IBM Promontory concluded that benchmark design (Principle 6), data sufficiency (Principle 7) and transparency (Principle 9) appear to be fully implemented for USD-AXI and USD-FXI.
NEW YORK, September 5, 2024 – Today SOFR Academy, Inc. welcomed the completion of an independent review of benchmark credit spreads USD Across-the-Curve Credit Spread Index (“USD-AXI”) and the USD Financial Conditions Credit Spread Index (“USD-FXI”) by IBM Promontory against certain International Organization of Securities Commissions’ (“IOSCO”) Principles for Financial Benchmarks (“Principles”). These indices were launched in July 2022, and index history is available from 2016. The introduction of USD-AXI and USD-FXI will not impact SOFR market liquidity.
IBM Promontory is IBM’s risk management and regulatory compliance consulting arm. In February 2024, they were engaged to perform a limited assurance review of USD-AXI and USD-FXI’s degree of implementation of certain IOSCO Principles. It considered IOSCO’s messages in its September 2021’s Statement on Credit Sensitive Rates, and the findings from July 2023’s Review of Alternatives to USD Libor (“Review”), as well as potential “inverted pyramid” risk. As previously confirmed in a public statement, neither USD-AXI or USD-FXI were included in the scope of IOSCO’s July 2023 Review. IBM Promontory concluded that benchmark design (Principle 6), data sufficiency (Principle 7) and transparency (Principle 9) appear to be fully implemented for USD-AXI and USD-FXI. Their reports are available for download here. In addition to IBM Promontory’s dedicated review, Invesco Indexing LLC completed independent assurance reviews against IOSCO Principles, conducted by PricewaterhouseCoopers LLP, in 2022 and 2023.
“At the very core of any financial contract is trust,” said SOFR Academy CEO Marcus Burnett. “Market participants can begin to reference AXI and FXI in financial instruments with confidence, knowing that these important benchmark supplements for SOFR are developed, published, and administered to the highest possible international standards. The design and operationalization of AXI and FXI has been a careful, measured, and deliberative process. We have invested multiple years in moving from concept to operational reality, taking into account valuable input from industry associations, market participants, public sector representatives, and other relevant stakeholders. We walked, not ran.” added Burnett.
“Based on the limited assurance review performed previously, and Promontory’s conclusion that SOFR Academy and the Administrator appear to have reasonably addressed the recommendations in the Report, IOSCO Principles 6, 7, and 9 appear to be fully implemented for AXI and FXI.”– IBM Promontory, 2024
Recent work by Harry Cooperman, Darrell Duffie, Stephan Luck, Zachry Wang and Yilin (David) Yang utilized data from the Federal Reserve’s FR2052a report and Y14Q data collection to show that usage of a credit sensitive element such as USD-AXI and USD-FXI will enhance the efficiency, transparency, and stability of U.S. financial markets (Cooperman, Duffie, Luck, Wang & Yang (2023)).
USD-AXI and USD-FXI are calculated and published each business day at approximately 9 AM ET, using the prior day’s transaction data. The indices are accessible via Bloomberg (tickers: AXIIUNS & FXIXUNS) and LSEG Data & Analytics (RICs: .IIAXI & .IIFXI) and are posted publicly at www.invescosofracademyaxi.com, where market participants can also submit questions, provide feedback, or request licensing documentation.
About SOFR Academy, Inc.
SOFR Academy is a member of the American Economic Association (AEA), the Loan Syndications and Trading Association, the International Swaps and Derivatives Association, the Asia Pacific Loan Market Association, the Bankers Association for Finance and Trade which is a wholly owned subsidiary of the American Bankers Association and the U.S. Chamber of Commerce. SOFR Academy’s backers include 8VC, and former Goldman Sachs partner Robert Litterman who developed the Black–Litterman model together with Fischer Black in 1990. For more information, please visit www.SOFR.org.
About Invesco Indexing LLC
Invesco Indexing LLC is an independent index provider owned by global asset manager Invesco Ltd. Invesco Indexing develops and administers a wide array of equity, fixed income, and multi-asset indices. These indices provide market exposures for both local and global markets, offering a full range of strategies. Invesco Indexing’s full range of indices are constructed by experienced investment professionals and are designed to help clients meet specific financial objectives. As of June 30, 2024, Invesco Indexing administered over 150 indexes with $24.8 billion in associated assets. Invesco is not affiliated with SOFR Academy or IBM Promontory. For more information, visit www.invescoindexing.com.
About 8VC
8VC is a leading technology investment firm, backing visionary teams and industry-transforming companies. The partners have an extensive track record as founders, builders, and operators of companies including Palantir, Addepar, Resilience, and OpenGov. 8VC manages over $6 billion in committed capital, investing primarily in smart enterprise platforms, healthcare, logistics, Bio-IT, and defense. For more information, visit https://8vc.com.
About the Secured Overnight Financing Rate
SOFR is published by the Federal Reserve Bank of New York and is subject to The New York Fed’s Terms of Use. The New York Fed has no liability for your use of the data. Neither USD-AXI or USD-FXI are associated with, endorsed, or sponsored by The New York Fed or the Federal Reserve System.
Media Contacts
For SOFR Academy, Inc.
[email protected]
Phone +1 855 236 6106
