UK watchdog proposes new rules to avoid excessive fees for benchmarks

Wed Jun 3, 2015 9:51am EDT
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By Huw Jones

LONDON, June 3 (Reuters) - Britain's financial watchdog has proposed rules to ensure that widely-followed market benchmarks like Libor interest rates, gold or oil are available to all at a fair price.

After banks were fined for trying to rig the Libor interest rate benchmark and currency markets, Britain has required eight major market benchmarks to be run by an independent administrator to reduce the chances of manipulation.

A unit of ICE exchange now runs Libor or London Interbank Offered Rate, and the daily LBMA (London Bullion Market Association) gold price, which replaced the century-old 'fix' in March.

The London Metal Exchange has become the administrator for platinum and palladium twice-daily auctions, while the CME Group and Thomson Reuters started to run the LBMA silver benchmark in August 2014.

The administrators of the silver price charge $20 a month for real time access.

The Financial Conduct Authority (FCA) said concerns have been raised about the unconstrained ability of these administrators to set prices for benchmarks.

"We have subsequently reflected on this issue further and determined that there is likely to be merit in additional rules," the FCA said in a consultation paper published on Wednesday.

Libor and the other seven indices run by administrators are used by many thousands of market participants across the world to help price financial contract worth trillions of dollars.   Continued...