The New York Fed has endeavored to adopt policies and procedures consistent with best practices for financial benchmarks. The New York Fed’s Audit Group has concluded that the internal control structure over the production of the EFFR and the OBFR is effective and that the production of the EFFR and the OBFR is compliant with the applicable sections of the IOSCO Principles for Financial Benchmarks (the Principles) as detailed in the New York Fed’s Statement of Compliance. The New York Fed will assess the compliance of the EFFR and the OBFR with the Principles on an annual basis and issue a Statement of Compliance accordingly.
The New York Fed calculates the EFFR and OBFR from daily transaction data reported under the authority of the Board of Governors of the Federal Reserve System on the FR 2420 Report of Selected Money Market Rates. For further information about the FR 2420, please see the following:
The EFFR is calculated using data on overnight federal funds transactions provided by domestic banks and U.S. branches and agencies of foreign banks, as reported in the FR 2420.
The OBFR is calculated using the same federal funds transaction data that is included in the EFFR, as well as certain overnight Eurodollar transaction data reported on the FR 2420. The included Eurodollar transactions are unsecured borrowings of U.S. dollars booked at international banking facilities and at offshore branches that are managed or controlled by a U.S. banking office. For U.S. branches and agencies of foreign banks, “managed and controlled” branches are defined by Reporting Form FFIEC 002S as those offshore branches for which the U.S. branch or agency has majority responsibility for business decisions. For U.S. banks, the managed and controlled branches represent offshore branches for which the U.S. office of the bank primarily manages the funding activity.
For both rates, consistent with the FR 2420 reporting, overnight transactions are transactions settled on the same day as the trade date and maturing the following business day. Rates for transactions with greater than one business day to maturity or without a specified maturity date (“open transactions”) are not included in the calculation.
Both the EFFR and OBFR are calculated as a volume-weighted median, which is the rate associated with transactions at the 50th percentile of transaction volume. Specifically, the volume-weighted median rate is calculated by ordering the transactions from lowest to highest rate, taking the cumulative sum of volumes of these transactions, and identifying the rate associated with the trades at the 50th percentile of dollar volume.1 The published rates are the volume-weighted median transacted rate, rounded to the nearest basis point.
The 1st, 25th, 75th and 99th percentiles for each rate are also calculated using the same volume-weighted methodology. Volume is calculated as the sum of overnight transaction volume, rounded to the nearest billion. These additional summary statistics reflect the inputs included in the rate calculation, and will only be revised if amendments to the data result in a revision to the EFFR or OBFR.
In calculating the rates each day, the New York Fed will review the data to assess whether any errors are apparent in the dataset that could affect the accuracy of published statistics and, in some circumstances, may exercise expert judgment to determine whether reported transactions appear to be erroneous. Time permitting, the New York Fed will attempt to contact the relevant reporting institution in such situations to verify the accuracy of the reported data. Transactions that cannot be confirmed as correct or revised by the reporting institution prior to the rate publication may be excluded from the rate calculation. If an excluded transaction is subsequently confirmed or revised, the published rates will be subject to revisions as described in Rate Revisions.
On most days, the rates will be published at approximately 9:00 a.m. ET with FR 2420 data. If rates are published with reduced volume due to missing reporters or other circumstances, a note will be included with the published rate to indicate reduced volume. If the New York Fed deems that the reported transactions are incomplete and insufficient to publish a rate, then the rate publication may be delayed. Ultimately, the New York Fed may also publish the rates using data obtained from federal funds and Eurodollar brokers. Under extraordinary circumstances, when all data sources are insufficient, the New York Fed may publish the prior day’s rates in the absence of an adequate data source. In such instances, the change in source will be noted when the rate is published.
If transaction data are revised or an error is discovered in the calculation process subsequent to the rate publication on the same day, the affected rate or rates will be revised at approximately 2:30 p.m. ET. These revisions will only take place if the change in the published rate exceeds one basis point. Any time a rate is revised, a footnote would indicate the revision. This revision threshold will be reviewed periodically and may be amended based on market conditions.
If the EFFR is revised, the OBFR will also be revised, irrespective of whether the resultant change from recalculation was greater than the rate revision threshold. In this situation, the OBFR revision could result in a change to the volume or the percentiles. In other circumstances, the OBFR may be revised without a revision to the EFFR. Any revisions to the rates will be same-day only, except in extraordinary circumstances. The New York Fed may decide to revise the summary statistics or publish additional summary statistics on a lagged basis.
Additional summary statistics based on FR 2420 data are available. These statistics may differ from the EFFR or the OBFR for a given day because the additional summary statistics may incorporate data that was not used in the calculation of the EFFR and the OBFR for that day pursuant to the "Rate Revisions," "Data Exclusions" or "Data Contingency" policies described above.
Quarterly FR 2420 Summary Statistics (data updated as of 12/31/2018)
An internal Oversight Committee periodically reviews and provides challenge on the rate production process. The Committee consists of members from across the New York Fed organizational structure who are not involved in the daily production of the reference rates, and includes the Chief Risk Officer and other senior staff from various control areas of the New York Fed. Among the Committee’s responsibilities are a number of periodic reviews of the rate production process, including quarterly reports of any use of non-standard procedures in the production of rates, an annual review of the robustness of the rate calculation methodology, in addition to reviewing policies regarding complaints received, audit findings, and conflicts of interest.
As a reference rate administrator, the New York Fed may seek to revise the composition or calculation methodology for one or more of the reference rates it administers in response to market evolution or for some other reason. An Oversight Committee, charged with periodically reviewing the composition and calculation methodology of each reference rate to ensure that it continues to properly reflect its underlying interest, will review and approve any such proposed changes. In its evaluation of proposed changes, the Oversight Committee will take into account relevant factors such as the uses of the affected reference rate(s) and the breadth and depth of those uses, the nature of the stakeholders, the resource implications of the proposed change(s), and any risks posed by potential delays in implementing the changes.
To the extent that changes being considered are deemed material2 by the Oversight Committee, the New York Fed will seek public comment in a manner that is proportional and appropriate to the circumstances. Typically, this will involve publishing a notice on its website detailing the proposed change, posing specific questions for feedback, and inviting interested parties to provide written comments by a specified date.
In most instances, the New York Fed will issue a final notice prior to implementing any material change(s) to its reference rates. This notification will describe the final change, explain the rationale for the change and what it entails, highlight any modifications to the proposed change that were made in response to public feedback, and note when the change will take effect. Additionally, the New York Fed anticipates that it will publish individual comments received during this public consultation as well as a summary response to those comments when it issues the final notice.
Depending on the nature of the change, however, alternative consultation mechanisms may be utilized, such as in instances where the Federal Reserve Board of Governors is required to engage in a formal notice-and-comment process for some types of changes.
The New York Fed has policies on ethics and conflicts of interest. In addition, staff will consider and address potential conflicts of interests and related concerns specific to administration of the rates.
Complaints about the rate calculation process or a given day’s rate should be submitted in writing to the New York Fed via the following email address: email@example.com. The New York Fed will investigate and review any such complaints and will endeavor to respond to the complainant in a timely manner. For additional resources to report complaints, please see Tips and Complaints.