangement, all UK BMR regulated benchmarks are eligible for use in the EU as Third Country transitional benchmarks, without EU registration. A Benchmark Regulatory Statement is available on the CBA webpages.


25. What happens when the Third Country transition period ends in Dec 2023?

At the end of the transition period, use of a benchmark in the EU will require that benchmark to be registered in the EU, either as a Third Country benchmark, an EU benchmark or through equivalence. There is also an option for the EU to extend the transition period by a further 2 years until the end of 2025. CME Group is committed to ensuring that CME Term SOFR continues to be available for use as a benchmark in the EU post-transition.


26. Are Term SOFR Reference Rates IOSCO compliant?

CME The 1-month, 3-month, 6-month and 12-month Term SOFR Reference Rates have been designed to meet industry best practices and the IOSCO Principles for Financial Benchmarks. A statement of IOSCO compliance is available on the CBA webpages here.


27. Who is the Benchmark Administrator for CME Term SOFR?

CME Group Benchmark Administration Limited (CBA) is the Administrator of CME Term SOFR Reference Rates. CBA is a registered Benchmark Administrator, regulated by the UK Financial Conduct Authority (FCA).


28. What is the role of the Term SOFR Oversight Committee?

The Oversight Committee is a requirement for both IOSCO and BMR standards. The Committee provides independent oversight of, and challenge to the administrator on all aspects of the determination process. The Oversight Committee approves proposed changes to the Calculation Methodology including, but not limited to, the structure of the benchmark, input data used and all aspects of the Calculation Methodology. Details of the Committee, its members and meeting minutes can be found on the CBA webpages.


29. Is CME Term SOFR an available Floating Rate option in the ISDA Definitions?

Yes, ISDA recently added a new Supplement 84, dated Sept 8th, 2021, to their 2006 ISDA Definitions document to specifically support use of CME Term SOFR in OTC Derivatives. This update covers a variety of Rate Options definitions and guiding principles, for the purposes of determining a “Relevant Rate”, including the use of CME Term SOFR upon a Reset Date.

CME Term SOFR Rates

CME Term SOFR Reference Rates provide an indication of the forward-looking measurement of overnight SOFR, based on market expectations implied from derivatives markets.


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