Barclays Plc, which paid about $450 million as the first bank tosettle in a worldwide probe of interest-rate rigging, saidbenchmarks should be tied to actual market transactions and notestimates.

Overseers of financial benchmarks should have limited or nodiscretion to set levels, Barclays said in a letter releasedyesterday by the International Organization of SecuritiesCommissions. The letter, dated Feb. 11, was a response to IOSCO'sJanuary request for comments on possible measures to overhaul thesetting and governance of such benchmarks.

“Reporting transactions or tradeable prices available to themarket would serve to reduce conflicts, especially as trades arealready subject to a clear and robust regulatory framework,”Francois Jourdain, a Barclays managing director, wrote on behalf ofthe U.K.'s second-biggest bank by value.

Barclays, UBS AG and Royal Bank of Scotland Group Plc have paida combined $2.5 billion since June in fines stemming from therate-rigging investigation involving about 20 banks. An IOSCO taskforce, run by the U.S. Commodity Futures Trading Commission andU.K. Financial Services Authority, plans to complete the first stepin overhauling benchmarks by summer, according to the CFTC.

The review will initially seek to set standards againstconflicts of interest in benchmarks, CFTC Chairman Gary Genslersaid on Feb. 27.

Gensler, whose agency spearheaded the investigation into Liborrigging beginning in 2008, has urged that rates be based onunderlying transactions instead of estimates. He questions thelong-term viability of Libor.

'Not Anchored'

“If it's not anchored, I don't know what it means, truly,”Gensler said Feb. 27 at a roundtable meeting in Washington.

The Barclays letter was one of more than 50 submissions fromlobbying associations and companies including LCH.Clearnet GroupLtd. and Nasdaq OMX Group Inc.

BlackRock Inc., the world's largest asset manager, and CME GroupInc., operator of the world's largest futures exchange, said ratesshouldn't have to be based only on transaction data.

Libor should be changed to have a combination of submission andtransaction data, BlackRock managing directors Joanna Cound andJames DesMarais said in a Feb. 18 letter.

“We strongly recommend a move to such a hybrid rate benchmarkover a move to rate benchmarks based purely on transactions,” theywrote.

CME Group said that the necessary data for a benchmark variesdepending on the specific market. The global review “should containclear language that there be no prescription of methodology,neither for benchmark creation nor for determination of market orprice information on which the benchmark is based,” Julie Winkler,CME Group managing director, said in a Feb. 11 letter.

Barclays also said that some illiquid markets may not provideenough data for a transaction-based benchmark.

“Such benchmarks can be useful in providing indicativetransparency on normally less transparent markets,” according tothe bank's letter.

Bloomberg News

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