UPDATE 4-NYSE Euronext to take over scandal-hit Libor

Tue Jul 9, 2013 5:21pm EDT
 
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By Kirstin Ridley

LONDON, July 9 (Reuters) - The U.S. owner of the New York Stock Exchange announced Tuesday it will take over the running of Libor, the benchmark interest rate at the center of a global rigging scandal, in a move that Britain's financial regulator said would restore its integrity.

A central cog in the world financial system, Libor rates are used as a reference for some $550 trillion in contracts ranging from complex derivatives to everyday credit card bills. Trust in the London interbank offered rate (Libor) was shaken by revelations last year that traders had routinely manipulated it, prompting an overhaul of the system by which it is calculated.

NYSE Euronext will take over Libor from the British Bankers' Association (BBA) for a token 1 pound (US$1.50), according to a source who declined to be identified because the contract details are confidential. The BBA, a trade body, had since the 1980s administered the rate which reflects what banks say they are charged to borrow by other banks.

The focus for NYSE Euronext will be on restoring credibility and integrity to Libor and ensuring it remains one of the most important global rates, another source who declined to be named said, adding that since Libor underpinned the interest rate trading market it was vital to the exchange's own banking and brokerage customers.

London is not losing oversight of the benchmark that bears its name because the rate will continue to be regulated for the time being by Britain's Financial Conduct Authority (FCA).

Tuesday's decision to award the administration of Libor to NYSE Euronext from early 2014 was taken by an advisory committee appointed in October by the UK finance ministry to find a successor to the BBA.

Martin Wheatley, chief executive of the FCA, which started regulating Libor in April in response to public and political outrage at the scandal, called the appointment "an important step in enhancing the integrity of Libor."   Continued...