During the LIBOR transition, non-financial companies expressed concerns about the in arrears approach, commonly used for FRS or risk-free rates as it left little advanced notice about your upcoming interest payments. Many borrowers and market participants were used to forward-looking term rates such as LIBOR, which allowed for certainty in cashflow projections over specified periods such as one, three or six months. To address this concern, term RFRs were developed offering a forward-looking rates based on derivatives of overnight RFRs. Like SOFR. These rates allowed borrowers and businesses to reference an interest rate for a set term period such as one, three, or six months, as shown in the diagram. This structure closely mirrors how LIBOR worked, providing predictability and easing the transition from LIBOR to RFRs. However, regulators have been cautious about widespread adoption of term RFRs, emphasizing the reliability of overnight RFRs. The goal is to promote transparency and consistency in financial markets with overnight RFRs offering a clearer reflection of actual market conditions. As such, the use of term RFRs has been limited primarily to non-financial counterparties, such as in corporate lending rather than in the derivatives or wholesale markets. That said, there are circumstances under which term RFRs linked derivatives can be used. For instance, a bank may offer a swap linked to Term SOFR if it is specifically to hedge a loan, that is directly tied to Term SOFR as well. But the use of erm SOFR swaps for speculative purposes is discouraged, and as a result, the market for term RFR linked derivatives remain smaller than the market for overnight RFR linked derivatives.