Group of professionals discuss finance

Breaking news and expert analysis on legal and compliance issues

[Back To Home][Back To Archives]

From Banking and Finance Law Daily, December 11, 2017

Fed finalizes production of new repo rates

By Charles A. Menke, J.D.

The Federal Reserve Board announced it is finalizing the production of three new reference rates based on overnight repurchase agreement (repo) transactions on Treasury securities. The three reference rates— the Secured Overnight Financing Rate (SOFR), Triparty General Collateral Rate (TGCR), and Broad General Collateral Rate (BGCR)—will be produced by the Federal Reserve Bank of New York, in cooperation with the U.S. Office of Financial Research.

Rate publication. The New York Fed will begin publishing the rates in the second quarter of 2018, according to the Fed’s notice and accompanying release. The target publication time will be no later than 8 a.m. ET each morning.

Rate calculations. The rates will be calculated as a volume-weighted median of transacted rates. The SOFR, which is the most comprehensive rate, will be a broad measure of overnight Treasury financing transactions. The SOFR was chosen by the Alternative Reference Rates Committee as its recommended alternative to U.S. dollar LIBOR. SOFR will include triparty repo data from Bank of New York Mellon (BNYM) and cleared bilateral and GCF Repo data from the Depository Trust & Clearing Corporation (DTCC). The TGCR, meanwhile, will be based solely on triparty repo data from BNYM, and the BGCR will be based on the triparty repo data from BNYM and GCF Repo data from DTCC.

Risk-free rates. The Fed noted that the three interest rates will be constructed to reflect the cost of short-term secured borrowing in highly liquid and robust markets. In addition, since the rates are based on transactions secured by Treasury securities, they are essentially risk-free rates, providing a valuable benchmark for market participants to use in financial transactions, the Fed added.

MainStory: TopStory FederalReserveSystem FinancialStability PrudentialRegulation SecuritiesDerivatives

Back to Top

Banking and Finance Law Daily

Introducing Wolters Kluwer Banking and Finance Law Daily — a daily reporting service created by attorneys, for attorneys — providing same-day coverage of breaking news, court decisions, legislation, and regulatory activity.

A complete daily report of the news that affects your world

  • View full summaries of federal and state court decisions.
  • Access full text of legislative and regulatory developments.
  • Customize your daily email by topic and/or jurisdiction.
  • Search archives for stories of interest.

Not just news — the right news

  • Get expert analysis written by subject matter specialists—created by attorneys for attorneys.
  • Track law firms and organizations in the headlines with our new “Who’s in the News” feature.
  • Promote your firm with our new reprint policy.

24/7 access for a 24/7 world

  • Forward information with special copyright permissions, encouraging collaboration between counsel and colleagues.
  • Save time with mobile apps for your BlackBerry, iPhone, iPad, Android, or Kindle.
  • Access all links from any mobile device without being prompted for user name and password.