CME Term SOFR Reference Rates
Benchmark Methodology
CME Group Benchmark Administration Limited
Version 1.4.4
Publication Date: June 14th, 2024

Version Control
VERSION

APPROVAL DATE

1.0•

Initial version

October 30th, 2020

1.1

•
•

Defining approach for early market close days
Update pre-publication reliability checks

March 18th, 2021

1.2•

Addition of 12-month tenor

September 10th, 2021

1.3•

Updates to Eligibility of SOFR OIS

October 15th, 2021

1.3.1

•

Minor update to Error Policy

December 14th, 2021

1.4•

Early Close Calendar 2023 added

1.4.1

•

Minor clarifications

October 31st, 2022

1.4.2

•

Early Close Calendar 2024 added

January 20th, 2023

•
•
•
•

Annual Review
Minor clarifications
Annual Review
Updates to Publication and Error Policy

1.4.3
1.4.4

2

KEY CHANGESMay 6th, 2022

June 27th, 2023
April 18th, 2024

© 2024 CME Group. All rights reserved.

Contents
1.
1.1.
2.
3.
3.1.
4.
4.1.

Introduction
CME Group and CME Group Benchmark Administration Limited
CME Term SOFR Reference Rates Benchmarks
Input Data
Use of Expert Judgement
Calculating Term Rates from SOFR Futures
SOFR Futures Contract Specifications

4
4
5
6
6
6
6

4.2.

Sampling Market Prices

7

4.3.

Defining Observation Intervals

8

4.4.

Eligible Observation Intervals

9

4.5.
5.
5.1.

Aggregating the Intervals
Modelling Forward Rates
Calculation Methodology

9
10
10

5.2.

Optimization

11

5.3.
6.
7.
7.1.

Computing Term Rates from Projected Overnight Rates
Eligibility of SOFR OIS
Pre-publication Reliability Checks
Market Volatility Checks

14
15
16
16

7.2.

Technical Failure – IT System

16

7.3.
8.
8.1.

Unavailability of Input Data
Publication and Error Policy
Benchmark Publication

16
17
17

8.2.

Error Policy

17

8.3.

Publication Alerts

17

8.4.
9.
9.1.

Consultations and Notices
GovernanceOversight Committee

17
18
18

9.2.

Review of the Methodology

18

9.3.

Consultation Process

18

9.4.

Cessation

19

9.5.

Records Retention

19

9.6.

Auditing

19

9.7.

Data Licensing and Distribution

19

9.8.
Complaints Procedures
Appendix I – Key Terms & Definitions
Appendix II – CME Term SOFR Reference Rates Early Close Calendar
2024 Early Close Calendar

20
21
22
22

2025 Early Close Calendar

22

3© 2024 CME Group. All rights reserved.

1.

Introduction

The Secured Overnight Financing Rate (SOFR) is calculated and published by the Federal Reserve Bank of
New York 1 (NY Fed) and was selected as the preferred overnight reference rate for U.S. Dollar financial
contracts by the Alternative Reference Rates Committee (ARRC). CME Term SOFR Reference Rates
Benchmarks provide the forward-looking measurement of overnight SOFR based on market expectations
implied from derivatives markets.
Each Business Day, the NY Fed publishes SOFR on the NY Fed website at approximately 8:00 a.m. ET. In
addition to the daily SOFR rate, and in collaboration with the Treasury Department’s Office of Financial
Research, the NY Fed publishes three daily compounded averages of SOFR and a SOFR Index:••••

SOFR Index
30-day Average SOFR
90-day Average SOFR
180-day Average SOFR

1.1. CME Group and CME Group Benchmark Administration Limited
As a leading and diverse derivatives market operator, CME Group is the parent of four U.S.-based designatedcontract markets (DCMs): Chicago Mercantile Exchange Inc. (CME), Board of Trade of the City of Chicago,Inc. (CBOT), New York Mercantile Exchange, Inc. (NYMEX), and the Commodity Exchange, Inc. (COMEX)(collectively, the “CME Group Exchanges”). These exchanges offer a wide range of products available acrossall major asset classes, including futures and options based on interest rates, equity indexes, foreignexchange, energy, metals, and agricultural commodities.
CME Group Benchmark Administration Limited (CBA) capitalizes on CME Group’s wealth of electronictransaction-based data in the calculation of its indices and benchmarks. CBA is authorized and regulated by
the UK Financial Conduct Authority (FCA), for the administration of the CME Term SOFR Reference Rates.
The CME Term SOFR Reference Rates is a benchmark under the UK Benchmark Regulation (BMR) 2.
CBA is the Benchmark Administrator of the CME Term SOFR Reference Rates, with Chicago Mercantile
Exchange Inc. (CME Inc.) providing calculation agent and distribution services.
Since 1981, CME Group has been positioned at the forefront of Money Market Interest Rates’ productinnovation, currently offering One-month and Three-month future contracts referencing SOFR 3.
CME SOFR Futures contracts are listed in consecutive monthly and quarterly contracts reflecting SOFR
expectations, with contract expiries extending out to 10 years and providing a term structure to fulfil risk
management needs.

123Federal Reserve Bank of New York SOFR Data
https://www.fca.org.uk/markets/benchmarks/regulation
Secured Overnight Financing Rate (SOFR) Futures

4© 2024 CME Group. All rights reserved.

