The Federal Reserve Bank of New York (the "NY Fed"), in cooperation with the Treasury Office of Financial Research, proposed publishing daily compounded averages of the Secured Overnight Financing Rate ("SOFR") for three tenors. In addition, the NY Fed is proposing to publish a daily SOFR index to allow market participants to calculate compound SOFR over custom periods. The NY Fed intends to begin publishing the compounded SOFR averages and index in the first half of 2020.
Under the proposal, on each business day, the NY Fed would publish compounded SOFR averages for the prior 30, 90 and 180 calendar days. The daily SOFR index would consist of SOFR compounded over a period beginning on the first publication date of SOFR and ending on the index publication date. Market participants would be able to determine a compound SOFR average over a custom period by entering the index values for the first and last day of the custom period into a formula provided by the NY Fed. The methodology for determining compound SOFR and the index would provide that SOFR would compound only on business days during the applicable tenor. The SOFR value for days during an observation period that are not business days would be the SOFR value for the preceding business day. The compounded SOFR averages will be rounded to the fifth decimal, and the index values will be rounded to the eighth decimal place.
The compounded SOFR averages and the index would be published on their own dedicated webpage on the NY Fed's public website shortly after the publication of SOFR for the applicable day and would be subject to revision until 2:30 p.m., Eastern Time, on such day.
The NY Fed requests comments from market participants regarding the above proposal. Comments on the proposal must be submitted to the NY Fed via email ([email protected]) by December 4, 2019.