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December 08, 2017

FED announced final plans for the production of three new reference rates (namely SOFR, TGCR, and BGCR) based on overnight repurchase agreement (repo) transactions secured by Treasury securities. The three reference rates will be produced by the Federal Reserve Bank of New York (FRBNY), in cooperation with the OFR. FRBNY intends to begin publishing the three rates in the second quarter of 2018.

FED had earlier sought public comment on the proposed production of these rates. In response to the comments received, FRBNY has adjusted its expected daily publication time and plans to publish the rates no later than 8 a.m. ET. The published Notice clarifies details related to the governance and calculation of the rates. The three interest rates will be constructed to reflect the cost of short-term secured borrowing in highly liquid and robust markets. These rates are based on transactions secured by Treasury securities and, therefore, they are essentially risk-free rates, providing a valuable benchmark for market participants to use in financial transactions.

Each rate will be calculated as a volume-weighted median of transacted rates. The most comprehensive of the rates, the Secured Overnight Financing Rate (SOFR), will be a broad measure of overnight Treasury financing transactions and was selected by the Alternative Reference Rates Committee as its recommended alternative to U.S. dollar London Interbank Offered Rate (LIBOR). SOFR will include tri-party repo data from Bank of New York Mellon (BNYM) and cleared bilateral and General Collateral Finance (GCF) Repo data from the Depository Trust & Clearing Corporation (DTCC). Another rate, the Tri-party General Collateral Rate (TGCR) will be based solely on tri-party repo data from BNYM. The final rate, the Broad General Collateral Rate (BGCR) will be based on the tri-party repo data from BNYM and GCF Repo data from DTCC.


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Keywords: Americas, US, Banking, Repo Transactions, US Dollar LIBOR, Reference Rates, SOFR, TGCR, BGCR, FED

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