2.

CME Term SOFR Reference Rates Benchmarks

The CME Term SOFR Reference Rates benchmark is a daily set of forward looking interest rate estimates,
calculated and published for 1-month, 3-month, 6-month and 12-month tenors. Each CME Term SOFR
Reference Rates tenor will start on (and include) the second US Government Securities Business Day
following the publication day and span the corresponding tenor (e.g., 1-month, 3-month, 6-month, 12-month)in accordance with Modified Following day-count conventions.
The CME Term SOFR Reference Rates calculation method leverages the work developed by Federal
Reserve economists, Erik Heitfield and Yang-Ho Park, and published in the Finance and Economic
Discussion Series (FEDS) 2019-014 4.
The work of Heitfield and Park lays out a method to determine a possible path of overnight rates that is
consistent with the observable averages implied by SOFR based derivative contracts. Upon determining apath of overnight rates one can directly create averages over standard tenors. These will be published as
CME Term SOFR Reference Rates.
The publication of CME Term SOFR Reference Rates will occur on the next Business Day following theBusiness Day during which futures data sampling takes place. CME Term SOFR Reference Rates arecomputed based on a reference period that begins two Business Days (T+2) after the Publication Date.
CME Term SOFR Reference Rates will be calculated for each Business Day, in accordance with therecommended SIFMA US Holiday Schedule 5.
CBA is the Benchmark Administrator with CME Inc. providing calculation agent and distribution services. This
document describes the methodology used by CBA to calculate the CME Term SOFR Reference Rates.

4

Inferring Term Rates from SOFR Futures Prices,” Finance and Economics Discussion Series 2019-014

5https://www.sifma.org/resources/general/holiday-schedule/5© 2024 CME Group. All rights reserved.

3.

Input Data

CME Term SOFR Reference Rates Methodology uses a combination of one month and three month SOFR
Futures to ensure that the term structure is appropriately calculated, providing as many data points as
possible.

3.1. Use of Expert Judgement
No expert judgement is applied to the determination of the CME Term SOFR Reference Rates benchmarks;
input data are sourced as described below in Calculating Term Rates from SOFR Futures.

4.

Calculating Term Rates from SOFR Futures

As described in Computing Term Rates from Projected Overnight Rates, CME Term SOFR Reference Rates
are estimated for 1-month, 3-month, 6-month and 12-month tenors.
To ensure full coverage of the above tenors, the calculation algorithm uses the following Future contract
months:••

One-month SOFR Futures (SR1): 13 (thirteen) consecutive months contracts
Three-month SOFR Futures (SR3): 5 (five) consecutive quarterly contracts (Mar, Jun, Sept, Dec).

Futures contracts are rolled according to CME Term SOFR Reference Rates Benchmarks, the day after therespective expiry day.
SR1 and SR3 sampling market hours are 7:00am CT until 2:00pm CT, sub-divided into 14 (fourteen)observation intervals of 30 (thirty) minutes each.
For SR1 and SR3 contracts that meet the criteria above, it is necessary to include the known historical SOFR
overnight rates into the calculation in order to determine the implied average value of unknown SOFR rates
for the remainder of such contract; compounded returns are expressed as Actual/360.

4.1. SOFR Futures Contract Specifications
There are two variations of the SOFR Futures product set, both reference the same underlying interest rate
while providing comprehensive coverage of the yield curve including more granularity in the nearby months.
One-Month SOFR Futures (SR1) is a monthly contract that follows a calendar month schedule.
Final settlement price is determined by the formula 100-R, where R represents the annualized rate of interest
calculated as a simple average of individual rates applied to all days in the month.
An overnight rate is assigned to every day in the contract month (SOFR values are published on the next
good Business Day after transaction date); weekends and holidays are assigned the prevailing rate from thelast preceding day for which a rate was published.

6© 2024 CME Group. All rights reserved.

To calculate the final settlement of a one-month SOFR Future, the simple arithmetic average of the daily
SOFR rates of the calendar month is calculated (i.e. the sum of all rates in the month period divided by the
number of calendar days in the month period). The arithmetic average is rounded to the nearest 1/10th of abasis point, and the contract Final Settlement Price is equal to 100-the rounded arithmetic average.
Three-Month SOFR Futures (SR3) is a quarterly contract that follows the IMM schedule.
The final settlement price of an expiring SR3 contract is based on SOFR benchmark values for all US
government securities market Business Days occurring within the contract reference quarter.
A contract reference quarter starts on (and includes) the third Wednesday of its contract name identification
month (SR3M0 begins on June 17, 2020) and ends on (and not including) the third Wednesday of the next
quarterly month (SR3M0 ends on Sept 16, 2020).
Final settlement price is determined by the formula 100-R where R represents the annualized rate of interest
derived from compounding of all SOFR benchmark settings during the reference quarter, rounded to thenearest 1/100th of a basis point. Simple interest is accrued to all non-Business Days in the reference quarter(weekends and holidays) based on the SOFR benchmark from the preceding good Business Day.
Then all Business Days’ interest is compounded. The resulting rate is represented as an annualized interest
rate using money market day count convention (Actual/360).
CME SOFR Futures Contract Specifications and settlement methodologies are available on the CME Groupwebsite.

