NY Fed Sets Implementation Date for Modifications to SOFR Methodology

The Federal Reserve Bank of New York ("NY Fed") reported that proposed modifications to its secured overnight financing rate ("SOFR") calculation methodology will go into effect on November 25, 2024. 

The proposed modifications include: (i) removing transactions between affiliated institutions—the NY Fed said that it excludes such transactions "when relevant and when the data to make such exclusions are available;" and (ii) "adjust[ing] the mechanism applied to mitigate the influence of 'specials' transactions"—repo trades that command a premium relative to the general collateral rate—to "eliminate day-to-day variability." Both changes apply to transactions in the centrally cleared delivery-versus-payment segment. 

The NY Fed said that public comment on these modifications was "broadly supportive" of the changes.

The NY Fed said it "will begin publishing SOFR inclusive of the two proposed modifications on November 25, 2024" reflecting transaction data from November 22. The NY Fed also stated that it "will adopt policies and procedures consistent with best practices for financial benchmarks, to the extent appropriate, so that SOFR will remain compliant" with IOSCO Principles.