Steps to implement best practice in setting benchmark rates continue to be taken, with the International Swaps and Derivatives Association (ISDA) and Thomson Reuters announcing changes to comply with global guidelines.
ISDA expects to complete its first phase of changes to setting of interest-rate benchmark ISDAFIX, including the standardisation of the polling process across currencies, in the first quarter of 2014. The move is in response to principles laid out by the International Organisation of Securities Commissions.
ISDA has stripped London brokerage giant ICAP of its role in helping set ISDAFIX, handing over the responsibility to Thomson Reuters, which has served as the collection agent for all non-US dollar ISDAFIX rates. Thomson Reuters took on the USD process on 27 January.
The association is also working towards establishing a code of conduct and an oversight committee to strengthen checks and analysis of bank submissions.
“Our ongoing work to strengthen the process, governance and controls for the existing ISDAFIX framework is a key initiative for ISDA,” Stephen O’Connor, ISDA chairman, said. “Changes to the current polling methodology are an important step in this work and will improve the transparency of this important rate-setting process.”
The second phase includes moving from the current bank submission-based method to an automated model that uses live prices from multilateral trading facilities. ISDA plans to make the move in Q2 2014 for euro swaps, and late 2014 or early 2015 for US dollar and sterling swaps.
Meanwhile, Thomson Reuters has also launched a solution to help financial institutions report benchmark submissions and other price sensitive data.
The new capability is being offered through its Thomson Reuters Enterprise Platform, which embeds a unique identifier, alongside a published price or rate.
The data can then be integrated into an organisation’s auditing and reporting tools, allowing them to tag, analyse, and set alerts, thus providing transparency for compliance monitoring.
“The new capability gives our customers the detailed level of transparency into contributed data that they need to ensure they can effectively monitor activity and be in a stronger position to satisfy evolving global regulations,” Brennan Carley, global head of platform, Thomson Reuters, said.
Banks and brokers have been facing increasing scrutiny around benchmark contributions following recent benchmark-fixing investigations, with regulations looking into firms’ compliance measures closely to ensure more transparency and control.