IDEAS home Printed from https://ideas.repec.org/p/rba/rbardp/rdp2026-03.html

Designing an Efficient Reference Rate: Lessons from SOFIA

Author

Listed:
  • James Brugler

    (Department of Finance, The University of Melbourne)

  • Calebe de Roure

    (Reserve Bank of Australia)

  • Marta Khomyn

    (University of Adelaide)

  • Max Prakoso

    (Reserve Bank of Australia)

  • Talis Putniņš

    (University of Technology Sydney)

Abstract

We evaluate the informational efficiency of the Secured Overnight Funding Index Australia (SOFIA™), currently in its beta phase, and how design choices may impact the benchmark rate. We use a state-space model to separate time-varying noise in the benchmark from the underlying efficient rate and investigate the determinants of noise in the daily time series and at the transaction level. Related-party transactions, high market concentration, and low transaction volumes are associated with higher noise. Our modelling suggests that considering alternative methods for trimming the transactions used in calculating the benchmark, compared to the initially proposed approach, may enhance its informational efficiency and robustness. These results provide evidence on how to optimise the benchmark's design. Indeed, the Australian Securities Exchange has already adjusted its SOFIA methodology to reflect most of these findings, in preparation for the potential transition of SOFIA from its beta phase to a live benchmark.

Suggested Citation

  • James Brugler & Calebe de Roure & Marta Khomyn & Max Prakoso & Talis Putniņš, 2026. "Designing an Efficient Reference Rate: Lessons from SOFIA," RBA Research Discussion Papers rdp2026-03, Reserve Bank of Australia.
    • Handle: RePEc:rba:rbardp:rdp2026-03
    DOI: 10.47688/rdp2026-03
    as

    Download full text from publisher

    File URL: https://www.rba.gov.au/publications/rdp/2026/pdf/rdp2026-03.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.47688/rdp2026-03?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rba:rbardp:rdp2026-03. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Paula Drew (email available below). General contact details of provider: https://edirc.repec.org/data/rbagvau.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.