4.2. Sampling Market Prices
CME Term SOFR Reference Rates use executed transactions and executable bids and offers in SOFR
Futures, traded on the CME Designated Contract Market (DCM) 6, with contract specifications detailed in
SOFR Futures Contract Specifications.
A set of Volume Weighted Average Prices (VWAP) are calculated using transaction prices observed during anobservation interval, along with a snapshot of executable bid/ask prices at a random moment during theobservation interval.
Candidate solution sets are identified using trade activity in outright contracts during the interval. First a set of
seed values is determined on a VWAP or, where there are no transactions occurring in a given interval, themidpoint of the bid/ask.. A candidate solution price is one within 5 increments of the seed value, with theincrement being 0.01 basis points.

6

CME Group Designated Contract Markets are subject to regulation by the US Commodity Futures Trading Commission (“CFTC”). In addition, CME Group Designated Contract
Markets are subject to the rules and regulations of the local jurisdictions in which they conduct business, including the European Securities and Markets Authority (“ESMA”) and the UK
Financial Conduct Authority (“FCA”).

7© 2024 CME Group. All rights reserved.

Exhibit 1: Example Selected Prices derived from the VWAP while staying within Bid/Ask constraints

4.2.1.

BID

ASK

VWAP

SELECTED PRICE

MAY

5.0

5.25

5.22

5.22

JUN

4.5

5.0

4.85

4.85

JUL

3.5

4.0

3.50

3.5

AUG

2.0

2.5

2.54

2.5

SEP

1.5

2.5

2.5

2.5

OCT

0.5

1.5

1.64

1.5

NOV

0.5

1.0

0.85

0.85

Linear Optimization

For the first 7 SR1 contracts and the 5 SR3 contracts; an algorithm selects the price among the candidates,
applying linear optimization to find a “best fit” set of values that minimize violations of the bid/ask quotations inoutright markets, calendar spread markets and butterfly markets. The algorithm locates the set of relevant
SOFR futures contract prices that accommodates the maximum number of bids and asks in these
instruments. It then selects the “optimum” as the candidate solution set that, in aggregate, is closest to the
VWAP seed values, weighted so as to give higher priority to futures contracts nearer to expiration.
For a given candidate solution set, the score for the candidate solution is the sum of the squared differences
between each contract’s price in the solution set and the VWAP price. The same calculation is repeated foreach candidate solution set. The candidate solution set with the lowest aggregate score is selected as the“optimal” solution.
4.2.2.

Boundary Conditions

For the 8th to 13th SR1 contacts; bid/ask quotations in outright markets, calendar spread markets and butterfly
markets are used to construct an upper and lower bound for each SR1 contract. Where the VWAP seed value
is within the boundaries, the seed value becomes the selected price. Where the VWAP seed value is outsideof the boundaries, the closest of the upper or lower bound to the VWAP seed value is used for the selected
price.

4.3.

Defining Observation Intervals

The CME Term SOFR Reference Rates Benchmarks use observation intervals configured, in duration andnumber, to provide as many meaningful VWAP solutions as possible.
The duration of each observation interval is set at 30 minutes, covering in total 14 daily observation intervals,
between the hours of 7:00am CT to 2:00pm CT.
On days where there is an early market close (in accordance with the SIFMA US Holiday Schedule), the 30
minute observation intervals will cover a reduced portion of the day, see Appendix II for further details.
Appendix II will be updated by the Administrator and approved by the Oversight Committee annually.

8© 2024 CME Group. All rights reserved.

During each interval, snapshots of executable Bid/Offer quotes are taken at a randomized point, ensuring thatconsecutive snapshots are not too proximate in time (i.e. at the end of one interval and at the beginning of thesubsequent interval).

4.4.

Eligible Observation Intervals

Each observation interval is eligible for the final calculation if it has executed transactions in any of the SOFR
Futures contracts.
For each SOFR Future contract, a VWAP of transactions executed during the interval is calculated andoptimized, as described in Sampling Market Prices; the resulting VWAP becomes the Selected Price for that
SOFR Future contract, for the observation interval.
For SOFR Future contracts with no executed transactions, but with executable Bid/Offer quotes, the mid-priceof the random Bid/Offer snapshot is optimized, as described in Sampling Market Prices; and becomes the
Selected Price for that SOFR Future contract, for the observation interval.
For SOFR Future contracts with no VWAP and no executable Bid/Offer quotes, the previous interval Selected
Price is adjusted by the net change of the preceding contract’s price. This value is optimized, as described in
Sampling Market Prices; and becomes the Selected Price for that SOFR Future contract, for the observationinterval.
The Selected Prices, formed as above, are aggregated and used for the final calculation on a volume
weighted basis of the eligible observation intervals.
Only one interval is required for the final calculation. If all intervals have no executed transactions, theprevious day’s Aggregated Prices, as described in Aggregating the Intervals, will be re-applied to the final
calculation.

4.5.

