Secured Overnight Financing Rate (SOFR)

Daily publication coming in Q2 2018

Endorsed by the Alternative Reference Rate Committee (ARRC) in June 2017, the Secured Overnight Financing Rate (SOFR) is a broad Treasuries overnight repo financing rate to be published by the Federal Reserve Bank of New York and the Office of Financial Research starting in Q2 2018. Futures and options will launch soon after publication begins.*

SOFR Timeline

*Pending regulatory review

SOFR Features and Mechanics

  • Data to be sourced from tri-party repo data from Bank of New York Mellon (BNYM), and cleared bilateral and GCF Repo data from the Depository Trust & Clearing Corporation (DTCC)
  • Calculated as a transaction-volume-weighted median repo rate
  • Underpinned by the U.S. Treasury overnight repurchase (repo) market, for which the pool of eligible transactions is ~$800 billion per day**

**Joshua Frost, Introducing the Secured Overnight Financing Rate (SOFR), presentation to Alternative Reference Rates Committee Roundtable, Federal Reserve Bank of New York, 2 November 2017, available here.

SOFR Futures Design Considerations

Futures on SOFR will complement Eurodollar and Fed Fund futures products. SOFR is financially distinct but correlated with both LIBOR and the daily effective federal funds rate (EFFR). We seek market input on design of SOFR futures to ensure they provide:

  • Comparability with established STIR futures for easier adoption
  • Maximum flexibility in terms of how it can be used
  • Reliable indicator of market expectations of SOFR along the curve
  • Easy spread trading against STIR futures via CME Globex inter-commodity spreads
  • Margin efficiencies against STIR and Treasury futures
  • Efficient portfolio margining against cleared interest rate swaps

Tell Us What You Think

Your input and insights on the design of SOFR futures is very important to us and will help achieve a solution that best serves the market’s needs.

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