Exchanges face increased Libor due diligence under CFTC guidance

Guidelines passed on 5-0 vote

CFTC seal CFTC seal

May 10 (Bloomberg) -- The U.S. Commodity Futures Trading Commission voted to complete guidelines urging derivatives exchanges to have additional information about how private industry groups set prices, including the London interbank offered rate.

The guidelines, part of final rules approved on a 5-0 vote in Washington, will govern exchanges and how they review information from private price-reporting agencies including the British Bankers’ Association. Regulators around the world are probing whether banks colluded five years ago to manipulate rates including Libor, the basis for $360 trillion in securities worldwide.

“Large parts of the futures and swaps markets rely on the price reporting agencies,” CFTC Chairman Gary Gensler, told reporters after the meeting. “In the financial markets, it matters to corporations across this land who are borrowing against an index called Libor.”

The guidance would apply to exchanges that have contracts tied to prices set by private groups in the agriculture, energy and financial markets. The guidelines are an effort to ensure that “the underlying price index is not susceptible to distortion or manipulation,” Gensler said.

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