ICE Benchmark Administration Publishes Roadmap for ICE LIBOR
LONDON--(BUSINESS WIRE)--
Intercontinental Exchange (NYSE:ICE), a leading operator of global
exchanges and clearing houses and provider of data and listings
services, announced today that ICE
Benchmark Administration (“IBA”) has published its Roadmap for the
evolution of ICE LIBOR
(“LIBOR”).
The publication of the LIBOR Roadmap follows extensive and wide-ranging
consultation with market participants, stakeholders, central banks and
regulators across the globe which commenced at the end of 2014. The
Roadmap sets out evolutionary reforms to reduce the risk profile of
LIBOR and create the conditions for more banks to participate, including:
-
Incorporating transaction data into the LIBOR methodology to the
greatest extent possible
-
Publishing a single, clear and comprehensive LIBOR definition
-
Implementing a construct for ensuring the rate can adapt to changing
market conditions with appropriate consideration for the interests of
all stakeholders, and
-
Conducting a feasibility study on transitioning the calculation of
LIBOR to IBA, using transaction data to deliver an even more robust
and sustainable rate for the long term
Finbarr Hutcheson, President, ICE Benchmark Administration, said: “LIBOR
is the primary benchmark for short term interest rates globally; it
underpins more than US$350 trillion in outstanding contracts and much of
the world’s financial system. The improvements we have made in the last
two years, coupled with this Roadmap published today, are designed to
secure LIBOR as one of the world’s most trusted, scrutinised and robust
financial benchmarks. We would like to thank the more than 200 market
participants, users and contributor banks who continue to work with us
to evolve this vital benchmark which is so central to global funding
markets.”
The Roadmap, which will be implemented this year, outlines a set of
measures to anchor LIBOR in transactions from a broader set of market
participants, reflecting changes in banks’ funding models. To support
this, IBA has developed a waterfall of methodologies to ensure that
LIBOR can be published every day and in all market circumstances, in
line with feedback received from the consultation, as well as the
direction set by the Financial Stability Board (“FSB”) and other
official sector bodies.
In parallel with the evolution announced today, IBA is conducting a
feasibility study on the design and implementation of an appropriate
algorithm to calculate LIBOR with banks providing only transaction data
to IBA. The algorithm, currently in design phase, would use the
real-time transaction data provided by contributor banks following the
parameters in the waterfall announced today, further minimising the risk
for LIBOR contributor banks. It is anticipated that reducing the risk
profile of LIBOR will pave the way for increased participation,
augmenting the number of transactions that LIBOR is based on and making
the benchmark even more robust.
The full Roadmap document for the Evolution of ICE LIBOR can be accessed
on the ICE
website.
A factsheet summarising LIBOR’s evolution under IBA administration is
also available on the ICE
website.
Editor’s Notes
LIBOR has global significance; it is referenced by an estimated US$350
trillion of outstanding contracts in maturities ranging from overnight
to more than thirty years. LIBOR is produced by IBA on each London
business day for five currencies with seven maturities (overnight to 12
months), resulting in 35 published rates each day.
IBA, based in London, was established in 2013 for the purpose of
administering benchmarks and is a wholly-owned subsidiary of
Intercontinental Exchange, Inc. IBA administers the following three
systemically important benchmarks: ICE LIBOR, ICE Swap Rate and the LBMA
Gold Price.
Last year, IBA successfully transitioned the LBMA Gold Price and ICE
Swap Rate to new, transparent calculation methodologies. Today, the LBMA
Gold Price is based on an electronic auction process and ICE Swap Rate
is derived from tradable quotes from regulated trading venues.
As the administrator of LIBOR since February 2014, IBA has made
significant investments in technology, surveillance and governance to
improve the benchmark:
-
A dedicated team of IBA analysts examine banks’ trading activity and
related evidence every day running millions of pre- and
post-publication statistical calculations and analysis on LIBOR
submissions, and
-
The submission process which had been unchanged for many years is now
run on modern, purpose-built technology with a redesigned and
automated process, providing real-time validation checks on the
submissions to prevent errors before the rate is calculated.
About Intercontinental Exchange
Intercontinental Exchange (NYSE:ICE) operates the leading network of
global futures, equity and equity options exchanges. ICE provides world
class clearing, data across financial and commodity markets. The New
York Stock Exchange is the world leader in capital raising, listings and
equities trading.
Trademarks of ICE and/or its affiliates include Intercontinental
Exchange, ICE, ICE block design, NYSE and New York Stock Exchange,
Interactive Data and Trayport. Information regarding additional
trademarks and intellectual property rights of Intercontinental
Exchange, Inc. and/or its affiliates is located at www.intercontinentalexchange.com/terms-of-use.
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, 2015, as filed with the SEC on February 4, 2016.
SOURCE: Intercontinental Exchange
ICE-CORP
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Source: Intercontinental Exchange