Aggregating the Intervals

Once a solution is found for each observation interval, the final result will be calculated by averaging thevalues at each futures contract, weighted by the aggregate volume of trade during the observation intervalfrom which they were derived.
This calculation can be illustrated by the formula:
𝑃𝑃(𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹) = (� 𝑃𝑃(𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼) ∗9

𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉 𝑜𝑜𝑜𝑜 𝑎𝑎𝑎𝑎𝑙𝑙 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 (𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼))𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉 𝑜𝑜𝑜𝑜 𝑎𝑎𝑎𝑎𝑎𝑎 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 ( 𝐴𝐴𝐴𝐴𝐴𝐴 𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼)© 2024 CME Group. All rights reserved.

5.

Modelling Forward Rates

As mentioned in CME Term SOFR Reference Rate Benchmarks, the work of Heitfield and Park is leveraged
in calculation of CME Term SOFR Reference Rates. Though overnight SOFR rates are not directly
observable, as suggested in the paper and as utilized by various market participants for other overnightindexes, CME determines the path of overnight SOFR rates by assuming the overnight SOFR rates follow apiecewise constant step function and can only jump up or down the day after FOMC Policy Rateannouncement dates and remains at those levels across all dates in between the FOMC Policy Rateannouncement dates.
CME One-month SOFR Futures 7 (SR1) and CME Three-month SOFR Futures 8 (SR3) contracts provide
estimates of values of overnight SOFR on average over the specific contract reference periods; CME SOFR
Futures do not directly provide estimates of individual overnight SOFR rates.
The optimal path for the overnight SOFR rates is determined such that the implied value of selected SR1 andSR3 contracts under the optimal path matches the observed prices (determined from the sections below) as
closely as possible. Final term rates will be constructed by compounding overnight SOFR rates following
specific conventions.
Details of the algorithm are highlighted in the sections below.

5.1. Calculation Methodology
Supposing that the as of date for CME Term SOFR Reference Rate is 𝒕𝒕𝟎𝟎 and t represents a day after 𝒕𝒕𝟎𝟎 thatis a Business Day (in accordance with the SIFMA US Holiday Schedule), the following notations are used forthe calculation of projected overnight SOFR rates:
𝑴𝑴𝒌𝒌 : the date of the k th FOMC policy rate announcement date that occurs on or after 𝒕𝒕𝟎𝟎 ;𝜽𝜽𝟎𝟎 : the initial overnight SOFR rate as of date 𝒕𝒕𝟎𝟎 ;𝜽𝜽𝒌𝒌 : the jump size in overnight SOFR rate occurs on the day after the k-th FOMC policy rateannouncement date. A positive 𝜽𝜽𝒌𝒌 means the overnight SOFR rate jumps up after the k-th FOMC
policy rate announcement date 𝑴𝑴𝒌𝒌 ; a negative means the overnight SOFR rate jumps down after thek-th FOMC policy rate announcement date 𝑴𝑴𝒌𝒌 ;𝒇𝒇𝒕𝒕;𝜽𝜽 : the overnight SOFR rate as of date 𝒕𝒕, where 𝚯𝚯 = (𝜽𝜽𝟎𝟎 , … , 𝜽𝜽𝒌𝒌 ) and 𝑲𝑲 is the index of the last
relevant FOMC policy rate announcement date;𝟏𝟏{∙}: binary function returning 1 if the statement in the parenthesis is true and 0 otherwise.

The overnight SOFR rate for date t can be computed as:𝑓𝑓(𝑡𝑡; Θ) = 𝜃𝜃0 + � 𝜃𝜃𝑘𝑘 ∗ 1{𝑡𝑡 > 𝑀𝑀𝑘𝑘 }𝑘𝑘

7
8

One-Month SOFR Futures Contract Specs
Three-Month SOFR Futures Contract Specs10© 2024 CME Group. All rights reserved.

CME is solving for the unknown parameter set Θ = (𝜃𝜃0 , … , 𝜃𝜃𝑘𝑘 ) such that the projected path of overnight SOFR
rates results in the smallest mismatches for SR1 and SR3 prices as determined from the sections below.
The example in Graph 1, illustrates the piecewise constant step function followed by the overnight SOFR
rates and the corresponding average overnight SOFR rates implied by each SR1 and SR3 contract.
Graph 1

Constant interest rate implied by SR3
Constant interest rate implied by SR1
Average path of interest rates

Assumes constant between FOMC meeting dates

time

Dark grey line denotes the line of best fit for projected SOFR overnight rates. Rates are determined by use of the Industry standard model developed by FRB economists Heitfield& Young “Inferring Term Rates from SOFR Futures prices.” Input prices are derived from CME SOFR futures prices where the rate is 100 – futures price, dark blue represents OneMonth SOFR prices (SR1), light blue represents Three-Month SOFR prices (SR3).

