LONDON, Sept 10 (Reuters) - The European Money Markets Institute, the administrator of some of the benchmarks caught up in a global rate-rigging scandal, said on Monday it had abandoned efforts to create a new transaction-based reference index for the ‘secured’ interbank market.
EMMI said that it had devoted “significant efforts” to developing a repo market-based index that could serve as an alternative reference rate to existing indices, such as Euribor and Eonia, but had not seen sufficient traction.
“While the feedback to EMMI’s past consultations was broadly supportive of the initiative, the current environment in the world of reference rate indices does not encourage EMMI to pursue this path any further,” it said in a statement.
“Moreover, contacts and discussions with different market participants and infrastructure providers did not reveal a sufficiently significant appetite among different market actors for this reference rate.”
The move comes at the start of a crucial week for the future of Europe’s money markets.
On Thursday a working group which includes the major banks and industry bodies that use money markets will announce what has been chosen as the new ‘risk-free’ rate to replace EONIA which regulators say must be scrapped by 2020.
Authorities around the world are overhauling money market rates to prevent manipulation happening again. But their widespread use in financial contracts from mortgages to derivatives is making the switch to alternatives a slow process.
Time is getting tight, especially in Europe, where the European Commission wants either completely new, or revamped rig-proof versions of both Euribor and ‘overnight’ EONIA rates in place by the start of 2020.
EMMI’s decision on Monday to halt efforts on a “New Repo Index project” did not come as a huge surprise to money market watchers as the proposal had not been on the working group’s shortlist of preferred options.
“In light of the latest developments, the EMMI Board of Directors decided that EMMI’s resources should be fully devoted to the ongoing Euribor reform and the transition from EONIA to the alternative reference rate that will soon be recommended by the euro risk free rate working group,” EMMI said. (Reporting by Marc Jones; Editing by Toby Chopra)