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UK Money News
UPDATE 1-ICAP scraps rate fixing as banks reduce participation
Fri, 3rd Aug 2012 16:41
NEW YORK, Aug 3 (Reuters) - Interdealer broker ICAP said on Friday that it will discontinue a
ICAP launched its survey, the New York Funding Rate, or NYFR, in 2008 to address the shortcomings of Libor, which has come under increasing scrutiny since Barclays in June paid fines to U.S. and British regulators to settle charges that it manipulated the rate.
Doubts about Libor grew in 2008 after The Wall Street Journal reported that banks contributing dollar quotes to daily fixings had been under-quoting the true cost of funds to avoid being labeled as desperate for cash.
The NYFR was built to reflect banks' estimate on the market rate to obtain unsecured funding from each other, rather than the rates at which banks say they are borrowing, which Libor measures.
ICAP has been unable to publish the rate in recent days, however, because it did not receive the minimum number of sumbmissions required to publish the rate, the broker said in an email on Friday.
Lou Crandall, chief economist at Wrightson ICAP, a research arm of ICAP, said in an interview that bank submissions to the fixing fell below the minimum 12 required on July 9 and 10, and on each day since July 24.
'Unfortunately, it does not appear to ICAP that this is going to change in the near term,' ICAP said in the email. 'As a result, effective today, ICAP has decided that it will no longer be polling its participants and/or posting a NYFR Fixing.'
ICAP earlier this year reduced the minimum requirement of submissions to publish the rate to 12 from 16 due to declining participation.
Outrage over revelations that Barclays and other banks reported false borrowing rates to the Libor panel has increased a race to develop an alternative benchmark to underlie the trillions of dollars of loans and derivatives that are backed by the rate.
Low liquidity and other restrictions, however, are seen as complicating the shift to a new benchmark.
U.S. regulator the Commodity Futures Trading Commission requires Barclays to back up its rate sumbissions with documents and base them on specified factors as part of its settlement.
(Reporting by Karen Brettell and Richard Leong; Editing by Steve Orlofsky and Andrew Hay) Keywords: ICAP NYFR/RATES
(karen.brettell@thomsonreuters.com)(646 223 6274)(Reuters Messaging: karen.brettell.reuters.com@reuters.net)
COPYRIGHT
Copyright Thomson Reuters 2012. All rights reserved.
The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
rate survey it publishes that had been meant to act as an alternative to the London interbank offered rate (Libor), due to a decline in bank participation.
ICAP launched its survey, the New York Funding Rate, or NYFR, in 2008 to address the shortcomings of Libor, which has come under increasing scrutiny since Barclays in June paid fines to U.S. and British regulators to settle charges that it manipulated the rate.
Doubts about Libor grew in 2008 after The Wall Street Journal reported that banks contributing dollar quotes to daily fixings had been under-quoting the true cost of funds to avoid being labeled as desperate for cash.
The NYFR was built to reflect banks' estimate on the market rate to obtain unsecured funding from each other, rather than the rates at which banks say they are borrowing, which Libor measures.
ICAP has been unable to publish the rate in recent days, however, because it did not receive the minimum number of sumbmissions required to publish the rate, the broker said in an email on Friday.
Lou Crandall, chief economist at Wrightson ICAP, a research arm of ICAP, said in an interview that bank submissions to the fixing fell below the minimum 12 required on July 9 and 10, and on each day since July 24.
'Unfortunately, it does not appear to ICAP that this is going to change in the near term,' ICAP said in the email. 'As a result, effective today, ICAP has decided that it will no longer be polling its participants and/or posting a NYFR Fixing.'
ICAP earlier this year reduced the minimum requirement of submissions to publish the rate to 12 from 16 due to declining participation.
Outrage over revelations that Barclays and other banks reported false borrowing rates to the Libor panel has increased a race to develop an alternative benchmark to underlie the trillions of dollars of loans and derivatives that are backed by the rate.
Low liquidity and other restrictions, however, are seen as complicating the shift to a new benchmark.
U.S. regulator the Commodity Futures Trading Commission requires Barclays to back up its rate sumbissions with documents and base them on specified factors as part of its settlement.
(Reporting by Karen Brettell and Richard Leong; Editing by Steve Orlofsky and Andrew Hay) Keywords: ICAP NYFR/RATES
(karen.brettell@thomsonreuters.com)(646 223 6274)(Reuters Messaging: karen.brettell.reuters.com@reuters.net)
COPYRIGHT
Copyright Thomson Reuters 2012. All rights reserved.
The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