5.2. Optimization
In order to determine the optimal path for the overnight SOFR rates, CME implemented the Broyden-FletcherGoldfarb-Shanno algorithm that solves for the unknown parameter set Θ = (𝜃𝜃0 , … , 𝜃𝜃𝑘𝑘 ) and utilizes 13 SR1 and5 SR3 contracts to cover the SOFR term rates computation period up to 12-month tenor.
The optimization function is designed to solve the following minimization problem:⎧

Where:
•
•

11

12

2

4

2

1
2

1
2⎫

1
𝑚𝑚𝑚𝑚𝑚𝑚𝛩𝛩 � � 𝑤𝑤𝑚𝑚
× �𝑃𝑃𝑚𝑚1 − 𝑃𝑃�𝑚𝑚1 (Θ)� + � 𝑤𝑤𝑞𝑞3 × �𝑃𝑃𝑞𝑞3 − 𝑃𝑃�𝑞𝑞3 (Θ)� � + 𝜆𝜆 × ��(𝜃𝜃𝑘𝑘 )2 �
⎨ 𝑚𝑚=0
⎬
𝑘𝑘
𝑞𝑞=0
⎩
⎭

𝑃𝑃𝑚𝑚1 and 𝑃𝑃𝑞𝑞3 : the observed blended prices of SR1 and SR3 contract with reference month 𝑚𝑚 andreference quarter 𝑞𝑞, respectively;
𝑃𝑃�𝑚𝑚1 (Θ) and 𝑃𝑃�𝑞𝑞3 (Θ): the implied value of SR1 and SR3 contract with reference month 𝑚𝑚 and reference
quarter 𝑞𝑞, respectively;© 2024 CME Group. All rights reserved.

•
•

1
𝑤𝑤𝑚𝑚
and 𝑤𝑤𝑞𝑞3 : weighting parameters for pricing errors of SR1 and SR3 with reference month 𝑚𝑚 andreference quarter 𝑞𝑞, respectively;
0.01
𝜆𝜆: weighting parameter for penalty function. 𝜆𝜆 =where 𝐾𝐾 is the number of scheduled FOMC
√𝐾𝐾

meetings in the period.

For SR1 contracts, whose reference month is not the current month (𝑚𝑚 > 0), the implied value only depends
on projected overnight SOFR rates:
𝑃𝑃�𝑚𝑚1 (Θ) = 100 × �1 −1
� 𝑓𝑓(𝑡𝑡; Θ)�
1
𝑁𝑁𝑚𝑚
1
𝑡𝑡𝑡𝑡𝑇𝑇𝑚𝑚

Where:••

𝑇𝑇𝑚𝑚1 : set of calendar days for the 𝑚𝑚-th month;1: total number of calendar days in 𝑚𝑚-th month.
𝑁𝑁𝑚𝑚

For the SR1 contract, whose reference month is the current month (𝑚𝑚 = 0), the implied value can becalculated using published SOFR fixings and projected overnight SOFR rates:

𝑃𝑃�01 (Θ) = 100 × �1 −1
� � 𝑟𝑟𝑡𝑡 + � 𝑓𝑓(𝑡𝑡; Θ)��
𝑁𝑁01
1+
1−
𝑡𝑡𝑡𝑡𝑇𝑇0

𝑡𝑡𝑡𝑡𝑇𝑇0

Where:•••

𝑇𝑇01+ = {𝑡𝑡𝑡𝑡𝑇𝑇01 |𝑡𝑡 ≥ 𝑡𝑡0 };𝑇𝑇01− = {𝑡𝑡𝑡𝑡𝑇𝑇01 |𝑡𝑡 < 𝑡𝑡0 };𝑟𝑟𝑡𝑡 : published SOFR fixing for date 𝑡𝑡.

For SR3 contracts, whose reference quarter is not the current quarter (𝑞𝑞 > 0), the implied value only depends
on projected overnight SOFR rates:𝑃𝑃�𝑞𝑞3 (Θ) = 100 × �1 −360
𝑓𝑓(𝑡𝑡; Θ) × 𝑑𝑑𝑡𝑡� �(1 +
) − 1��
3
360
𝑁𝑁𝑞𝑞
3
𝑡𝑡𝑡𝑡𝑇𝑇𝑞𝑞

Where:••

12

𝑇𝑇𝑞𝑞3 : set of Business Days for the 𝑞𝑞-th quarter;
𝑁𝑁𝑞𝑞3 : total number of calendar days in 𝑞𝑞-th quarter;© 2024 CME Group. All rights reserved.

•𝑑𝑑𝑡𝑡 : the number of calendar days from date 𝑡𝑡 to its next Business Day following the SIFMA US Holiday
Schedule 9, if the next Business Day is no later than the end date of the 𝑞𝑞-th quarter; otherwise, 𝑑𝑑𝑡𝑡
equals to the number of days from date 𝑡𝑡 to the end date of the 𝑞𝑞-th quarter.

For the SR3 contract, whose reference quarter is the current quarter (𝑞𝑞 = 0), the implied value can becalculated using published SOFR fixings and projected overnight SOFR rates:
𝑃𝑃�03 (Θ) = 100 × �1 −360
𝑟𝑟𝑡𝑡 × 𝑑𝑑𝑡𝑡
𝑓𝑓(𝑡𝑡; Θ) × 𝑑𝑑𝑡𝑡
) × � (1 +) − 1��
3 � � (1 +
360
360
𝑁𝑁0
3+
3−
𝑡𝑡𝑡𝑡𝑇𝑇𝑞𝑞

𝑡𝑡𝑡𝑡𝑇𝑇𝑞𝑞

Where:•••

𝑇𝑇𝑞𝑞3+ = {𝑡𝑡𝑡𝑡𝑇𝑇𝑞𝑞3 |𝑡𝑡 ≥ 𝑡𝑡0 };𝑇𝑇𝑞𝑞3− = {𝑡𝑡𝑡𝑡𝑇𝑇𝑞𝑞3 |𝑡𝑡 < 𝑡𝑡0 };𝑟𝑟𝑡𝑡 : published SOFR fixing for date 𝑡𝑡.

