NYSE Euronext to take over LIBOR

The owner of the New York Stock Exchange is set to take over administration of the London interbank offered rate, or LIBOR, which was at the centre of a global market manipulation scandal.

NYSE Euronext has won the contract for setting the LIBOR rate, an independent committee of the British government announced Tuesday.

LIBOR is the rate banks use to borrow from each other. Set daily, the rate indirectly affects the cost of more than a half a trillion dollars worth of mortgages, bonds and consumer loans — although it's impact is very limited in Canada.

The British Bankers' Association had supervised the rate-setting for LIBOR since the 1980s, working with information from a group of banks.  The scandal emerged last summer when authorities realized some banks — including Royal Bank of Scotland, Barclays and Swiss-based UBS — were submitting false data to gain market advantage for their traders.

Canadian banks such as Royal Bank and Canadian affiliates of banks such as RBS, HSBC, Deutsche Bank, JP Morgan Bank and Citibank were asked to submit financial information to the government committee as it investigated the Libor scandal.

The committee had previously recommended stripping the BBA of authority over LIBOR, after learning it had failed  to address concerns about the rate-setting process first raised in 2008 by then New York Fed president Timothy F. Geithner.

NYSE Euronext will have the task of restoring trust in LIBOR, which underpins trillions of loans and derivatives around the world. 

The changeover is scheduled to be completed by early 2014, according to Sarah Hogg, chair of the government panel.

NYSE Euronext already operates Liffe, Europe’s second-largest derivatives exchange, which offers derivatives based on LIBOR. It is believed to have been chosen ahead of British bidders, among them Thomson Reuters, which worked with the BBA to gather rate information.

"This change will play a vital role in restoring the international credibility of LIBOR," Hogg said in a statement.  

British and U.S. regulators have fined three banks – Barclays, UBS and RBS — a total of $2.6 billion and two men have been charged for manipulating LIBOR and similar benchmark rates. More banks and individuals remain under investigation.

The U.K.’s Financial Conduct Authority began regulating LIBOR in April as part of the overhaul.