27th Jan 2014 15:13
LONDON (Alliance News) - ICAP PLC is set to lose its role to Thomson Reuters Corp in setting a benchmark rate for interest-rate swaps.
The International Swaps and Derivatives Association Inc said in a statement Monday that Thomson Reuters will take over responsibility for the dollar-denominated part of the rate, known as ISDAfix.
Thomson Reuters had previously just been responsible for collecting non-dollar ISDAfix rates but will take on the dollar-denominated rates as well, as ISDA moves to an automated, market based ISDAfix rate. The first phase is set to be implemented during the first quarter of 2014.
The second stage in the process will see the current bank submission-based method move to an automated model that utilizes live prices from multilateral trading facilities, according to ISDA.
Once Thomson Reuters has taken on the USD process, it will work with panel banks to change the polling window length across all main currencies to 10 minutes from the current range of five to 59 minutes, reducing the time it takes to calculate the rate.
Regulators in the US and UK are investigating ISDAfix over allegations that the benchmark has been the subject of possible manipulation.
"Work is under way to establish an ISDAfix Code of Conduct and an ISDA Oversight Committee, which will address internal governance, systems and controls so as to maintain the highest standards and professional reputation for ISDAfix and contributing banks and to comply with the IOSCO Principles for Financial Benchmarks," ISDA said in a statement.
ISDA established ISDAfix in 1998 in co-operation with Reuters, which is now Thomson Reuters, and Intercapital Brokers, now ICAP PLC.
?We appreciate ISDA?s interest in having a consistent polling process across each of the relevant currencies and fixings," an ICAP spokesperson told Alliance News.
"ICAP has assisted with the ISDAfix process for more than 15 years, including collecting submissions and providing market-based reference points for US Dollars ISDAfix. As swap market structures evolve, we remain committed to participating in the development and administration of benchmark processes where we can add value to market functioning and transparency," the spokesperson added.
It's the latest blow to hit the interbroker dealer after it was in September fined GBP55 million by UK and US regulators over the manipulation of yen Libor rates by its brokers from at least October 2006 through at least January 2011.
"Effective 27th January 2014, Thomson Reuters can confirm it will take over the exclusive collection of USD ISDAfix rates at 11:00am and 3:00pm New York time directly from all contributor banks, bringing this currency into line with the methodology for all other ISDAfix rates. Thomson Reuters will also publish the USD ISDAfix rates at 11:30am and 3:30pm New York time. Thomson Reuters and ISDA will work together with all parties during this period of transition," Thomson Reuters said in a statement.
ICAP shares were Monday quoted at 401.70 pence, down 13.90 pence, or 3.4%.
By Samuel Agini; [email protected]; @samuelagini
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