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The Federal Reserve Bank of New York began publishing the Secured Overnight Financing Rate (SOFR) in April 2018.
SOFR emerged as a key alternative reference rate in the financial services industry, as the world moves away from the London Interbank Offered Rate (LIBOR). As an overnight rate, SOFR is based on transactions in the US dollar overnight repurchase agreement (repo) market, making it a highly reliable and transparent benchmark. The transition from LIBOR to SOFR was completed on 30th June 2023.
SOFR is calculated as the average of the overnight repo lending transactions secured by U.S. Treasury securities that are cleared through the Broad General Collateral Rate (BGCR) and reported by the New York Fed. The calculation is based on data submitted by various market participants, such as primary dealers and market makers, and is performed by the New York Federal Reserve Bank. SOFR is published each business day at 8:00 a.m. Eastern Standard Time.
Our analytics team use Repo order and transaction data, sourced from our leading USD Repo business in New York, to create a forward prediction of the SOFR fixing. In addition to the use of USD Repo data, we take into account events such as end-of-month corporate tax days where demand for cash increases, producing a more robust forward looking curve.
Tradition dominated the Inter-Dealer Broker USD rates market in 2022 in terms of volume of trades. This means you can count on our data to provide the most robust, comprehensive and accurate view of the market through packages that best meet your needs.
As a benchmark for financial products such as floating rate bonds, loans and derivatives
For risk management purposes, including the calculation of Value-at-Risk and other metrics
For benchmarking financial institutions’ own funding costs diversification: By using FX options, investors can diversify their portfolio by adding exposure to different currencies, which can help to reduce overall portfolio risk.
For compliance with regulatory requirements, such as the new Fundamental Review of the Trading Book (FRTB) rules
As a reference rate in contracts, including ISDA documentation, loan agreements and derivative contracts.
A valuable insight during the trading day as to where SOFR will fix tomorrow.
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