As banks prepare to move away from the scandal-tainted London interbank offered rate (LIBOR), few in the city of London will be watching more closely than William Porter. Now head of European credit strategy at Credit Suisse Group AG, Porter was working on J.P. Morgan's short-term interest rate and strategy team in the mid-1990s as it searched for a way to hedge short-term floating-rate risks against European currencies.

Their solution was the sterling overnight index average, or SONIA. Earlier this year, the benchmark, which is considered impossible to manipulate because it's based on actual transactions, was designated LIBOR's heir apparent by the Bank of England. Here, Porter describes how SONIA came to life and why it still isn't the perfect solution to measuring overnight lending rates.

EMMA HASLETT: Set the scene: It's 1996, you're working at J.P. Morgan. How does SONIA come about?