| NEW YORK
NEW YORK May 1 A top bond broking firm plans
to launch as soon as Friday an alternative U.S. rate benchmark
to the London interbank offered rate, whose reliability has
been questioned during the current global credit crisis.
ICAP plc (IAP.L) said on Thursday its survey of borrowing
rates between U.S. banks, called the New York Funding Rate
(NYFR), is intended to address the shortcomings of Libor cited
by traders and analysts.
NYFR will 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 at, which Libor
"By changing the parameters, we will get a different
perspective," said Lou Crandall, chief economist at Wrightson
ICAP. "Whether it (NYFR) is accurate, the players will know."
ICAP already publishes Eurodollar rates, which are
reflected in dollar Libor, on news and data terminals from
Bloomberg, Thomson Reuters (TRI.TO) TRIL.L and other
information vendors. Those rates are cited by the Federal
Reserve in its daily survey of U.S. interest rates.
Crandall said, however, the NYFR is not intended to
displace Libor as a rate benchmark. Trillions of dollars of
loans and financial instruments around the worldwide are pegged
Doubts about Libor picked up steam earlier this month after
The Wall Street Journal reported 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 BBA has taken steps to assure the market about Libor's
accuracy, including the expulsion of any bank from its rate
survey if it is found acting improperly.
"The BBA will ensure that dollar BBA Libor continues to be
a transparent, objective, accurate rate," said John Ewan,
director of BBA LIBOR with the London-based banking group.
"Commercial providers trying to emulate the BBA LIBOR
fixing process for any region would need similar support and
commitment from the markets and would have to meet BBA LIBOR's
standards for transparency if it seeks to win the market's
confidence," Ewan said in a statement.
NYFR differs with the Libor system by offering anonymity
to the banks surveyed.
"We are asking for a generic market rate ... The anonymity
makes it useful from an information perspective," Crandall
That transparency, under which all the rate postings by
banks are made public, has become a liability for Libor,
according to Crandall. "In times like these, this could be a
drawback," he said.
Other NYFR features which differ from Libor:
-- The survey will be conducted at 9:30 a.m. New York time
and the NYFR rates will be generated at about 10 a.m. This
compares with 11 a.m. London time, or 6 a.m. in New York, when
the BBA sets Libor in all currencies.
-- ICAP will collect rates on 1- and 3-month overseas
dollar deposits. BBA's dollar Libor rates go out to 12 months.
-- NYFR will encompass unsecured bank funding sources such
as certificates of deposits, money market mutual funds and
government-sponsored enterprises. Libor is explicitly defined
as an interbank deposit rate.
(Additional reporting by Jamie McGeever in London; editing by