Jan 26 Swaps broker ICAP will give up
its role in establishing a widely used benchmark for
derivatives, two sources familiar with the situation said on
Sunday, after U.S. and UK regulators started probing the
The International Swaps and Derivatives Association (ISDA)
will announce the change as early as Monday, one of the sources
said, another blow for the UK broker after its involvement in
the Libor rate-rigging scandal.
The organization's ISDAfix benchmark is an important
reference point underlying contracts in the $630 trillion
derivatives market, and ICAP collects data for the U.S.
dollar-denominated part of it.
But in April last year, ISDA said it had been subpoenaed by
the U.S, derivatives regulator - the Commodity Futures Trading
Commission (CFTC) - over the benchmark, and ICAP has also said
it is involved in that probe. Britain's Financial Conduct
Authority is also investigating the benchmark.
The scandal surrounding Libor, which measures rates at which
banks lend to each other, has shown how easy it is to manipulate
such survey-based benchmarks, and how widespread the practice
is. Banks such as UBS, Barclays and RBS
have paid billions in fines over Libor.
Just last week, Reuters reported that global regulators now
also have started looking at reforming benchmarks used in the
largely unregulated currency market.
The ISDAfix rates are based on a survey of a panel of banks
for a range of different currencies. Until now, ICAP collected
banks' contributions for the U.S. dollar rate, and sent them on
to Thomson Reuters Corp, which calculates the fixing.
ICAP has been doing this for more than 15 years, but the
process will now change, and Thomson Reuters would start
collecting data for the U.S. dollar rates just as it does for
the other currencies, the first source said.
"We appreciate ISDA's interest in having a consistent
polling process across each of the relevant currencies and
fixings," ICAP said in a statement.
The firm had been providing "snapshots" using
transaction-based information from its BrokerTec platform in
addition to information from recent deals, the second source
said, but the process would now return purely to a poll of
There was a risk this could lead to inconsistencies, due to
the way the dollar-denominated swaps market worked, the person
ICAP was fined $87 million by British and U.S. authorities
in September over the role of its brokers in Libor-rigging.
Criminal charges were also filed against three of its former