Benchmark fallbacks are replacement rates that would apply to derivatives trades referencing a particular benchmark. These would take effect if the relevant benchmark becomes unavailable while market participants continue to have exposure to that rate.
ISDA plans to publish a supplement to the 2006 ISDA Definitions in July to incorporate new fallbacks for derivatives that reference certain key interbank offered rates (IBORs). Simultaneously, ISDA will publish a protocol that will allow market participants to choose to incorporate the revisions into their legacy derivatives trades.
Ahead of the publication, ISDA has published a factsheet, Understanding IBOR Benchmark Fallbacks, as well as a video interview with Ann Battle, Head of Benchmark Reform at ISDA, explaining why changes to fallbacks are necessary.
Additional information relating to financial benchmark reform and the transition from LIBOR is available on the
ISDA website.