NYSE Euronext, owner of the New York Stock Exchange and numerous exchanges across Europe including the Paris and Amsterdam ones, is to take over control of the benchmark London Interbank Offered Rate (Libor), according to press reports.
The group has beaten off competition from other contenders such as the London Stock Exchange (LSE) Group, Markit, Thomson Reuters, which used to run the calculations under the old system, and Bloomberg, which was pitching to do it in future, according to a ‘Sky News’ report. The report and breaking news across the 'BBC', 'Wall St Journal' and other outlets, speculated that an official announcement on the operation of Libor will be made later on today, with the UK Treasury later confirmiung the announcement in London. The new regulatory oversight procedures are necessary after the previous lax control led to the Libor scandal.
The buyer will reportedly pay a token sum of £1 to acquire the British Bankers’ Association (BBA) Libor system; the trade body was previously tasked with collating and administering the scandal-plagued rate after collecting the data from bank submitters.
Sky News commented that the choice of a US headquartered company to oversee the crucial benchmark-setting rate, which is used to price $300 trillion worth of derivatives and loads, is significant because of the fierce criticism of Libor's old oversight regime by US regulators.
With the ownership role crossing the Atlantic it might appear that a name change may be in order, but actually the New York headquartered group has said it will set up a new company in London called NYSE Euronext Rate Administration Ltd to run the London Interbank Offered Rate. Thew group already runs indices such as the CAC40 in France.
To date three banks - Barclays, Royal Bank of Scotland and UBS - have been fined more than £1.5bn by regulators for their role in the global Libor rate-rigging scandal, and a number of others are waiting to settle. Since the sandal first broke last year a number of procedural changes have already been made to try to strengthen the transparency and fairness of Libor with a three-month publication delay in force, for example, for the rates banks submit negating the temptation to manipulate the rate on a daily basis.
The UK Treasury’s decision comes shortly ahead of an impending change of ownership for NYSE Euronext with ICE waiting in the wings. The transatlantic group is awaiting final regulatory approval for its US$10bn cash-and-shares bid from US derivatives group IntercontinentalExchange (ICE).