September 27, 2021 - by Meredith Coffey. All lenders and investors should be aware that they probably will need a CME Term SOFR License in order to invest or participate in Term SOFR loans. To help educate members, the LSTA has posted a short podcast featuring CME’s Trey Berre explaining CME Term SOFR Licensing. The podcast and supporting slides are available here. Key points include:
- CME Term SOFR licensing will follow the norms of Ice Benchmark Administration (IBA) Libor licensing.
- If a party is a lender or investor, it probably doesn’t need a CME Term SOFR license IF the party only looks at CME Terms SOFR, but not does use it for any calculations.
- Once a party does something with Term SOFR – like calculate interest, reconcile interest, determine CLO note interest, etc. – it needs a license.
- It is not sufficient to simply have a license with Bloomberg or Refinitiv or another distributor or receive information from a third party like a trustee. The investor/lender still needs an underlying license with CME.
- Whether lenders or investors are aware of it, this actually is business as usual. Nearly every lender/ investor has an IBA LIBOR license at the parent level that covers the lender/ investor/ manager.
- There is no cost for a CME Term SOFR license for cash products through the end of 2026, but it is important to get a CME Term SOFR license.
- CME working hard and flexibly to get people licensed, but critical to contact them today.