Swaps body to reform benchmark to make rigging less likely

Mon Jan 27, 2014 12:23pm EST
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* Latest move to make benchmarks more difficult to manipulate

* ISDA will complete move to transactions by 2015

* ICAP will no longer collect data for dollar ISDAfix

By Huw Jones and Clare Hutchison

LONDON, Jan 27 (Reuters) - A benchmark used in the $630 trillion market for swaps will be based on actual market transactions rather than quotes from banks this year in an effort to make it less vulnerable to rigging and to comply with new global transparency rules.

The blueprint from the International Swaps and Derivatives Association (ISDA) is the latest response to intense regulatory pressure being exerted on the financial industry to restore trust after rigging scandals.

The global derivatives trade body is changing how its ISDAfix index is compiled following a U.S. and UK investigation into the process.

The ISDAfix is widely used by corporations and governments to fine tune their borrowing costs and can affect a range of products from pension annuities to real estate investments.

A number of benchmarks have come under scrutiny after several banks and interdealer broker ICAP were fined for rigging the London Interbank Offered Rate, or Libor. Probes into foreign exchange benchmarks are continuing.   Continued...