The Secured Overnight Financing Rate (SOFR) is a benchmark interest rate that reflects the cost of borrowing cash overnight, secured by U.S. Treasury securities. It is based on actual transactions in the repurchase agreement (repo) market, where financial institutions lend and borrow money using these securities as collateral. SOFR was introduced by the Federal Reserve in 2018 as an alternative to the London Interbank Offered Rate (LIBOR), which was phased out due to manipulation scandals. It aims to provide a more reliable and transparent measure of short-term borrowing costs in the U.S. financial system.