SOFR Futures vs. Fed Funds Futures Explained

The Federal Reserve Bank of New York publishes SOFR and EFFR as distinct reference rates. SOFR is based on transactions in the Treasury repo market and is a broad measure of the cost of overnight financing backed by Treasury securities. EFFR is based on eligible overnight unsecured federal-funds transactions. Similar market conditions can affect both, but they are not the same input or a single interchangeable rate.

That difference comes before any futures comparison. A screen that says “rate futures” can hide the reference rate, product code, contract month, calculation window, quote field, and timestamp. How to read futures contract specifications provides the record to collect before comparing two contracts.

CME's One-Month SOFR futures, commonly identified as SR1, use the arithmetic average of daily SOFR during the contract delivery month. Three-Month SOFR futures, commonly identified as SR3, use business-day compounded SOFR over a defined reference quarter. CBOT's 30-Day Federal Funds futures, commonly identified as ZQ, use the arithmetic average of daily EFFR during the contract delivery month.

Those differences make a vague comparison incomplete. SR1 and ZQ both use a one-month delivery-month average, but their named reference rates differ. SR3 uses SOFR too, but its three-month reference quarter and compounding method are not the same measurement window as either one-month contract.

Write the product code beside the name. Saying only “SOFR futures” can join SR1 and SR3 even though the quoted rate and settlement calculation are not the same record.

These products use a price convention that can be described as 100 minus a contract-defined rate. The convention makes a lower stated contract rate correspond to a higher price under the same product's calculation. It does not make all rate-futures prices directly comparable, because the reference rate, period, daily treatment, multiplier, and final settlement rule can differ.

For SR1 and ZQ, the rules describe daily rates averaged through the named delivery month, including treatment for days without a new published rate. For SR3, the rules describe business-day compounding through the named reference quarter. Do not turn a price from one method into another product's rate without the product-defined calculation.

Futures tick value and contract multipliers separates a quoted price movement from a contract's dollar sensitivity. The same-looking price convention does not prove identical cash exposure.

For SR3, CME defines the reference quarter from the third Wednesday of the third month before the delivery month, inclusive, to the third Wednesday of the delivery month, exclusive. The contract's displayed month therefore must be read with the specific product rule; it is not enough to assume a conventional calendar quarter from a short code.

SR1 and ZQ use their delivery-month daily-average conventions, while SR3 uses its reference-quarter compounding convention. Futures contract month codes shows why a month letter identifies a product-defined label rather than an all-purpose expiration calendar.

Save the start and end of the applicable reference period, the month-year, price field, timestamp, and source. That makes clear whether two displayed prices overlap in time or merely have similar names.

A difference between a named SOFR futures price and a named Federal Funds futures price describes a relationship between two contracts with different inputs or windows. It can be useful to state that relationship precisely, but it cannot by itself establish why the gap exists, where it will move, or what a policy committee will decide.

Use the correct official settlement and price fields when documenting a comparison. Futures settlement price versus last trade explains why an official settlement and a displayed last trade can have different timestamps and definitions even for one contract.

This guide compares contract mechanics and reference-rate records, not a recommendation to trade SOFR, Federal Funds, a rate spread, or any interest-rate product. Current exchange rules, reference-rate methodologies, clearing, and account policies govern an actual position.