Beyond LIBOR: UK to extend manipulation offence to 7 more benchmarks

The LIBOR fixing scandal led to the establishment of a new regime and regulation governing how the benchmark LIBOR (London Inter-Bank Offered Rate) is calculated and administered and an offence of benchmark manipulation under the Financial Services Act 2012  that is punishable by up to 7 years’ imprisonment.

On 22 December 2014, the UK’s HM Treasury published the government’s response to their September 2014 consultation on extending this new regulatory regime to these seven other benchmarks:

  • WM/Reuters’ FX benchmark rates (WMR) – the main global forex benchmark
  • Sterling Overnight Index Average (SONIA) & Repurchase Overnight Index Average (RONIA) –  reference rates for unsecured Sterling overnight funding administered by WMBA
  • ISDAFix – principal benchmark for swap rates and spreads for interest rate swaps administered by ICE
  • ICE Brent Index – the crude oil futures benchmark
  • LBMA Gold Price (currently London Gold Fix whose administration is being taken over by ICE in early 2015)
  • LBMA Silver Price (administered by CME Group and Reuters)

HM Treasury intends to lay draft legislation before Parliament in early in 2015 so that changes can be debated and the new legislation can commence on 1 April 2015.

Alongside these measures, the UK’s Financial Conduct Authority (FCA) as the regulator with oversight of the benchmark regime, has launched a consultation on how it proposes to regulate the various firms administering these benchmarks.  This outlines the FCA’s proposed changes to the Market Conduct sourcebook (MAR) and the Supervision manual (SUP) of the FCA Handbook.  The consultation is open until 30 January 2015.

It is expected that this regulatory regime may in the future be modified or superseded by the EU’s Benchmark Regulation that is currently being debated by the European Council but it is not expected to be in place in the near future.

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