How key London benchmarks are calculated
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The UK government is giving regulators the power to police seven key financial market benchmarks, as part of an effort to prove that Britain is clamping down on London’s scandal-tainted financial markets.
These are the benchmarks that will come under formal oversight.
WM/Reuters FX benchmark rates
The WM/Reuters 4pm rate is the dominant benchmark in the $5tn foreign exchange market. It has been at the centre of rate-rigging allegations, with dozens of traders and staff suspended, placed on leave or fired amid concerns that bankers used chat rooms and other communication to manipulate the daily benchmarks.
Sonia and Ronia
The Sterling Overnight Index Average and the Repurchase Overnight Index Average are the main two rates alongside Libor for the sterling money markets. Both are administered by the UK-based wholesale Markets Brokers’ Association. Sonia and Ronia are used as reference rates for overnight index swaps and to remunerate sterling collateral.
Isdafix
This is the main global benchmark for rates on interest-rate swap transactions. It is calculated from quotes from a panel of banks which provide the prices at which they would buy and sell interest-rate swaps, a type of derivative contract. Since August it has been administrated by ICE Benchmark Administration Ltd. The fix has been under investigation by regulators but no charges have been brought.
Precious metals
The two key precious metals benchmarks based in the UK are the London Gold Fixing and the LBMA Silver Price. The gold rate is produced through an auction system involving participating members. The LBMA silver price was launched in August to replace the silver fix, and is an electronic auction based on transactions.
Oil
The main financial benchmark is the ICE Brent futures contract, traded on the ICE Futures Europe exchange. It is the largest crude oil futures contract based on volume, and is based on transactions and prices reported by a number of publishers and information providers.
This article has been amended
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