On March 2, 2020, the Federal Reserve Bank of New York (the “New York Fed”), as administrator of SOFR, began publishing 30-, 90-, and 180-day SOFR Averages as well as a SOFR Index.

The SOFR Averages for a given publication date incorporate all the SOFR values starting exactly 30-, 90-, and 180-calendar days before the publication date, regardless of whether or not that date is a weekend or holiday, and extend through the SOFR published that day.

The SOFR Index measures the cumulative impact of compounding the SOFR on a unit of investment over time, with the initial value set to 1.00000000 on April 2, 2018, the first value date of the SOFR. The Index is compounded by the value of each SOFR thereafter and can be used for the calculation of compounded average rates over custom time periods.

Because the number of days in a given one-month, three-month or six-month interest period often will not be exactly 30, 90 or 180, respectively, the SOFR Index is likely to be a more appropriate too for use in contractual provisions (for example, for use in floating rate notes or business loans).

In a series of floating rate notes issued in the days immediately following the New York Fed’s publication of the SOFR Index, at least one major international financial institution employed the SOFR Index as the method for determining compounded SOFR (as opposed to setting forth a specific, long-form formula for compounding daily SOFR rates, as had been market practice prior to publication of the SOFR Index). It remains unclear, however, whether the SOFR Index will be adopted for this purpose widely in the marketplace.

The New York Fed’s Statement Introducing the SOFR Averages and Index is available here.

The New York Fed will publish the SOFR Averages and SOFR Index here.

Additional Information with respect to the SOFR Averages and SOFR Index, including calculation methodologies and instructions for use, are available here.