This column is going to sound like it was written for a journal offering something to the left of Stalinism, but some things need to be said and asked. So let’s ask the question – is the UK’s Serious Fraud Office’s dropping of the Libor investigation yet another example of how senior managers are getting […]
In something of a surprise move the UK’s Serious Fraud Office (SFO) has announced the closure of its investigation into Libor manipulation, which has been going on since 2012. The SFO says in a statement, “Following a thorough investigation and a detailed review of the available evidence, there will be no further charges brought in […]
In the FICC of it is one year old this week, and, aside from expressing surprise they got this far, Colin Lambert and Galen Stops celebrate by plunging into two of the themes covered in the first podcast that still resonate today. Stops talks about the evolution of Euronext FX and has two questions for […]
A survey of more than 100 firms associated with the derivatives markets and conducted by JCRA, an independent financial risk management consultancy, along with law firm Travers Smith, has found that a large majority of firms with exposure to Libor are yet to start making preparations for its discontinuation.
The benchmark is set to be withdrawn in 2021, but the firms say that most of those surveyed have not started negotiating replacement language in their contracts that reference the outgoing benchmark.
The Bank of England and the UK’s Financial Conduct Authority (FCA) have announced the appointment of Tushar Morzaria as the new chair of the Sterling Risk Free Reference Rates Working Group.
The group was established in 2015 to implement the Financial Stability Board’s recommendation to develop alternative risk-free rates (RFRs) for use instead of Libor-style reference rates. In April 2017, the Working Group recommended the Sonia benchmark as their preferred RFR and since then has been focused on how to transition to using Sonia across sterling markets.
The problems around OTC market benchmarks are well-established, but it’s not just limited to these markets – there are suspicions and claims about collusion and attempted manipulation in listed markets as well. The latest lawsuit against FX banks has a very interesting paragraph in it which highlights the Plaintiffs’ belief that the Fix is open to manipulation, which begs the question, “Why use it?”
So is it time for a rational and genuine discussion about the use of these benchmarks? I think it is.
Two former Deutsche Bank interest rate traders have been found guilty by a New York jury of a scheme to manipulate the London Interbank Offered Rate (Libor) benchmark fix.
The two men, New York-based Matthew Connolly and London-based Gavin Campbell Black remain on bail pending post-trial motions likely to be complete in the first quarter of 2019. Connolly was found guilty on three of six counts, while Black was found guilty of two counts. Lawyers for both men have publicly stated their intention to appeal.
The Bank of England’s Working Group on Sterling Risk Free Reference Rates, which is tasked with leading the transition away from Libor to term Sonia rates, has launched a consultation process to help drive the evolution, which is intended to be complete by the end of 2021.
The work is part of a global effort to shift interest rate benchmarks away from the scandal-ridden mechanisms such as Libor, Euribor and Tibor, has been launched at a time when attention on the reform process is ratcheting up.
In this week’s In the FICC of It podcast, Colin Lambert apologises to the English nation and Galen Stops talks about the needs of a millennial.
They also discuss the week’s news from the FX world including SGX launching futurised OTC products and LCH going live with deliverable FX options clearing, as well as deliberate upon how hedge fund performance is measured; US regulators’ attitudes to cryptocurrencies; and the latest blow to the desktop terminal industry. They close out with a quote from their favourite profession – the legal industry – which rather aptly reinforces something Colin Lambert has been saying for some years – and let’s face it, if he says enough at some stage a lawyer somewhere will have to agree, it’s the law of averages!
In case you missed some of the original coverage this week, you can catch up here:
SGX Launches “Futurised” OTC FX Product
LCH Goes Live with Deliverable FX Options Clearing
US Regulators Shift Attitudes Regarding Cryptocurrencies
Hedge Funds Suffer in June: BarclayHedge
And Finally…(subscription required)
The International Swaps and Derivatives Association has launched a market-wide consultation on technical issues related to new benchmark fallbacks for derivatives contracts that reference certain interbank offered rates.
The consultation sets out options for adjustments that would apply to the fallback rate in the event an IBOR is permanently discontinued.
ISDA has been leading an industry effort to implement robust fallbacks for derivatives contracts referenced to certain Ibors since 2016, at the request of the Financial Stability Board’s Official Sector Steering Group.