Integral to launch new FX benchmark

Thu Dec 12, 2013 4:36pm EST
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By Gertrude Chavez-Dreyfuss

NEW YORK Dec 12 (Reuters) - Integral Development Corp, a technology provider for the foreign exchange market, plans a January launch of a second-by-second FX benchmark for major currency pairs, at a time when allegations of rate manipulation have tarnished the reputation of widely used currency benchmarks.

Integral, based in Palo Alto, California, and Stanford University have collaborated to develop once-a-second benchmark rates called Integral FX Benchmark (FXB). The rates are based on data from Integral's liquidity aggregation and over-the-counter FX trading network.

The company runs the cloud-based, "FX Grid" network, a multi-sided trading network used by hundreds of FX over-the-counter global exchanges.

"By publishing this benchmark on a second-by-second basis, you might consider it a continuous fixing," Harpal Sandhu, Integral's president said in an interview.

"The difference between having a fixing which everybody knows is going to take place at a certain time, versus something that is happening continuously is a sea change in transparency for the true users of foreign exchange which is the buy-side community."

The most commonly used benchmarks are calculated by WM/Reuters, a joint venture of The WM Co and Thomson Reuters Corp. However, financial regulators in several countries, including the United States, Switzerland and UK have been investigating rate-rigging allegations in forex markets.

Foreign exchange currently has no source of reference rates that allow investors and traders to benchmark their executions on a continuous basis. The existing fixing rates are calculated infrequently and are not universally available.

The popular WM/Reuters fixes include those at 4 p.m. or 8 p.m. London, times that trading operations are transferred from one global region to another. About $4 trillion in assets are tied to the fix, which is used to value portfolios.   Continued...