On 9 August 2019, the International Swaps and Derivatives Association (ISDA) published a statement summarising the preliminary results of its consultation on how derivatives contracts should address a regulatory announcement that LIBOR and certain other interbank offered rates (IBORs) are no longer representative of an underlying market.

The pre-cessation trigger for LIBOR would apply in the event that the FCA assesses that one or more panels have shrunk so significantly in terms of number of banks or the market share of the banks remaining, that it no longer considers the relevant rate capable of being representative.

ISDA found that there was no “clear majority in any one category” among the 89 respondents for either a “hard wired” trigger, an optional trigger, or no pre-cessation trigger whatsoever. Furthermore, ISDA notes that respondents expressed a number of issues for consideration related to the potential pre-cessation trigger itself and how to implement such a trigger.

In terms of next steps, ISDA expects to publish an anonymised and aggregated summary of the feedback received in September 2019. ISDA also intends to consult on a proposed documentation solution for derivatives that allows for the incorporation of a pre-cessation fallback trigger.