UPDATE 2-UK broker ICAP to lose role in ISDAfix swaps benchmark

Mon Jan 27, 2014 9:16am EST
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By Douwe Miedema

Jan 27 (Reuters) - Swaps broker ICAP will give up its role in establishing a widely used benchmark for derivatives, two sources familiar with the situation told Reuters, after U.S. and UK regulators started investigating the process.

The International Swaps and Derivatives Association (ISDA) is expected to announce the change on Monday, in another blow for UK interdealer broker ICAP after its involvement in the Libor rate-rigging scandal.

The organization's ISDAfix benchmark is an important reference point underlying contracts in the $630 trillion derivatives market, and ICAP collects data for the U.S. dollar-denominated part of it.

But in April last year, ISDA said it had been subpoenaed by the U.S. derivatives regulator - the Commodity Futures Trading Commission (CFTC) - over the benchmark, and ICAP has said it is involved in that inquiry. Britain's Financial Conduct Authority is also investigating the benchmark.

ICAP, like rivals Tullett Prebon and BGC Partners , makes money by matching buyers and sellers of bonds, swaps and currencies.

The scandal surrounding Libor, which measures rates at which banks lend to each other, exposed widespread attempts to manipulate survey-based benchmarks. Banks such as UBS, Barclays and RBS have paid billions in fines over Libor.

Last week, Reuters reported that global regulators have now also started looking at reforming benchmarks used in the largely unregulated currency market.   Continued...