The Federal Reserve Bank of New York is proposing two modifications to the calculation methodology of the Secured Overnight Financing Rate (SOFR). The New York Fed proposes implementing the changes by
Q1 2025.
Both of the proposed changes involve the treatment of transactions within the centrally-cleared Delivery-versus-Payment segment of the repo market, which is the largest of the three market segments incorporated into the calculation of SOFR. The first proposed change is to remove transactions between affiliated institutions. The second proposed change is to adjust the mechanism applied to mitigate the influence of “specials” transactions.