Goerge announces formalization of key Forex benchmark manipulation

The Chancellor of the Exchequer, George Osborne ( UK’s equivalent Minister for Finance)  confirmed that the government will extend the coverage of the legislation originally put in place to regulate LIBOR to further cover seven financial benchmarks, including the main, with those found guilty of manipulating these benchmarks facing up to seven years in prison.

The changes announced today will extend the criminal offense of manipulating a ‘relevant benchmark’ originally introduced for LIBOR to any person manipulating these seven benchmarks. They will also subject administrators of these benchmarks to a number of specific rules, and authorized firms will face a range of sanctions if they breach any of the Financial Conduct Authority’s (FCA) rules and principles – including financial penalties, suspensions and censures.

The policy coverage now includes the following benchmarks:

  • WM/Reuters 4pm London Fix, which is the dominant global foreign exchange benchmark;
  • Sterling Overnight Index Average (SONIA) and the Repurchase Overnight Index Average (RONIA), which both serve as reference rates for overnight index swaps;
  • ISDAFix, which is the principal global benchmark for swap rates and spreads for interest rate swap transactions;
  • London Gold Fixing and the LMBA Silver Price, which determine the price of gold and silver in the London market; and
  • ICE Brent index, which acts as the crude oil market’s principal financial benchmark.

Chancellor George Osborne said:

“The integrity of the City matters to the economy of Britain. Ensuring that the key rates that underpin financial markets here and around the world are robust, and that anyone who seeks to manipulate them is subject to the full force of the law, is an important part of our long term economic plan.”

“That’s why the government is determined to deal with abuses, tackle the unacceptable behaviour of the few and ensure that markets are fair for the many who depend on them.”

This development can be seen as a byproduct of the establishment of the Fair and Effective Markets Review, which is a joint review by the Treasury, the Bank of England, and the Financial Conduct Authority (FCA) into the way wholesale financial markets operate which was established in June this year.

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