New York Fed Publishes New Benchmarks | Practical Law

New York Fed Publishes New Benchmarks | Practical Law

The New York Fed began publishing three reference rates based on overnight repurchase agreement (repo) transactions.

New York Fed Publishes New Benchmarks

Practical Law Legal Update w-014-1089 (Approx. 4 pages)

New York Fed Publishes New Benchmarks

by Practical Law Finance
Published on 06 Apr 2018 • USA (National/Federal)
The New York Fed began publishing three reference rates based on overnight repurchase agreement (repo) transactions.
On April 3, 2018, the Federal Reserve Bank of New York (New York Fed) issued a statement that it has begun publishing, in cooperation with the Treasury Department's Office of Financial Research (OFR), three reference rates based on overnight repurchase agreement (repo) transactions collateralized by US Treasury securities:
  • The Board General Collateral Rate (BCGR). BGCR is a measure of rates on overnight Treasury general collateral repo transactions.
  • The Secured Overnight Financing Rate (SOFR). SOFR is a broad measure of the cost of borrowing overnight collateralized by Treasury securities. SOFR includes:
    • all trades in the BGCR; and
    • bilateral Treasury repo transactions cleared through the Delivery-versus-Payment (DVP) service offered by the Fixed Income Clearing Corporation (FICC).
  • The Tri-Party General Collateral Rate (TGCR). TGCR is a measure of rates on overnight, specific-counterparty tri-party general collateral repo transactions secured by Treasury securities.
The New York Fed noted that in June of 2017, SOFR was identified by the Alternative Reference Rates Committee as the recommended alternative to US dollar LIBOR for use in certain new US dollar derivatives and other financial contracts (see Legal Update, Fed Requests Comment on Proposed LIBOR Alternatives).
According to the New York Fed, the rates will be published each date at 8:00 a.m. eastern time. In addition to the publishing of the rates, the New York Fed will also publish statistics summarizing the distribution of volumes each day.
According to the statement, the New York Fed has endeavored to adopt policies and procedures consistent with global best practices for financial benchmarks, including the IOSCO Principles for Financial Benchmarks. The New York Fed will update its IOSCO Statement of Compliance, which currently covers the effective federal funds rate and the overnight bank funding rate, to also cover the three repo reference rates. The update will be available in the coming weeks.