TITLE: Reserve Bank of Australia Publishes Research on Secured Overnight Funding Index Australia Design Efficiency
BODY:
On June 2026, the Reserve Bank of Australia (RBA) published a research discussion paper evaluating the informational efficiency of the Secured Overnight Funding Index Australia (SOFIA), which is currently in its beta phase. The paper, authored by James Brugler, Calebe de Roure, Marta Khomyn, Max Prakoso, and Talis Putniņš, examines how design choices may impact the benchmark rate and provides recommendations for optimising SOFIA's structure.
The RBA's analysis uses a state-space model to separate time-varying noise in the benchmark from the underlying efficient rate. The research identifies key determinants of noise in SOFIA's daily time series and at the transaction level. The findings indicate that related-party transactions, high market concentration, and low transaction volumes are associated with higher noise levels in the benchmark. The paper suggests that alternative methods for trimming transactions used in calculating the benchmark, compared to the initially proposed approach, may enhance SOFIA's informational efficiency and robustness.
The research has already influenced regulatory practice. The Australian Securities Exchange (ASX) has adjusted SOFIA's methodology to reflect most of the RBA's findings as it prepares for the potential transition of SOFIA from its beta phase to a live benchmark. These design optimisations are intended to strengthen the reliability and accuracy of the benchmark rate, which serves as a critical reference for Australian financial markets. The full research discussion paper, including a non-technical summary and supplementary information, is available on the RBA's website.