SOFR Academy
| Company type | Private |
|---|---|
| Industry | Economic education, Market intelligence, Financial services |
| Founded | 2020 |
| Founder | Marcus A. Burnett |
| Headquarters | New York City , United States |
| Products | US-dollar Across-the-curve credit spread indices (AXI), Financial Conditions Credit Spread Indices (FXI) |
| Website | sofracademy |
SOFR Academy, Inc. operates as a United States-based provider specializing in economic education and market intelligence. In response to the global overhaul of reference rates and the phase-out of the London Interbank Offered Rate (LIBOR), the company created benchmark credit spreads, notably the US-dollar Across-the-curve credit spread indices (AXI), tailored for lending instruments used alongside the Secured Overnight Financing Rate (SOFR). These indices assist financial institutions in managing asset-liability imbalances during periods of market volatility, thereby strengthening their capacity to extend credit.
The organization maintains memberships in prominent academic and industry bodies such as the American Economic Association (AEA), Loan Syndications and Trading Association (LSTA), International Swaps and Derivatives Association (ISDA), Bankers Association for Finance and Trade (BAFT) affiliated with the American Bankers Association (ABA), the United States Chamber of Commerce (USCC), and the Bretton Woods Committee (BWC).
Foundation
Established in 2020 by Marcus A. Burnett, who began his career at the Commonwealth Bank of Australia (CBA) as an interest rate trader and later became a capital markets consultant, SOFR Academy initially concentrated on educational initiatives related to reference rate reform. By 2021, the company broadened its scope to include development of a credit spread supplement for SOFR, responding to requests from ten regional banks within the United States.
The advisory board comprises distinguished scholars from institutions such as Harvard University, University of California, Berkeley, New York University, Tsinghua University, University of Oxford, and London Business School. Key advisors have included Haoxiang Zhu, formerly a professor at Massachusetts Institute of Technology until 2021; Samim Ghamami, an ex-economist from the Federal Reserve Board and U.S. Treasury; and Alex Edmans, who joined in 2022. In 2023, Alex Roever, previously Head of US Interest Rate Strategy at J.P. Morgan, was appointed as senior advisor.
SOFR Academy benefits from backing by 8VC, a venture capital firm based in Austin led by Joe Lonsdale, founder of Palantir Technologies, along with support from industry experts like Robert Litterman, co-creator of the Black–Litterman model during his tenure at Goldman Sachs spanning over two decades.
Operationalization of AXI and FXI
In 2021, SOFR Academy revealed its intention to introduce the Across-the-Curve Credit Spread Indices (AXI) aimed at facilitating the transition away from U.S. Dollar LIBOR. The following year, it collaborated with Invesco Indexing LLC—a division of global asset manager Invesco Ltd (NYSE: IVZ)—to launch both the US-dollar AXI and Financial Conditions Credit Spread Indices (FXI). These indices are accessible via Bloomberg and Refinitiv/LSEG platforms.
AXI and FXI were developed to address challenges faced by U.S. banks under a SOFR-exclusive framework, where loan yields tend to decline amid economic downturns while unhedged funding costs increase, leading to asset-liability mismatches. These benchmarks have been topics of discussion at Federal Reserve Bank of New York Credit Sensitivity Group Workshops.
The concept behind AXI/FXI originated from Stanford's Darrell Duffie along with academics Antje Berndt and Yichao Zhu from Australian National University. The indices build upon reforms advocated by the Financial Stability Board’s 2014 Market Participants Group chaired by Duffie.
SOFR Academy has commissioned feasibility research for AXI/FXI across key regions:
- China, led by scholars at Tsinghua University
- Europe ("EURAXI"), directed by Rama Cont of University of Oxford and Susanna Sarayon
- Japan, with leadership from researchers at Keio University and Seikei University
Further feasibility studies are ongoing for Brazil, India, and Mexico.
Further reading
- Bloomberg: Landmark Bond Transaction Accelerates Efforts to Phase Out Libor
- Bloomberg: Global Banks Face $100 Million Each in Costs Due to Libor Transition This Year
- Bloomberg: Tom Hayes’ Release Sparks Renewed Discussion on Libor’s Reliability
- Bloomberg: Libor Observes a Significant Milestone with Partial Remedy for Derivative Risks
- Bloomberg: Challenges Persist in Eliminating Libor from the $200 Trillion Derivatives Market
- Bloomberg: Global Regulators Encounter Unexpected Difficulties in Ending Libor
- Bloomberg: Financial Institutions Prepare for Major Transition Affecting $80 Trillion in Swap Contracts