Currency to oil rates targeted for tougher rules after Libor

Data Accuracy

Organizations in charge of administrating rates should be responsible for verifying the accuracy of the data they receive from banks and other market participants, and ensuring it is based on data from actual trades as much as possible, Iosco said.

U.K. authorities said this month that responsibility for administrating Libor will be transferred from the British Bankers’ Association, an industry group, to NYSE Euronext, in a bid to restore credibility of the rate, which is tied to $300 trillion in securities.

Iosco, which brings together markets and securities regulators from over 100 countries, said that its guidelines should be applied to a broad range of benchmarks, ranging from interbank rates to benchmarks underlying energy, equity and commodities markets. Exceptions include benchmarks established by public authorities, such as consumer price indexes, and reference prices set by clearinghouses.

Oil Prices

The organization also said that the standards should be seen as supplementary to recommendations it published last year that target oil price reporting agencies.

Royal Dutch Shell Plc, BP Plc, Statoil ASA and Platts, the oil-price data collector owned by McGraw Hill Financial Inc., are being investigated by the European Commission on price fixing concerns.

“The PRA principles were developed with due regard to the specifics of the oil market,” whereas today’s guidelines are more general, Iosco said. “While both sets of principles reflect similar high-level concerns, they differ in specifics.”

Iosco said that it would weigh the need to more closely align the two sets of guidelines.

“Platts supports initiatives by legislators and regulators to assure confidence in price benchmarks in the oil markets and other physical commodities markets that we cover” Larry Neal, Platts president, said in an e-mailed statement.

Transaction Data

Benchmarks should be “anchored in observable transactions entered into at arm’s length between buyers and sellers,” according to today’s Iosco guidelines. Still, this doesn’t mean that “every individual benchmark determination must be constructed solely from transaction data.”

Regulators have clashed over the speed at which tarnished benchmarks should be replaced, and over how hard and how fast authorities should push the abandoning of rates based on estimates rather than real transactions.

While Gensler has said benchmarks such as Libor that are based on banks’ estimates should be replaced with alternatives using real transaction data as soon as possible, other authorities, including Wheatley, have argued in favor of a more incremental approach.

The Iosco standards are one of several steps being taken by international regulators to restore confidence in benchmarks.

Financial Stability Board Chairman Mark Carney, the governor of the Bank of England, said last month that global regulators will set up a task force with banks in a bid to repair or replace tarnished benchmarks in the wake of the rate- rigging scandals.

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