IBOR Fallback: Compounded Setting in Arrears

I continue my quest related to the IBOR fallback issue. I still fail to understand the precise meaning of the "Compounded Setting in Arrears" option for derivatives subject to the fallback.

I have contacted several people at ISDA (as reported here) and others that are mentioning this option. I have not yet received a clear answer to the issues I have reported in my "Quant perspective on IBOR fallback" and in my answer to the ISDA consultation. The dates between the IBOR underlying deposit and the derivatives do not match in all cases. How do you pay an amount before you know how much you have to pay (the time difference can be as long as the IBOR tenor)?

The answers I received are some version of "To be decided", "The impacted trades will mature before the discontinuation", or "The term sheets will change in the mean time". All of those answer do not answer the content of the question:
  • To be decided: No! The details have to be described before the consultation, before the user sign a contract, not after.
  • The impacted trades will mature before the discontinuation: No! FRA traded today may mature before 2022, but between now and the discontinuation many new FRA will be traded. The ones that will be traded the day before the discontinuation need to be taken into account in today's fallback definitions. Moreover the impact is also on vanilla swaps. Some have a maturity of more than 50 years; discontinuation will take place before 2068!
  • The term sheets will change in the mean time: Maybe! But if you thing so, show me the proposal for ISDA definitions that include those changes. They should be included before the fallback amendments, not after.

To repeat myself:
The term rate fallback problem is a term rate problem, not an overnight problem; even if the fallback is overnight-linked, a term rate is required for the solution.
I prefer a clean fallback based on imperfect term benchmark than a dirty fallback based on a perfectly compliant overnight benchmark.

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