I've just started reading the 3rd edition of Darbyshire's book. In Chapter 3 the author states that FRAs are (becoming) obsolete after IBOR cessation.
I am not an IR trader, but since there is Term SOFR couldn't these be used for SOFR FRAs? Of course the settlement mechanics will be different compared to IBOR FRAs, but other than this I do not see why FRAs should be / are obsolete, or am I missing something?
FRAs are historically products that had specific settlement mechanics and formula constructed around IBOR. In GBP, USD, etc (where there are no more IBOR) there are no FRAs traded. FRAs still trade in SEK, NOK, EUR, possibly some Australisias also.
But in those countries the possibility of transitioning from IBOR, after some cessation announcement, still exists and is still on the agenda. After that FRAs will not trade there either.
Technically, you are right and you could still trade an "FRA" on a term-SOFR index, but I have never seen it, and don't think it would be popular.
You can also trade single-period swaps which have almost identical mechanics to FRAs (except when you make payments and minor changes in discounting), so anyone trading term-SOFR I expect would now trade a swap instead of an FRA.
It is common in EUR to book single-period swaps instead of FRAs for some practical reasons - I believe LCH only clears FRAs to 3Y whilst they clear swaps to 50Y so if you agree an FRA that is longer than 3Y it will be booked as a single-period swap since the mid-market price of these instruments are the same.
