SOFR Futures Final Settlement Explained: SR1 vs. SR3
Learn how SR1 and SR3 reach final cash settlement, which SOFR observation period each rule uses, and why daily settlement, a last trade, and final settlement are different records.
Direct answer
SR1 and SR3 are cash-settled futures, but each receives an official final settlement price through its own contract rule. SR1 uses the arithmetic average of daily SOFR during its delivery month. SR3 uses daily compounded SOFR over its Reference Quarter. The final price is not simply the displayed last trade or the last underlying rate publication. Trade termination, rate publication, exchange calculation, clearing, and account posting are separate events that need their own records.
Final settlement starts with a named SR1 or SR3 contract
Start with the exact SOFR futures product and month-year. Both SR1 and SR3 are cash settled, so their final process does not call for delivery of a Treasury security or CUSIP. That shared settlement type does not make their final price calculations the same.
SR1's final contract rate is based on the arithmetic average of daily SOFR in its delivery month. SR3's final contract rate is based on daily SOFR compounded in arrears over its Reference Quarter. One-Month versus Three-Month SOFR futures describes why the two observation periods and their named months must be kept separate.
Cash-settled versus physically delivered futures provides the broader distinction. It does not replace the product rule that defines which observations, rounding, and final-price field apply to a named SOFR futures contract.
Use realized SOFR observations, not the displayed last trade
An expiring contract's final price is determined from the realized SOFR observations specified by its rule, not by copying the last displayed futures trade. CME describes SR1's final price as 100 minus the delivery-month daily SOFR arithmetic average and SR3's final price as 100 minus the compounded SOFR rate over the Reference Quarter.
The last relevant SOFR observation is published by the New York Fed after its value date. That means the observation date, publication date, and exchange calculation date can be different fields. Treating one screen timestamp as all three causes avoidable reconciliation errors.
Futures settlement price versus last trade explains the general distinction between an official settlement record and a recent execution. Final settlement adds a product-defined completion process; it is not a new name for a last trade.
Apply the product-specific final-price rule and rounding
The current SR1 and SR3 rules use the 100-minus-R framework but define R and its precision differently. SR1 uses its delivery-month arithmetic average and SR3 uses its Reference Quarter's daily compounded rate. CME's materials describe SR1's final average as rounded to the nearest one-tenth of a basis point per annum and SR3's final compounded rate as rounded to the nearest one-hundredth of a basis point per annum. Confirm the current rulebook before reproducing an actual calculation.
The product rule also governs how the calculation treats business days, non-business days, publication revisions, and the final observation. A formula from a historical example, an average from a chart, or a rounded last trade is not a substitute for the current exchange-defined record.
SOFR futures price and implied rate explains how a live 100-minus-R quote differs from a final rate calculated after all observations in the relevant window are known.
Separate trade termination, publication, calculation, and account posting
For SR1, CME's current materials place trading termination at the end of the delivery month and calculate final settlement after the relevant final SOFR publication. For SR3, the Reference Quarter ends before its later delivery month's third Wednesday, and the final calculation follows the publication of the last required SOFR observation. Do not treat the month in an SR3 code as a complete final-settlement calendar.
The New York Fed's publication methodology and CME's contract rule are both needed to explain this sequence. A rate value can have a value date, a publication time, and a limited correction policy; CME specifies which rate record enters the final calculation. Your clearing firm and broker then have their own account-posting processes.
This sequence is why a cash movement or balance shown by an account should be reconciled with its own statement rather than inferred directly from a public futures chart.
Archive an exchange settlement record before reconciling an account
For a final-settlement record, retain the product code, month-year, current rule version, Reference Quarter or delivery-month boundaries, final settlement-price field, calculation date, exchange source, relevant SOFR publication, and timestamp. This lets another reader distinguish the exchange record from an account statement or an historical data-provider display.
If you also reconcile a position, create a second record for account quantity, trade prices, daily variation margin, fees, broker timing, and cash balance. Those fields are necessary for an account result but are not part of the public definition of the exchange's final settlement price.
This guide explains contract final-settlement mechanics. It is not a direction to hold an expiring position, predict SOFR, take a trade, or calculate a customer account obligation. Current exchange, clearing, broker, and account rules govern an actual transaction.
Common questions
Are SR1 and SR3 physically delivered?
No. They are cash-settled SOFR futures. Their final process uses each product's defined SOFR calculation rather than delivery of a Treasury security.
Is final settlement the same as the last traded price?
No. A last trade is a reported execution. Final settlement is an official, product-defined value calculated from the required realized SOFR observations.
When can SR1 final settlement be calculated?
After the delivery month has ended and the relevant final SOFR observation has been published, according to the current exchange rule. Check the exact product's current timetable rather than infer it from a generic month label.
Why can an SR3 contract's final settlement occur after the month in its code?
The SR3 named month identifies the beginning of its Reference Quarter, not its final-settlement date. Read the current contract rule for the relevant period, termination, publication, and calculation sequence.
Does final cash settlement show my final personal profit or loss?
Not by itself. An account result can also depend on quantity, trade prices, daily variation margin, fees, broker timing, and account rules. Reconcile the exchange record and the account statement separately.