| LONDON, Sept 19
LONDON, Sept 19 The world's top swaps trade
body, whose ISDAfix benchmark is being investigated by
regulators on both sides of the Atlantic for possible
manipulation, is to reform the market yardstick next year.
Benchmarks help price financial products worth trillions of
dollars around the world but are under the regulatory spotlight
after three banks were fined $2.6 billion for rigging the London
Interbank Offered Rate or Libor.
ISDAfix is overseen by the International Swaps and
Derivatives Association (ISDA) and based on a poll of banks.
ISDA aims next year to base the benchmark on actual swap
"The ISDAfix problem is easier to fix than Libor in the
sense there is an underlying market of swap transactions," ISDA
Chairman Stephen O'Connor told reporters.
Libor is the rate at which banks could borrow from each
other but there are few transactions compared with before the
2007-09 financial crisis.
O'Connor said there are hundreds if not thousands of swap
transactions a day on which to base a reformed ISDAfix.
"With that volume and with the move to centralised trading
facilities both in the U.S. and Europe, I think the approach
will be to pull information from those venues which will be
anchored in a market that has observable transactions," O'Connor
The switch will start with the euro and dollar based swaps
The ISDAfix for sterling, yen and Swiss franc will follow as
swaps volumes in those currencies build up on the new trading
facilities, O'Connor said.
Meanwhile the U.S. Commodity Futures Trading Commission
(CFTC) has asked ISDA for information on how ISDAfix is
"We are not aware of any specific allegations," ISDA chief
executive Robert Pickel told reporters.
"We have seen what's been reported in the press. We really
don't know where that's going, when that's going," Pickel said.
The European Commission's anti-trust unit has charged ISDA,
several banks and others with blocking exchanges' access to the
credit derivatives market between 2006 and 2009.
Pickel said ISDA was putting together its response by next
month to the EU's concerns which are "very narrow" in relation
to the trade body.
"I don't exactly know what the timeframe for the Commission
will be beyond that but it's probably later this year or early
next year," Pickel said.
ISDA was confident that the steps it took during the period
under investigation by the EU were "proper", Pickel added.