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U.K. Financial Conduct Authority to Require ICE Benchmark Administration to Publish “Synthetic” U.S. Dollar LIBOR
Rhea-AI Impact
(Low)
Rhea-AI Sentiment
(Neutral)
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Rhea-AI Summary
Intercontinental Exchange (NYSE:ICE) announced the U.K. Financial Conduct Authority's (FCA) decision to require ICE Benchmark Administration Limited (IBA) to publish synthetic U.S. dollar LIBOR settings for 1-, 3-, and 6-month terms. This requirement follows the end of the traditional U.S. dollar LIBOR bank panel on June 30, 2023, and is set to continue until September 30, 2024. Starting July 1, 2023, the FCA will prohibit new uses of synthetic U.S. dollar LIBOR by U.K. supervised entities, except for legacy contracts. IBA will also cease traditional LIBOR settings after June 30, 2023, further impacting the LIBOR landscape.
Positive
FCA's decision allows IBA to continue LIBOR publication, providing continuity for legacy contracts.
Implementation of synthetic LIBOR ensures some level of market stability in the transition period.
Negative
Prohibition of new synthetic U.S. dollar LIBOR uses may limit future liquidity and derivatives trading.
End of traditional LIBOR settings could create uncertainty and disrupt market operations.
LONDON--(BUSINESS WIRE)--
Intercontinental Exchange, Inc. (NYSE:ICE), a leading global provider of data, technology, and market infrastructure, today notes the decision from the U.K. Financial Conduct Authority (FCA) to require ICE Benchmark Administration Limited (IBA) to publish 1-, 3- and 6-month “synthetic” U.S. dollar LIBOR.
The FCAannounced today that, further to its November 2022 Consultation, it has decided to use its powers under the UK Benchmarks Regulation (UK BMR) to require IBA to continue the publication of the 1-, 3- and 6-month U.S. dollar LIBOR settings using an unrepresentative “synthetic” methodology. The FCA will require IBA to publish these “synthetic” U.S. dollar LIBOR settings for a temporary period after June 30, 2023, following the end of the U.S. dollar LIBOR bank panel, and intends for them to cease on September 30, 2024.
From July 1, 2023, all new use of “synthetic” U.S. dollar LIBOR by UK supervised entities will be prohibited under the UK BMR, which the FCA notes will override the exemptions to the prohibition on the new use of U.S. dollar LIBOR imposed by the FCA on January 1, 2022. The FCA has decided to permit the use of the 1-, 3- and 6-month “synthetic” U.S. dollar LIBOR settings by supervised entities in all legacy contracts, except for cleared derivatives.
IBA currently publishes the Overnight and the 1-, 3-, 6- and 12-month U.S. dollar LIBOR settings using panel bank contributions under the “panel bank” LIBOR methodology. IBA expects to continue to determine and publish these settings on this basis until June 30, 2023, at which point the Overnight and 12-month U.S. dollar LIBOR settings will cease.
IBA is also currently required by the FCA to publish the 3-month “synthetic” sterling LIBOR setting, which the FCA expects to cease on March 28, 2024. IBA had been required by the FCA to publish 1- and 6- month “synthetic” sterling LIBOR settings until March 31, 2023, when publication of those settings ceased.
All other LIBOR settings have ceased to be published.
ICE Benchmark Administrationis authorized and regulated by the Financial Conduct Authority for the regulated activity of administering a benchmark and is authorized as a benchmark administrator under the UK Benchmarks Regulation. ICE, LIBOR, and ICE Benchmark Administration are registered trademarks of IBA and/or its affiliates.
About Intercontinental Exchange
Intercontinental Exchange, Inc.(NYSE: ICE) is a Fortune 500 company that designs, builds and operates digital networks to connect people to opportunity. We provide financial technology and data services across major asset classes that offer our customers access to mission-critical workflow tools that increase transparency and operational efficiencies. We operate exchanges, including the New York Stock Exchange, and clearing houses that help people invest, raise capital and manage risk across multiple asset classes. Our comprehensive fixed income data services and execution capabilities provide information, analytics and platforms that help our customers capitalize on opportunities and operate more efficiently. At ICE Mortgage Technology, we are transforming and digitizing the U.S. residential mortgage process, from consumer engagement through loan registration. Together, we transform, streamline and automate industries to connect our customers to opportunity.
Trademarks of ICE and/or its affiliates include Intercontinental Exchange, ICE, ICE block design, NYSE and New York Stock Exchange. Information regarding additional trademarks and intellectual property rights of Intercontinental Exchange, Inc. and/or its affiliates is located here. Key Information Documents for certain products covered by the EU Packaged Retail and Insurance-based Investment Products Regulation can be accessed on the relevant exchange website under the heading “Key Information Documents (KIDS).”
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 -- Statements in this press release regarding ICE's business that are not historical facts are "forward-looking statements" that involve risks and uncertainties. For a discussion of additional risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see ICE's Securities and Exchange Commission (SEC) filings, including, but not limited to, the risk factors in ICE's Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on February 2, 2023.
What is the FCA's decision regarding ICE Benchmark Administration and LIBOR?
The FCA has decided that ICE Benchmark Administration must publish synthetic U.S. dollar LIBOR settings for 1-, 3-, and 6-month terms until September 30, 2024.
When will traditional U.S. dollar LIBOR settings cease publication?
Traditional U.S. dollar LIBOR settings will cease publication after June 30, 2023.
How does the FCA's decision impact new uses of synthetic U.S. dollar LIBOR?
Starting July 1, 2023, new uses of synthetic U.S. dollar LIBOR by U.K. supervised entities will be prohibited.
What is the purpose of publishing synthetic LIBOR settings?
Synthetic LIBOR settings are intended to provide continuity for legacy contracts after the cessation of traditional LIBOR settings.
