By Ashlyn Cenicola and Corey Garriott
The SEC’s clearing rule will not only bring many repos into central clearing but also make them eligible to be included in the computation of the Secured Overnight Financing Rate (SOFR). OFR researchers use the OFR’s pilot data on non-centrally cleared bilateral repos to ask how SOFR might change once these repos are cleared. The finding: There would be little effect on SOFR had the rule been in effect in June 2022. Still, the tails of the SOFR distribution might change, which might alter some of the risk characteristics of SOFR over time.
The full article is available here.