The U.K. government is planning to make the manipulation of a number of benchmarks in markets a criminal offense. This is the government's attempt revive the confidence in the integrity of the financial center, London.
According to the Economic Secretary to the Treasury Andrea Leadsom "The integrity of the City matters to the economy of Britain." She added that "Ensuring that the key rates that underpin financial markets are robust, and that anyone who seeks to manipulate them is subject to the full force of the law is vital."
The Treasury is looking at whether they should extend the regulations covering the regulation of the London Interbank Offered Rate to other areas such as the WM/Reuters 4 p.m. London currency fix, the Sterling Overnight Index Average, the London gold fixing and the ISDAFix. They are looking to extend the rules made for Libor to the currency, fixed income and commodity markets.
The U.K. government is hoping to already have the rules in place by the end of the year. This is five months before the next election.
Following the recent LIBOR fixing scandal, the government had stepped up on strengthening the penalties for manipulation of benchmarks. Numerous institutions have been penalized for an estimated $6.5 billion for that scandal. The London Interbank Offered Rate is the average interest rate estimated by several banks in London. The government had decided to make penalties and jail sentences with a maximum of seven years for making false or misleading statements about the benchmark.
The benchmark rates covered by the current review are the following: Sterling Overnight Index Average and Repurchase Overnight Index Average which is the reference rates for overnight index swaps; the WM/Reuters rates which determines what most fund managers pay for their foreign exchange; ISDAFix which is a benchmark used in the swap market; the London gold fixing, LBMA Silver Price and the ICE Brent futures contract which is the world's highly traded crude oil future.
