By Pam Martens: July 9, 2013
According to a report out of London this morning, the New York Stock Exchange (NYSE/Euronext) has been selected from a number of bidders to take over administration of Libor, the now discredited, rigged interest rate benchmark that had been previously overseen by the British Bankers Association, a lobbying organization for banks.
The idea that turning over the administration of Libor to the NYSE, whose major shareholders include some of the Wall Street firms currently under investigation for rigging Libor, would restore confidence in using Libor as an interest rate benchmark is…well…typical of Wall Street’s irrational thinking.
According to a March 31, 2013 report from Morningstar, the following Wall Street firms are among the major shareholders of NYSE/Euronext: Citigroup, 6.5 million shares; Morgan Stanley, 5.9 million shares; JPMorgan Asset Management (UK) Ltd., 4.9 million shares; Merrill Lynch & Co. Inc., 4.2 million shares; Deutsche Bank AG, 3.7 million shares; Credit Suisse First Boston, 3.6 million shares; Goldman Sachs & Co., 3.1 million shares.
The Board of Directors of NYSE/Euronext includes former executives from across Wall Street, raising further red flags about the independence of the rate setting mechanism.
NYSE/Euronext also owns Liffe, a derivatives exchange operated out of Europe. Liffe trading includes derivatives indexed to Libor.
The company is in the midst of being acquired by the Atlanta-headquartered Intercontinental Exchange, known on Wall Street simply as ICE. The European Union has approved the acquisition but it is still subject to additional regulatory approvals. According to a September 30, 2012 report from Morningstar, units of Morgan Stanley and Goldman Sachs continue to own sizeable stakes in ICE.
In 2008, ICE announced it was teaming up with nine of the largest Wall Street and foreign banks to create its own solution to trading credit default swaps:
“Under the terms of the new agreements, ICE will acquire TCC [The Clearing Corporation] and will form ICE US Trust (ICE Trust), a New York limited purpose trust company and subsidiary of ICE, with the support of Bank of America, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, J.P. Morgan, Merrill Lynch, Morgan Stanley and UBS. As previously announced, ICE and TCC continue to work closely with regulators, other market participants and industry groups to develop a comprehensive central counterparty clearing solution for the CDS [credit default swap] market. This customized solution is currently undergoing final testing in preparation for launch.”
After ICE Trust submitted its application for its derivatives clearinghouse to the Commodity Futures Trading Commission (CFTC), the plan was criticized as a “club” for just the big boys because it imposed hefty capital requirements. ICE withdrew its application in 2010.