LIBOR administration will pass to US operator NYSE Euronext from 2014, says BBA

NYSE Euronext Rate Administration Ltd was the preferred choice of the Hogg Tendering Advisory Committee, the panel set up to identify an appropriate successor to the BBA following allegations of rate manipulation that emerged last summer. The new administrator is expected to take over responsibility for the rate from early 2014, subject to authorisation from the Financial Conduct Authority (FCA) and a transitional period, the BBA said.

FCA chief executive Martin Wheatley, who recommended that a new administrator be found as part of his review of LIBOR and the rate-setting processes, said that the appointment was a "significant step".

"The FCA has already introduced a number of improvements in the way LIBOR is set, and we expect NYSE Euronext Rate Administration Ltd to develop further the oversight and governance of LIBOR," he said.

"Benchmarks are an important tool that enable a wide range of markets to function effectively. The selection of a new administrator, who will need to be authorised and then subject to ongoing scrutiny by the FCA, is an important step in enhancing the integrity of LIBOR," he said.

LIBOR is a daily reference rate based on the interest rates at which banks can borrow unsecured funds from other banks. It is widely used internationally as the pricing basis for some $550 trillion worth of financial instruments including interest rates and currency hedging instruments, and to set the interest rate for syndicated loans.

On 27 June 2012, Barclays became the first bank to announce that it would pay penalties to regulators in the UK and US for "misconduct" in relation to LIBOR submissions. Other banks have since settled with the regulators, while a criminal investigation led in the UK by the Serious Fraud Office (SFO) is ongoing.

The recommendations of Wheatley's review of LIBOR, which was published in September, were later accepted in full by the UK Government. The Government has already legislated to bring the administration of LIBOR and submissions to it under the regulatory oversight of the FCA, and has introduced a new criminal offence of making misleading statements in relation to benchmarks. These changes, which were also recommended by Wheatley, took effect in April.

The BBA and interim LIBOR administrator BBA LIBOR Ltd have taken steps to implement Wheatley's recommendations that did not require legislation. This included streamlining the number of LIBOR currencies and maturities so that instead of publishing rates for ten currencies and 15 maturities, only five currencies and seven maturities are now quoted every day. Additionally, publication of individual banks' submissions to LIBOR is now embargoed for three months, although real-time rates remain available to benchmark administrators and the FCA.

NYSE Euronext is a leading global operator of financial markets. It operates NYSE Liffe, which includes derivatives trading hub the London International Financial Futures and Options Exchange, as well as markets in the US and continental Europe. NYSE Euronext Rate Administration Ltd will be a UK based company, registered by the FCA, and was chosen by the Hogg Committee as "best placed" to "achieve an orderly transition to an effective new regime for LIBOR" and "restore its international credibility".

Criteria used by the Hogg Committee to assess the suitability of applications to administer the rate included financial soundness, proposed IT model, business model, business model, institutional capacity, proposed governance model and proposed transition plans, it said.