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Wall Street beats the City in bidding war to run Libor

  • @ArmitageJim

The New York Stock Exchange yesterday beat off the London Stock Exchange in the bidding to run the disgraced Libor benchmark, triggering howls of protest in the UK at yet another "capitulation" to the might of Wall Street.

As US financial news networks ran wall-to-wall headlines declaring "London loses Libor", MPs responded with shock that such a key indicator for the global financial markets was now to be run by New York.

The decision was made by a committee led by City grandee Baroness Hogg, whose daughter Charlotte has just taken up office as Mark Carney's chief operating officer at the Bank of England. She said the award to NYSE Euronext would "play a vital role in restoring the international credibility of Libor".

John Mann, a Labour MP on the Treasury Select Committee, said: "This is a wholesale surrender. Because the Government did not get on top of this scandal and the regulator messed around, we let America take the lead on investigating Libor fixing and they are now getting the prize."

The Serious Fraud Office originally declined to investigate the Libor scandal, while the Financial Services Authority was seen as having been sluggish to act, giving the impression that Wall Street's watchdogs were making all the running.

In one concession to the UK, the rate will be physically based in NYSE's London headquarters and regulated by the Bank of England's Financial Conduct Authority. There are no current plans to change the name. At present, Libor, whose very name – the London Interbank Offered Rate – denotes its British heritage, is issued by the British Bankers Association after being collated by Thomson Reuters. It will be replaced by a new company, NYSE Euronext Rate Administration, early next year.

As well as the London Stock Exchange, data companies Thomson Reuters and Markit are also thought to have bid. In addition to collating and distributing the Libor data, NYSE will also issue new guidelines to banks about how they should calculate the rates they submit.

In the scandal, it emerged that banks were colluding with each other to fix their Libor submissions up or down in order to hit certain targets.

The contract award follows growing concern in the UK that the US regulators have been using the financial scandal as a way of securing more power for Wall Street.

NYSE paid a nominal £1 for the contract and will now license its use to customers, as it does with other benchmarks it operates, such as the French shares index, the CAC-40.

A comparison of the charges from the US and the UK laid against Tom Hayes, currently on trial in London over the Libor scandal, show how the US action makes no mention of the Wall Street banks he worked for. The UK charges cite his work at Citigroup and his alleged conspiring with JPMorgan.