The framework of the optimization method is guided by the following principles:
•

•

•
•

9

Reflect Market Expectations. The first term of the optimization function is the weighted averagesquared error between implied values and observed prices of the 13 SR1 and 5 SR3 contracts. The
optimization algorithm is trying to minimize the root mean squared errors of the deviations frommarket expectations.
Equivalent importance of inputs. CME assigns each input price the same level of importance withrespect to the contribution to the error function in the optimization. The weight for each future contract
is 0.05� for all 13 (thirteen) SR1 contracts and all 5 (five) SR3 contracts.
Eighteen Month Jump Window. CME assumes that no jumps will occur more than eighteen months
after the as of date.
Policy Gradualism. The second term of the optimization function is a penalty function which will
impose punishment on large jump size. This regularization term in the optimization function ensuresthat the optimization prefers “gradual jump patterns” of the overnight SOFR rates rather than “extreme
jump patterns” if the two patterns leads to the same contract prices. For example, suppose two or
more FOMC meetings occurred during the lifespan of a single SR3 contract (multiple jump patterns),
with a big jump at one FOMC policy rate announcement date and no jumps at other meetings orequal jump at each FOMC policy rate announcement date, may have the same implied contract price.
In this case, the penalty function will select the equal jump pattern to minimize the absolute value ofthe largest individual jump size such that the path for overnight SOFR rates will be smoother. A small
positive number will be assigned to λ and hence it will not materially affect the parameter estimates.

https://www.sifma.org/resources/general/holiday-schedule/13© 2024 CME Group. All rights reserved.

5.3. Computing Term Rates from Projected Overnight Rates
Term Rates are derived by compounding the overnight SOFR rates over one, three, six and twelve months.
The compounding follows conventions listed as below:ℎ(𝑇𝑇) =

•

•
•
•

14

360
𝑓𝑓(𝑡𝑡; Θ) × 𝑑𝑑𝑡𝑡× � � �1 +
� − 1�
360
𝑇𝑇
𝑡𝑡∈𝑇𝑇� (𝑇𝑇)𝑇𝑇�(𝑇𝑇): the set of Business Days from the term start date to date 𝑇𝑇 days in the future. Each term tenor
will start on (and include) two Business Days following the publication day, based on Following
convention. The term rate will span the corresponding tenor (e.g., 1-month, 3-month, 6-month, 12month which is represented by 𝑇𝑇 days in the formula) in accordance with Modified Following
conventions.
𝑡𝑡: a Business Day in set 𝑇𝑇�(𝑇𝑇)𝑑𝑑𝑡𝑡 : the number of calendar days from date 𝑡𝑡 to its next Business Day following the SIFMA US Holiday
Schedule, if the next Business Day is no later than the end date of SOFR term rate; otherwise, 𝑑𝑑𝑡𝑡 isequal to the number of days from date 𝑡𝑡 to the end date of SOFR term rate.
𝑓𝑓(𝑡𝑡, Θ): the overnight SOFR rate as of date 𝑡𝑡.

© 2024 CME Group. All rights reserved.

6.

Eligibility of SOFR OIS

In addition to futures markets, the Over the Counter (OTC) market for SOFR Overnight Indexed Swaps (OIS)
may provide an indication of CME Term SOFR Reference Rates values.
SOFR OIS will be considered for inclusion in the benchmark’s calculation when their transacted monthly
volumes exceed 25% of SOFR Futures volumes for a consecutive 6 (six) month rolling period. SOFR OIS
executed volumes are observed based on available CCP cleared OIS data with a tenor shorter than 1 (one)year. Where SOFR OIS data is not available from third parties for tenors less than 1 year, the available tenor
data will be adjusted. The adjustment will be based on a rolling 6-month average ratio of 1 year vs theavailable tenor data as reported by CME Group.
The Administrator will monitor the monthly SOFR OIS volumes and report its findings to the OversightCommittee. The Oversight Committee is responsible for approving the inclusion of SOFR OIS data into the
CME Term SOFR Reference Rate calculation.
There are currently no OTC OIS data sources used in the calculation of the CME Term SOFR Reference
Rates.

15© 2024 CME Group. All rights reserved.

7.

Pre-publication Reliability Checks

Pre-publication reliability checks are performed daily, to validate that the calculated CME Term SOFR
Reference Rates are within acceptable tolerances and to identify and remediate any potential error in thecalculation process.

7.1. Market Volatility Checks
For each CME Term SOFR Reference Rates tenor, changes (in interest rate terms) from the previous day arecalculated and stored; 70 days rolling average and standard deviation are calculated.
The daily changes described above, are then compared for consistency, as follow:••

whether daily changes are within 2 (two) standard deviations from their historical 70 days average;
whether daily changes are within a tolerance of 150% of the corresponding changes of the input
prices (in interest rate terms).

If at least one of the above validation tests is passed, CME Term SOFR Reference rates are published.
In the occurrence of both validation tests failing, the Calculation Agent consults with the Administrator toassess consistency of CME Term SOFR Reference Rates changes with the underlying market and approvefor publication.
In the occurrence that the day-on-day changes are not consistent with the movement in the underlying
market, the previous day CME Term SOFR Reference Rates are re-used.

