CFTC Finalizes Rule Shifting CAD and MXN Swap Clearing to Risk-Free Rate Benchmarks

Key Takeaways

• The CFTC has finalized amendments to its interest rate swap clearing requirement, removing CDOR- and TIIE-referencing swaps from mandatory clearing and replacing them with CAD- and MXN-denominated overnight risk-free rate swaps.
• Compliance teams at swap dealers and major market participants must update clearing determination processes and trading documentation ahead of the new effective date.

Deep Dive

This final rule reflects the continued global transition away from interbank offered rates (IBORs) toward overnight, nearly risk-free rate (RFR) benchmarks in the swaps clearing regime. The CFTC is amending Regulations 50.4 and 50.26 to remove the clearing mandate for interest rate swaps referencing the Canadian Dollar Offered Rate (CDOR) and the Mexican Interbank Equilibrium Interest Rate (TIIE), both of which are being phased out or restructured, and replace them with a clearing requirement for swaps referencing the Canadian Overnight Repo Rate Average (CORRA) and the Overnight TIIE Funding Rate.

Key structural changes include an expanded termination date range for CAD-denominated overnight index swaps (OIS) referencing CORRA (now seven days to 30 years), and the addition of MXN-denominated OIS referencing the Overnight TIIE Funding Rate with a termination range of 28 days to 21 years. Simultaneously, CDOR-referencing CAD swaps and TIIE-referencing MXN swaps are being removed from the fixed-to-floating swap class entirely, meaning these products will no longer be subject to mandatory clearing once the rule takes effect.

The final rule becomes effective 30 days after Federal Register publication, giving market participants a relatively short runway to adjust internal systems, clearing determination logic, and trade booking workflows. Firms should confirm the exact Federal Register publication date to calculate the precise compliance deadline, and note that associated compliance dates for onboarding newly mandated products may be staggered.

Compliance teams should immediately inventory existing CAD- and MXN-denominated swap books to identify legacy CDOR/TIIE trades no longer subject to clearing and new CORRA/TIIE Funding Rate trades that will require clearing. Trading, legal, and operations teams should update internal clearing eligibility rules, client disclosures, and ISDA/CSA documentation referencing the affected benchmarks. Firms should also coordinate with clearinghouses (DCOs) to confirm product onboarding timelines and test connectivity for newly mandated swap classes.

From a risk perspective, failure to timely update clearing determination logic could result in inadvertent non-compliance (clearing an exempted product or failing to clear a newly mandated one), creating both regulatory and operational risk. This rule is part of a broader benchmark transition theme that compliance teams should track alongside other IBOR transition workstreams (e.g., LIBOR, EURIBOR reforms) to ensure consistent governance across currencies.

Source: Commodity Futures Trading Commission