The Financial Conduct Authority (FCA) will regulate seven additional UK-based financial benchmarks in the fixed income, commodity and currency markets from 1 April 2015.
This extends the FCA’s initial regulation of LIBOR (the London Interbank Offered Rate), as introduced by HM Treasury in 2013, and implements the recommendations of the Fair and Effective Markets Review.
The FCA said in a statement accompanying the announcement: "The action applies the high standards we expect of firms in relation to LIBOR to benchmarks in these vitally important markets, ensuring that market participants can be confident in the fairness and integrity of the benchmarks they use."
The FCA’s consultation seeks views on extending its approach to regulating LIBOR to the firms that administer, and where appropriate, contribute data or information to the following benchmarks:
• SONIA (Sterling Overnight Index Average) and RONIA (Repurchase Overnight Index Average), which both serve as reference rates for overnight index swaps.
• WM/Reuters London 4pm Closing Spot Rate, which is the dominant global foreign exchange benchmark.
• ISDAFIX, which is the principal global benchmark for swap rates and spreads for interest rate swap transactions.
• London Gold Fixing and the LMBA Silver Price, which determine the price of gold and silver in the London market.
• ICE Brent Index, traded on the ICE Futures Europe (IFEU) exchange, which acts as the crude oil futures market’s principal financial benchmark.
Benchmark administrators and firms that contribute to benchmarks will be FCA-authorised, and the FCA has proposed a senior individual within each relevant firm should oversee compliance with the FCA’s requirements.
Key requirements include identifying potentially manipulative behaviour, controlling conflicts of interest and implementing robust governance and oversight arrangements.
The consultation closes on 30 January 2015, while the FCA expects to publish final rules during the first quarter of 2015.