EDIT 2020-11-17:

thank you to @user42108 for the link to OpenGamma conventions PDF in his answer below. The PDF is comprehensive and explains the mechanics of USD OIS Swaps based on Effective Federal Funds Rate (EFFR) well, I paste an extract from the PDF here:

"Federal Fund swaps are a USD particularity. They are swaps exchanging quarterly USD Libor payment for quarterly average of USD-Effective Federal Funds Rate. They are often called the Feds or Fed swaps. The particularity is that the rate paid is the arithmetic average of the fed fund rates; the rates are not compounded like in the traditional OIS. The quarterly coupon payment is not equal to a three months OIS. The code on Bloomberg is USBGx Curncy with x the tenor"

As we know, USD Libor rate will be replaced by SOFR rate by the end of 2021, and my understanding is that there are already traded SOFR OIS Swaps: to encourage other answers, are there any knowledgeable users of the SOFR OIS Swaps? What is the exact mechanics of these? Is the liquidity of these comparable to the EFFR OIS Swaps? Do you think the market will eventually favour USD OIS swaps indexed to SOFR as opposed to USD OIS swaps indexed to EFFR?

Finally, notice the definition of the USD "OIS" swaps indexed to EFFR, cited above from the OpenGamma PDF (these EFFR swaps are indexed against USD Libor, so effectively are basis swaps, rather than classical OIS swaps that are vs. fixed): will the USD-Libor leg on these swaps be replaced by a SOFR leg? (So effectively, these swaps would become EFFR against SOFR: not sure that would make much sense as a product??)

Original question:

(i) Are USD OIS Swaps indexed to SOFR (Secured Overnight Funding Rate), EFFR (Effective Federal Funds Rate) or the FFTR (Federal Funds Target Rate).

(ii) If USD OIS Swaps exist on multiple benchmarks, which ones are the most liquid ones?

(iii) What are the exact mechanics of these swaps? (For example, EONIA-indexed OIS swaps use a kind of backward-looking geometric average of realized overnight EONIA rates to compute the floating leg: how does the USD OIS mechanics work?)

(iv) Finally, are there any SOFR-EFFR or SOFR-FFTR basis products?

  • 1
    $\begingroup$ When the OIS is based on Fed Funds, it is based specifically on EFFR as published by Federal Reserve Bank of NY. newyorkfed.org/markets/data-hub $\endgroup$
    – nbbo2
    Commented Sep 23, 2020 at 16:21
  • 2
    $\begingroup$ This doesn't directly answer your question, but you might want to check out clarusft.com/blog. They track liquidity in SOFR swaps, among other things that might be of interest to you. I have no affiliation with them, just trying to help. $\endgroup$
    – user42108
    Commented Sep 28, 2020 at 14:35
  • $\begingroup$ @user42108: really useful, thank you for that link, appreciate it. $\endgroup$ Commented Sep 28, 2020 at 16:57

3 Answers 3


I try to keep your enumerated structure yet address the points you edited into the question:

(i) I only know of USD OIS referencing the EFFR and the SOFR

(ii) My perception is that EFFR als float leg reference is far more liquid at the moment (compare the traded volumes, e.g. https://apps.newyorkfed.org/markets/autorates/fed%20funds vs. https://www.cmegroup.com/trading/interest-rates/cleared-otc-sofr-swaps.html?gclid=EAIaIQobChMIrqGvi7mL7AIVwdmyCh1B0AfhEAAYASAAEgKAv_D_BwE&gclsrc=aw.ds for an indication)

(iii) This is really dependent on the rate used, and maybe the PDF suggested in the other answer might help. In either case, as these are overnight rates, any OIS (or tenor basis swap involving an overnight rate) with payments occurring every x weeks/months, will transform the daily rates into an "average" rate over this period x (most often geometric / compounded, but sometimes also arithmetic / simple).

(iv) Indeed there are various forms of tenor basis swaps: EFFR vs. LIBOR, SOFR vs. LIBOR, and EFFR vs. SOFR. Note that the "USBGx" example you quoted is the first case (i.e. EFFR 1d arithmetic vs. the 3m Libor). This is not an "OIS" in the classical sense, where you would usually have (a) a fixed rate on the other leg rather than a 3M Libor, and (b) compound the 1d rate fixings rather than use arithmetic average.

  • $\begingroup$ Thank you so much for the nice answer. I suppose that in the first sentence in your last point (iv), you mean "...and EFFR vs. SOFR", instead of "...and EFFR vs. LIBOR"? $\endgroup$ Commented Sep 28, 2020 at 9:04
  • 1
    $\begingroup$ Indeed. Have edited just now. $\endgroup$
    – KevinT
    Commented Sep 28, 2020 at 9:12

I think a little clarity is needed here. A swap means exchanging A for B. Swaps trade on anything and everything. You can trade IOS/BBA Muni swaps, you can trade a swap linked to the gold forward levels versus Euribor 9 month fixings. Whatever you want.

You have a mistake above. OIS swaps are not OIS vs Libor. Generally, when someone trades an interest rate swap it is swapping fixed vs floating. (Although it doesn't have to be as mentioned above). But, when someone says "OIS swap" they mean fixed vs float OIS. That means I pay you a fixed rate, whatever the market level is, and then I receive from you a rate based on the daily Fed effective.

There are all kinds of basis swaps, trading all kinds of indices and tenors vs each other. For example, there are libor 3/6 swaps trading two 3 month libor settings vs one six month setting. A very popular swap is FRA-OIS , which means libor (usually 3m libor) settings vs daily OIS settings.

The most liquid swaps are the traditional IRS swaps. You receive a fixed payment vs 3month libor settings. Those trade in the trillions each day.

  • $\begingroup$ Thank you for the comment, Josh. Regarding the "EFFR vs. Libor" OIS Swap: I pasted that directly from the openGamma PDF shared by @user42108. The PDF looks legit, but if you have direct experience with USD OIS swaps and you say that Libor vs. EFFR doesn't classify as OIS, I'll take your word for it. $\endgroup$ Commented Oct 1, 2020 at 5:44
  • 2
    $\begingroup$ LIBOR vs OIS would be called a LIBOR/OIS swap , FRA/OIS swap, or a basis swap. Saying "OIS swap" means fixed rate vs OIS floating daily fixings. $\endgroup$
    – JoshK
    Commented Oct 1, 2020 at 6:13
  • $\begingroup$ I am struggling to understand why someone would use SOFR-Fed Funds or SOFR-Libor basis swaps. Can someone help me understand this? $\endgroup$ Commented Nov 22, 2020 at 17:18
  • 1
    $\begingroup$ Bhaskar. LIBOR futures are super liquid. People hedge rate risk with them. But LIBOR might not really be your reference rate, so then you trade a basis swap to turn it into your real risk, $\endgroup$
    – JoshK
    Commented Nov 22, 2020 at 22:25

iii) The OpenGamma piece on IRS market conventions might help. https://quant.opengamma.io/Interest-Rate-Instruments-and-Market-Conventions.pdf [EDIT or USSO2 BGN Curncy DES, for e.g., which provides details on the conventions for each leg]

iv) Yes, SOFR/FF basis swaps trade OTC. Or you can trade SOFR futures vs. Fed Funds futures.

  • $\begingroup$ How liquid are the SOFR/FF basis swaps? $\endgroup$
    – equanimity
    Commented Jan 19, 2022 at 16:33

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