7.2. Technical Failure – IT System
If there is a technical failure in the calculation of CME Term SOFR Reference Rates, the average change of
input data, converted into interest rate, is calculated and applied equally to the previous day CME Term SOFR
Reference Rates, for all tenors.

7.3. Unavailability of Input Data
If SOFR Futures input data are unavailable, the prior day inputs are entered into the projection model (Section5) to calculate the CME Term SOFR Reference Rates.
If the NY Fed Overnight SOFR rate is unavailable for a day where the CME Term SOFR Reference Rates arecalculated, the previous published Overnight SOFR rate will be used in the calculation of the day’s CME Term
SOFR Reference Rates.
If there is a technical failure in the projection model and the SOFR Futures input data are unavailable,
preventing the calculation of changes over the previous day as described above, the CME Term SOFR
Reference Rates from the previous day are re-published.
In the event that the previous day CME Term SOFR Reference Rates are republished for more than 3 (three)consecutive Business Days, the Administrator must promptly convene the Oversight Committee to assess
available remedial actions.

16© 2024 CME Group. All rights reserved.

8.

Publication and Error Policy

8.1. Benchmark Publication
The CME Term SOFR Reference Rates Publication will be on the next Business Day following the BusinessDay during which futures data sampling takes place.
CME Term SOFR Reference rates are calculated and published to 5 (five) decimal places.
CME Term SOFR Reference Rates are computed based on a reference period that begins two Business
Days (T+2) after the Publication Date settlement, where publication occurs on the Business Day following thesampling date.
CME Term SOFR Reference Rates is calculated each Business Day, in accordance with the recommended
SIFMA US Holiday Schedule. Publication will occur at 5.00am CT (6.00am ET, typically 11.00am GMT/BST).
Please refer to Appendix II for further details.
In addition, CBA may, with notification to the market, choose not to publish the CME Term SOFR Reference
Rates on any given business day.
The CME Term SOFR Reference Rates are published on the CME Group website and on licensed data
vendor platforms.

8.2. Error Policy
The Administrator takes the utmost care to ensure that input data and calculations are accurate; during the
calculation process and prior to publication, the Administrator performs additional validation checks (as in Prepublication Reliability Checks) to identify possible errors, and swiftly recalculate and revalidate CME Term
SOFR Reference Rates prior to publication.
If the Administrator identifies an incorrect publication the same day, prior to 2pm CT, the CME Term SOFR
Reference Rates will be republished if the error is greater than 1 basis point. In the event that there is an error
in the publication that requires a re-publication of the rate, users will be informed via the CME Global
Command Centre System Alerts.

8.3. Publication Alerts
In the event of disruptions to the standard CME Term SOFR Reference Rates publication process,publication alerts will be issued if and when publication disruptions have not been resolved: a publication
alert will be issued by 7:00am CT (8.00am ET,13.00pm GMT/BST) at the latest .
Publication alerts will be made available via the CME Globex system utilizing the GCC System Alerts.

8.4. Consultations and Notices
CBA will inform the users and stakeholders of any announcements relating to republication, restatements or
consultations via the CBA Notice Page.
In addition, CBA may, at its discretion, release information notices with respect to issues impacting theavailability of the CME Term SOFR Reference Rates, via the CBA Notice Page.

17© 2024 CME Group. All rights reserved.

9.

Governance

The Administrator operates under a comprehensive Risk and Control Framework, providing clear policies on
Governance, Oversight, Benchmark Design and Calculation, Outsourcing, Operations, Reporting ofInfringements and Business Continuity.
CBA has in place a "Three Lines of Defence" model, enabling close cross-monitoring of the governanceprocess - this being business, compliance and audit who all have a key role in ensuring that CBA meets its
regulatory requirements.

9.1. Oversight Committee
An Oversight Committee is appointed by the Administrator to review the integrity of the benchmark, in
accordance with the CBA Terms of Reference for Oversight Committees.
The Oversight Committee will provide independent oversight of, and challenge to the Administrator on all
aspects of the Benchmark determination process. The minutes of the Oversight Committee are madeavailable on the Administrator's website.
The Oversight Committee will escalate to the CBA Board if required.

9.2. Review of the Methodology
The Administrator constantly monitors the Benchmark Methodology and its consistency with the statedobjectives. The Benchmark Methodology is reviewed annually by the Administrator and the OversightCommittee.
The Oversight Committee approves proposed changes to the Calculation Methodology including, but notlimited to, the structure of the Benchmark, input data used and all aspects of the Calculation Methodology.
The Oversight Committee may direct the Administrator to consult on any changes to the methodology with
Stakeholders and the wider market.

9.3. Consultation Process
The Administrator will engage relevant stakeholders and end users on material changes to the Benchmark
Methodology, if required by regulation or where the Oversight Committee requests such consultation.
Changes to the Methodology are deemed material on the basis of an assessment conducted by the
Administrator and submitted to the Oversight Committee for advice and feedback.
The Administrator will publish notice of the consultation on its website, inviting feedback from stakeholders
and the wider market. Notice of a consultation will be posted at least 1 (one) month prior to the deadline forresponses. The notice will include the details of the proposed material change, the timeline and the rationale
for the change.
Findings of the consultation process and proposed changes to the Benchmark Methodology, recommended
as a result of the consultation, will be presented by the Administrator to the Oversight Committee for its
consideration.

