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Secured Overnight Financing Rate (SOFR)
Practical Law Glossary Item w-020-6501 (Approx. 3 pages)
Glossary
Secured Overnight Financing Rate (SOFR)
A broad measure of the cost of overnight borrowing collateralized by Treasury securities. SOFR is calculated as a volume-weighted medium of transaction-level tri-party Treasury repurchase agreement (repo) data drawn from the following three sources:
- Tri-party Treasury repo transactions cleared and settled by Bank of New York Mellon (BNYM), excluding General Collateral Financing (GCF) Repos and transactions to which the FRB is a counterparty.
- Treasury repo transactions occurring within the Depository Trust & Clearing Corporation (DTCC) GCF service for which the Fixed Income Clearing Corporation (FICC) acts as a central counterparty.
- Bilateral Treasury repo transactions cleared through FICC’s Delivery-versus-Payment (DVP) service.
SOFR is published on the following business day at approximately 8:00 a.m. on the FRBNY website.
In 2017, in response to concerns about the sustainability of LIBOR, the Alternative Reference Rates Committee (ARRC), a committee convened by the Federal Reserve Board (FRB) and the Federal Reserve Bank of New York (FRBNY), identified SOFR as its preferred LIBOR-alternative reference rate for financial contracts.