An Update on How the Treasury Clearing Rule for Repo Might Affect SOFR

Views expressed are those of the authors and do not necessarily represent official positions or policy of the Office of Financial Research or the U.S. Department of the Treasury.

In April 2025, the Office of Financial Research (OFR) estimated how the Securities and Exchange Commission (SEC) rule requiring central clearing of certain Treasury repurchase agreements (repos) might affect the Secured Overnight Financing Rate (SOFR). That analysis used a 2022 pilot collection of non-centrally cleared bilateral repo (NCCBR) data covering three days. It found that newly cleared repos would not have changed SOFR but could widen the tails of its rate distribution.¹ With the repo compliance date of June 30, 2027, about eight months away, this post updates that estimate using OFR’s NCCBR collection over the last year.

The method used here follows the original analysis. It applies the SEC rule and the Federal Reserve Bank of New York’s SOFR eligibility criteria to NCCBR data and assumes that all repo volume subject to the clearing requirement is centrally cleared through FICC’s delivery-versus-payment (DVP) service. Repos that are not required to be cleared are excluded, including inter-affiliate repos and repos with optionality. Unlike the original, this update uses the current specials trim, which excludes the bottom 20% of volume-weighted DVP repo rates. The original analysis used the 25% “specials” threshold procedure.

As before, the analysis assumes no change in market participant behavior. The results should be read as an approximate backward-looking analysis, not a forecast of the market after the transition occurs. Under these assumptions, the clearing mandate could add slightly more than $500 billion in daily transaction volume to SOFR. The pilot-based estimate was about $85 billion. Despite this increase, the effect on SOFR would be small. The hypothetical SOFR could increase by 1 basis point higher than the published rate, and its volatility is roughly unchanged, assuming details of the SOFR calculation is left unchanged.

Additional to the transition into central clearing, shifts in client volume within the centrally cleared segments could also affect SOFR, mainly if participants move out of DVP and into other segments not included in SOFR’s calculation. For example, money market funds, the primary cash lenders in repo, have historically cleared through Sponsored DVP but have begun using Sponsored General Collateral (GC). Under an extreme scenario in which all these funds’ volume shifted from Sponsored DVP moves to Sponsored GC, SOFR could see a relative shift of up to 2 basis points above historical levels.

Taken together, the clearing mandate is likely to continue to increase the volume underlying SOFR while shifting its level only slightly, though how participants choose to clear will impact the size and direction of any shift. Because these estimates assume no change in behavior, the full effects remain uncertain. Balance-sheet-constrained dealers may reprice, while netting in central clearing could ease those constraints. The OFR will continue to monitor these effects as the compliance date approaches.

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