ICE Benchmark Administration (IBA) publishes position paper on the evolution and enhancement of ICE LIBOR (“LIBOR”)
LONDON--(BUSINESS WIRE)--
Intercontinental Exchange (NYSE: ICE), the leading global network of
exchanges and clearing houses, announced that ICE Benchmark
Administration (“IBA”) has today published a Position Paper on the
Evolution of ICE LIBOR.
Having taken over the administration of LIBOR in February 2014, IBA has
already established rigorous oversight and surveillance mechanisms for
LIBOR and the Paper sets out:
-
IBA’s key findings so far on the administration of LIBOR;
-
A summary of recent improvements to the LIBOR administration process;
and
-
Proposals for consultation on further enhancements to the LIBOR
submission process.
IBA welcomed the publication of the Financial Stability Board’s July
2014 report, “Reforming Major Interest Rate Benchmarks”, which created
additional momentum for change and clearly signaled that LIBOR should be
underpinned to the greatest extent possible with transaction data.
IBA now invites comments on proposed enhancements to elements of LIBOR:
-
Setting a universal approach, with a more prescriptive calculation
methodology using pre-defined parameters that the LIBOR Oversight
Committee will keep under review
-
Expanding the universe of transactions to reflect changes in recent
years in activity in the interbank market
-
Ensuring that transaction-based submissions are used to the extent
possible and defining a waterfall methodology for use when there are
insufficient transactions to produce a reliable submission
-
Allowing transactions in all representative locations to be used by
submitters
-
Allowing all wholesale and professional entities to be regarded as
eligible counterparty types, recognizing that bank funding has changed
over the years
-
Widening the window for eligible transactions so that LIBOR is based
on as many transactions as possible
-
Creating robust analytical tools to solidify the methodology to
produce a matrix of eligible transaction sizes as well as minimum
aggregated volume for each currency and tenor
-
Defining the role of qualitative methods: expert judgment should only
have a place as a fall-back of last resort
Finbarr Hutcheson, President of IBA, said: “LIBOR provides the financial
markets with a common language, enabling banks around the world to do
business with each other and creditors to enter into long term contracts
with confidence. Today represents a significant step forward in the
LIBOR journey. At IBA, we are seeking to make LIBOR ever more robust by
creating a methodology that can keep pace with today’s fast moving
markets. We believe that IBA’s approach to evolving benchmarks will
benefit LIBOR’s many and diverse stakeholders.”
IBA is seeking feedback on its proposals from all LIBOR stakeholders.
Comments should be submitted to IBA by Friday, 19th December, 2014. https://www.theice.com/publicdocs/ICE_LIBOR_Position_Paper.pdf
About Intercontinental Exchange
Intercontinental Exchange (NYSE: ICE) is the leading network of
regulated exchanges and clearing houses for financial and commodity
markets. ICE delivers transparent, reliable and accessible data,
technology and risk management services to markets around the world
through its portfolio of exchanges, including the New York Stock
Exchange, ICE Futures and Liffe.
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Safe Harbor Statement under the Private Securities Litigation Reform Act
of 1995 - Statements in this press release regarding ICE's business that
are not historical facts are "forward-looking statements" that involve
risks and uncertainties. For a discussion of additional risks and
uncertainties, which could cause actual results to differ from those
contained in the forward-looking statements, see ICE's Securities and
Exchange Commission (SEC) filings, including, but not limited to, the
risk factors in ICE's Annual Report on Form 10-K for the year ended
December 31, 2013, as filed with the SEC on February 14, 2014.
About ICE Benchmark Administration Limited
ICE Benchmark Administration Limited (IBA) is a UK company based in
London. It was established for the sole purpose of administering
benchmarks and is now a wholly-owned subsidiary of the Intercontinental
Exchange group (ICE). The Wheatley Review concluded that there should be
statutory regulation around LIBOR. Both administering LIBOR and making
submissions to LIBOR became regulated activities from April 2013. LIBOR
is the first benchmark to be regulated. As the new administrator for
LIBOR, IBA became authorised and regulated by the FCA in February 2014.
In August 2014 IBA became administrator for ISDAFIX, the leading global
benchmark for interest rate swaps.
About LIBOR
LIBOR has global significance. It is referenced by an estimated US$ 350
trillion of outstanding business in maturities ranging from overnight to
more than 30 years. LIBOR indicates the interest rate that banks pay
when they borrow from each other on an unsecured basis. It is
fundamental to the operation of both UK and international financial
markets, including markets in interest rate derivatives contracts. LIBOR
is used to determine payments made under credit products and derivatives
by a wide range of counterparties including small businesses, large
financial institutions and public authorities. LIBOR is published every
UK business day for five currencies: US Dollars; Pounds Sterling; Euros;
Japanese Yen; and Swiss Francs. Each currency has seven maturities
ranging from Overnight to 12 Months. The banks’ submissions are ranked
for each maturity in each currency and then the highest 25% and lowest
25% of submissions are excluded. The remaining contributions are
arithmetically averaged to create the final LIBOR rates which IBA then
publishes and distributes to data vendors.
SOURCE: Intercontinental Exchange
ICE-CORP
Media Contact:
James Dunseath - Corporate Communications
Intercontinental
Exchange | ICE
+44 20 7429 4584
james.dunseath@theice.com
or
Brunswick
Group
Gill Ackers/Brian Buckley
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ICEUK@brunswickgroup.com
or
Investor
Contact:
Kelly Loeffler
+1 770 857 4726
kelly.loeffler@theice.com
Source: Intercontinental Exchange