Capitolis Completes LIBOR Swaptions Transition Initiative

Capitolis completes LIBOR swaptions transition as it announces the successful execution of a series of multilateral exercises designed to transition legacy USD LIBOR-referenced swaptions to vanilla SOFR replacements for 17 global dealers. Through nine live executions, Capitolis, alongside Capitalab before its acquisition-facilitated the transition of over 17,000 legacy LIBOR swaptions across its dealer network.

Consequently, participants have now removed the operational strain of managing expiries tied to outdated LIBOR instruments. The challenges surrounding pricing legacy USD LIBOR swaptions first surfaced in 2020 when key clearinghouses shifted their discounting methods from Fed Funds to SOFR for USD swaps. This transition fragmented the USD swaption market, adding complexity and creating time-intensive demands for volatility trading desks. 

Moreover, with a major clearinghouse officially ending support for exercised legacy LIBOR swaptions as of June 30, 2025, the urgency for an effective solution increased sharply. Responding to clients’ mounting concerns about their remaining LIBOR-based swaption positions, Capitalab, now operating under Capitolis, engaged with its dealer network to craft a viable and scalable strategy. 

Capitolis Completes LIBOR Swaptions Transition Initiative

Within two months, the firm executed a proof-of-concept run involving nine dealers. This effort rapidly expanded into nine full multilateral cycles, which have now transitioned over 17,000 trades. As a result, participants benefit from a streamlined book of vanilla SOFR swaptions, drastically reducing their ongoing complexity and operational risks.

Gavin Jackson, Co-Head of Portfolio Optimization at Capitolis, highlighted the significance of the initiative, stating that the effort showcases both industry-wide collaboration and the potential of innovative solutions to address real-world market challenges. He emphasized that the volume of successfully transitioned trades illustrates the trust clients place in Capitolis and their readiness to embrace progress. 

Now that most market participants hold minimal legacy LIBOR swaptions, Capitolis remains ready to run additional cycles on an ad-hoc basis if needed. This flexibility ensures continued support for firms still navigating the final stages of LIBOR transition while maintaining operational efficiency in an evolving financial landscape.

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