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Intercontinental Exchange (NYSE:ICE), the leading global network of exchanges and clearing houses, announced that ICE Benchmark Administration (IBA) has today published a secondposition paper on the evolution of ICE LIBOR. IBA is seeking feedback on proposals included in the paper from all LIBOR stakeholders. Comments should be submitted to IBA by October 16, 2015.
Finbarr Hutcheson, President of IBA, said: “LIBOR is the world’s most important short-term interest rate benchmark, referenced by transactions totaling an estimated $350 trillion. IBA is investing significant resources to strengthen the calculation methodology and governance of LIBOR in order to restore market confidence and integrity to this vital economic benchmark.”
The second position paper published today sets out in more detail the evolutionary approach and timeline for LIBOR and in particular, describes a number of parameters for a more unified and prescriptive transaction-based methodology. The key aspect of LIBOR’s evolution remains the establishment of a waterfall of calculation methodologies to ensure the continued availability of LIBOR rates and the consistency and reliability of data.
The position paper specifies that to further anchor LIBOR in transaction data, the underlying liquidity pool, which is currently based on the inter-bank unsecured lending market, should be expanded. A number of proposals to improve liquidity and therefore increase available transaction data are included in the position paper including extending the eligible counterparty types, funding centres, transaction types and the transaction timing and window.
IBA received authorisation from the Financial Conduct Authority (FCA) in 2014 to administer and provide LIBOR, following an independent tendering process conducted by the Hogg Committee. This marked the start of a transformative, new era for LIBOR which is now underpinned by enhanced governance, oversight surveillance.