18© 2024 CME Group. All rights reserved.

Feedback to a consultation is considered confidential, however the Administrator will publish an anonymized
summary with its conclusions, as soon as it is practical, but before implementation of any changes.

9.4. Cessation
The Administrator constantly monitors the representativeness of the Benchmark. If the Benchmark is deemed
to be unrepresentative of the underlying economic reality due to paucity of input data or systemic changes in
the related markets, the Administrator will engage the Oversight Committee at the earliest opportunity. Thesecessation arrangements are designed to mitigate cessation and transition risks.
The Oversight Committee may direct the Administrator to consult with Stakeholders as described in theConsultation Process section.
As a last resort, if no alternative arrangements are feasible, the Oversight Committee may advise theAdministrator to discontinue the Benchmark, providing Stakeholders at least 6 (six) months’ notice andassistance to explore alternative reference instruments.
The Administrator will endeavour to identify alternative benchmarks; however, this might not always be
possible due to regulations, market conditions or suitable alternatives.
Users of the Benchmark are recommended to ensure that they have adequate fallback policies andprocedures in the event of the Benchmark becoming unrepresentative of its economic interest.

9.5. Records Retention
The Administrator has in place policies for the retention of any relevant evidence and documentation related
to the determination and dissemination of the Benchmark, either in paper or in electronic format, for at least
the mandatory term of 5 (five) years.

9.6. Auditing
An internal audit process will be undertaken regularly, to ensure adherence to the stated Methodology, theIOSCO principles and regulatory requirements.
An external audit will be carried out at least every two years. External audits can be requested at any time by
the Administrator’s board, the Oversight Committee or the internal audit function.

9.7. Data Licensing and Distribution
The Benchmark is made available subject to execution of an Information License Agreement (ILA) together
with the appropriate Schedules. Market participants that intend to subscribe to the Benchmark should contact
the Administrator at the following email address: CMEDataSales@cmegroup.com.

19© 2024 CME Group. All rights reserved.

9.8. Complaints Procedures
The CME Group EMEA / APAC Complaints Procedures sets out details on the management of customer
complaints to ensure that they are handled fairly and effectively, in a prompt and transparent manner and inaccordance with applicable regulatory requirements.
Complaints will be dealt with by a senior member of staff not directly involved with the benchmark calculationand dissemination. Information related to complaints will be stored in a restricted access area and kept for aperiod of at least 5 (five) years following the date when the complaint was first lodged. Complaints can besubmitted at internationalcompliance@cmegroup.com

20© 2024 CME Group. All rights reserved.

Appendix I – Key Terms & Definitions
TERM

DESCRIPTION

Administrator

CME Group Benchmark Administration Limited

ARRC

Alternative Reference Rates Committee

BMR

Benchmark Regulation

Business Day

US Government Securities Business Day

CBA

CME Group Benchmark Administration Limited

DCM

Designated Contract Market

FCA UK

Financial Conduct Authority (UK)

FED

Federal Reserve System

FOMC

Federal Open Market Committee

IMM

International Money Market day-count convention

IOSCO

International Organization of Securities Commissions

NY FED

Federal Reserve Bank of New YorkOC

Oversight Committee

OIS

Overnight Indexed Swaps

OTC

Over the Counter

SIFMA

Securities Industry and Financial Markets Association

SOFR

Secured Overnight Financing Rate

SR1

One-month SOFR Futures

SR3

Three-month SOFR Futures

VWAP

Volume Weighted Average Price21© 2024 CME Group. All rights reserved.

Appendix II – CME Term SOFR Reference Rates Early Close Calendar
2024 Early Close Calendar
DATE
28-Mar-2024
24-May-2024
03-Jul-2024
29-Nov-2024
24-Dec-2024
31-Dec-2024

SIFMA CALENDAR/
MARKET CLOSE TIME
2:00pm ET
2:00pm ET
2:00pm ET
2:00pm ET
2:00pm ET
2:00pm ET

CME TERM SOFROBSERVATION WINDOW
7:00am CT - 12:00pm CT
7:00am CT - 12:00pm CT
7:00am CT - 12:00pm CT
7:00am CT - 12:00pm CT
7:00am CT - 12:00pm CT
7:00am CT - 12:00pm CT

SIFMA CALENDAR/
MARKET CLOSE TIME
2:00pm ET
2:00pm ET
2:00pm ET
2:00pm ET
2:00pm ET
2:00pm ET

CME TERM SOFROBSERVATION WINDOW
7:00am CT - 12:00pm CT
7:00am CT - 12:00pm CT
7:00am CT - 12:00pm CT
7:00am CT - 12:00pm CT
7:00am CT - 12:00pm CT
7:00am CT - 12:00pm CT

2025 Early Close Calendar
DATE
17-Apr-2025
23-May-2025
03-Jul-2025
28-Nov-2025
24-Dec-2025
31-Dec-2025

22© 2024 CME Group. All rights reserved.

cmegroup.com© 2024 CME Group. All rights reserved.