The Time to Enhance SOFR Is Upon Us

The adoption of SOFR is imminent, but questions remain as to whether it is right for all market participants and products.

Boston, December 9, 2020 At the end of 2021, the London Interbank Offered Rate, or LIBOR, will no longer be supported, as a global effort is underway to shift financial markets to alternative reference rates. While over the past two years the U.S. market has encouraged the development of instruments tied to the Secured Overnight Funding Rate (SOFR), the Alternative Reference Rates Committee’s (ARRC’s) preferred alternative to LIBOR, several concerns have been voiced about the need to enhance SOFR with a credit spread and term structure. Based on interviews of several key industry participants, this Impact Brief explores the development of an enhancement to SOFR that better aligns it with traditional banking practices.

Clients of Aite Group’s Institutional Securities & Investments service can download this eight-page Impact Brief. To learn more about the topic covered in this Impact Brief, please contact us at [email protected].

This report mentions Australian National University, Bloomberg L.P., Cboe Global Markets, IHS Markit, The Intercontinental Exchange, Federal Deposit Insurance Corporation, Financial Conduct Authority (FCA), New York Federal Reserve, Stanford University, and U.S. Comptroller of the Currency.

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