EU Parliament Passes New Benchmark Rules

This week the EU Parliament addressed the benchmark rate rigging scandals that have plagued financial markets for the past several years, including LIBOR, FX, gold and oil. The goal is to “clean up the benchmark-setting process, improve transparency and prevent conflicts of interest.”

While not yet implemented, new rules will affect benchmarks while breaking them into three categories based upon the size of the instruments and/or contracts influenced (over Euro 500 billion, over 50 billion or below 50 billion). Administrators of benchmark rates will need to create structures to prevent conflicts of interest, will be subject to controls, will have to be authorized or registered, and will need to publish their methodology and procedures for calculating each benchmark. As well, quality standards will have to be put in place for the data used to set benchmarks.

Asian Regulators Probing Reports of Oil Benchmark Manipulation

The Wall Street Journal reports that British Petroleum says that Asian regulators are probing potential oil benchmark rate manipulation, in addition to earlier reports of European and US regulators.

There are similarities to the claims in the FX markets where allegations involve major banks manipulating rates set by WM Reuters.  Here it is Platts that sets the benchmarks involved, and last year large oil companies and Platts were subject to unannounced inspections by EU regulators.  Reports are that Japanese and Korean regulators became involved within the last three months.

BP also reported that 15 class-action lawsuits have been filed in the US alleging manipulation and antitrust violations, including a case brought by oil traders.  A similar number of cases have been filed in the FX allegations.

Both the oil and FX stories continue to unfold with few hints of an early conclusion.