The benchmark being eyed as a potential replacement for dollarLIBOR (the London interbank offered rate) is facingrenewed scrutiny after a year-end surge in the market underpinningthe new rate. With more volatility possible, Wall Street isincreasingly wondering if the nascent Secured Overnight FinancingRate (SOFR) will be up to the task.

Last month's jump in rates on overnight Treasury repurchaseagreements—the market that supports SOFR—pushed the benchmarkhigher by almost 70 basis points over a two-day span. It has sinceretreated and was set at 2.43 percent for Wednesday. But given thatboth repo and SOFR are also susceptible to swings in Treasury-billsupply, which itself could become more erratic as the U.S. grappleswith the reintroduction of the debt ceiling, some market veteransare forecasting further fluctuations ahead.

Concerns about SOFR range from a lack of term structure to tepidvolumes in derivatives that are tied to it. And that has tradersand strategists saying the new rate needs to make significantheadway in 2019 if U.S. regulators expect it to eventually take thebaton from LIBOR, which still underpins more than $200 trillion ofdollar-denominated instruments.