Business World

Friday 15 November 2019

NYSE owner to take over running of Libor

Traders on the floor at the New York Stock Exchange
Traders on the floor at the New York Stock Exchange

Kirstin Ridley and Steve Slater London

The US owner of the New York Stock Exchange (NYSE) will take over the running of Libor, the benchmark interest rate at the centre of a global rigging scandal, wresting control from a British bankers' trade body for a token £1 payment.

London interbank offered (Libor) rates are benchmarks for trillions of euro worth of contracts from complex derivatives to credit card bills.

Libor's credibility was destroyed by revelations that traders had routinely manipulated them to their own advantage, but the rate remains an important cog in the world financial system,

NYSE Euronext will from early 2014 take over Libor from the British Bankers' Association (BBA), which had administered the rates since the 1980s, a British committee set up to choose a new operator said yesterday.

Successor

However, Libor will continue to be regulated by Britain's Financial Conduct Authority (FCA), according to the advisory committee chaired by Sarah Hogg, appointed in October last year by the finance ministry to look for a successor to the BBA in taking ownership of setting Libor rates.

A source familiar with the deal said NYSE Euronext would pay a token sum of £1.

The appointment "is an important step in enhancing the integrity of Libor", said Martin Wheatley, chief executive of the FCA, which started regulating Libor this April after escalating public and political outrage at the scale of the scandal.

But with uncertainty about the future regulation of Libor – and given NYSE Euronext is being bought by US peer Intercontinental Exchange (ICE) for $8.2bn (€6.4bn) – not everyone was convinced the appointment was appropriate.

"We had a 'fox guarding the henhouse' issue here, and we should learn from that," said Bart Chilton, a member of the US Commodity Futures Trading Commission (CFTC) regulator.

Mr Chilton added: "I firmly believe that having a truly neutral third-party administrator would be the best alterna- tive, and I'm not sure that an exchange is the proper choice."

British and US regulators have so far fined three banks – Barclays Plc, UBS AG and RBS – a total of $2.6bn (€2.03bn) and two men have been charged for manipulating Libor and similar benchmark rates.

But more banks and individuals remain under investigation. (Reuters)

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