ICE Benchmark Administration

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ICE Benchmark Administration
Key People Finbarr Hutcheson, President

ICE Benchmark Administration (IBA) is the entity that took over administration of the London Interbank Offered Rate (LIBOR) in 2014 after a scandal in which bank traders were found to have rigged the LIBOR to benefit their own trading positions. The U.K. government asked the body that had been running the benchmark during the scandal years to step aside and introduced new regulations requiring an oversight committee. IBA is a unit of the Intercontinental Exchange (ICE).

The IBA was originally a unit of NYSE Euronext, which won the contract to run and administrate the LIBOR benchmark rate calculation process after the rate manipulation scandal. The Intercontinental Exchange (ICE) took the unit over from NYSE Euronext when ICE acquired the company, renaming it the ICE Benchmark Administration.

In July 2013, the Hogg Tendering Advisory Committee, an independent committee set up by the UK government, chose IBA as new the new administrator for the LIBOR. The transfer of the administration of LIBOR from BBA LIBOR to IBA was completed on February 1, 2014, following authorization by the Financial Conduct Authority (FCA).[1]

In November 2014, ICE Benchmark Administration won the race to administer the London gold price benchmark (the "gold fix"). The IBA launched the new benchmark, called the LBMA Gold Price, on March 20, 2015.[2] [3] [4] IBA will provide the price platform and methodology as well as the overall administration and governance for the LBMA Gold Price.[5] The LBMA Gold Price replaces the Gold Fixing Price that has been in existence since September 1919.

ICE will manage the gold price on behalf of the London Bullion Market Association, which holds the intellectual property rights to the fixes. The LBMA Gold Price will be set twice daily—at 10:30 Greenwich Mean Time and 15:00 GMT, which currently is 6:30 a.m. Eastern time and 11 a.m. EDT—in dollars, euros and sterling.

Six participants will be involved in setting the first LBMA gold price: the four current members of the century-old gold fix - Barclays, HSBC, Bank of Nova Scotia and Societe Generale - along with UBS and one as yet to be named participant. [6]

IBA will also take over as administrator of the LBMA Silver Price from CME Group and Thomson Reuters in late 2017.

IBA also administers ISDAFIX (since Aug. 1, 2014).

History

The gold, silver, platinum and palladium fixes came under scrutiny in 2014 after several entities were found to have rigged interest rate and foreign exchange benchmarks. Fixing participants said that they would no longer operate the processes.[7]

After taking over the LIBOR from the British banking group, the IBA implemented a number of changes to the benchmark, including installing a surveillance team to evaluate the data coming out of the banks, to ensure that lenders’ submissions are more accurate.

On October 20, 2014 IBA proposed a package of measures intended to make the rate setting more consistent. The proposed measures would define more closely which trades can be used to calculate bank-borrowing costs, and widen the number of transactions eligible to the calculations to ensure the setting of the rate is based on actual trades.[8] IBA published a position paper on the evolution of ICE Libor and asked for feedback on its proposals from Libor stakeholders by December 19, 2014.[9]

In November 2014 Bloomberg reported that ICE was planning to exempt the smallest banks from paying the new fees it began charging users of the LIBOR benchmark after banking groups suggested that some lenders might stop using the benchmark for their loans because the licensing fee was too high.[10]

On June 22, 2015 ICE Benchmark Administration announced that Morgan Stanley and Standard Chartered had joined as new direct participants in the gold auction. The Bank of China was also approved to participate in the auction and joined at the same time, bringing the total number of direct participants in the auction to ten.[11]

Products and Services

Membership

Key People

References

  1. ICE Benchmark Services. ICE Benchmark Administration.
  2. March Date Set For Gold Fix Switch. The Wall Street Journal.
  3. ICE Benchmark Administration to Administer the LBMA Gold Price from March 2015; LBMA Gold Price to replace the London Gold Fix. Intercontinental Exchange.
  4. LBMA Gold Price Successfully Launched. Commodities Now.
  5. ICE wins race to run London gold "fix" with electronic platform. Reuters.
  6. Six Banks Will Take Part in New Electronic Gold Fix. The Wall Street Journal.
  7. Six participants involved in revamped gold price benchmark. Reuters.
  8. Libor’s New Administrator Outlines Measures to Ensure Accuracy. The Wall Street Journal.
  9. ICE Benchmark Administration (IBA) publishes position paper on the evolution and enhancement of ICE LIBOR (“LIBOR”). ICE.
  10. ICE Said to Plan Waiving Libor Usage Fee for Small Banks. Bloomberg.
  11. ICE Benchmark Administration Announces Two New Direct Participants to the Gold Auction. ICE.