Thomson Reuters Sets Up Subsidiary to Beef Up Governance of Financial Benchmarks

Thomson Reuters has established a new subsidiary to manage its activities related to calculating financial benchmarks as it prepares for more stringent regulations after a series of investigations into banks.

Thomson Reuters Benchmark Services Limited (TRBSL) facilitates compliance with the International Organization of Securities Commissions (IOSCO) principles for benchmark administrators in advance of a July 2014 deadline.

The financial information provider has already received authorization from the U.K.’s Financial Conduct Authority (FCA) for its role as the ongoing calculator of the London Interbank Offered Rate (LIBOR), which was the center of an international rate-rigging scandal by banks.

IOSCO published a set of guidelines in July 2013 to bring credibility back to the benchmark-rate setting process, and to prevent a repeat of the rate-rigging scandal that occurred with LIBOR. The proposed guidelines provide a framework for benchmark administrators to ensure the quality, integrity, continuity and reliability of benchmarks. For Thomson Reuters, the establishment of TRBSL is a further step in ensuring robust governance and oversight that is aligned to IOSCO principles and other emerging regulatory reform impacting benchmark policy and protocols.

Thomson Reuters is focusing on the governance and compliance of financial benchmarks at a time when there are multiple investigations into bank traders that set benchmark rates. Such probes have expanded beyond interbank lending rates to include benchmarks underpinning energy prices currency trades and derivatives, according to Bloomberg News.

TRBSL intends to assume the governance and control of other financial benchmarks in Thomson Reuters global portfolio of 160 benchmarks, according to the release. Over the past year, Thomson Reuters has been selected to publish 11 new benchmarks as either the sole administrator or on behalf of partner administrators, which draw upon the company’s automation technologies, access to trade data streams and the expertise of the firm’s specialist benchmark teams. Thomson Reuters administers, calculates and distributes OTC financial benchmarks on behalf of a number of market associations and 52 central banks, including HIBOR, SIBOR and ISDAFIX, as well as producing Thomson Reuters indices covering equities, bonds, and commodities.

“Thomson Reuters supports the financial industry in multiple ways to improve transparency in both liquid and illiquid markets,” stated John Cooley, global head of indices and reference rates, Thomson Reuters, in today’s announcement. “Over the past 18 months, we have been working closely with global regulators, authorities and agencies to ensure that as an industry we collectively enhance and re-establish trust in key benchmarks and continue to support the vital role they play in financial markets. Our global benchmark portfolio means that we can do this at scale, applying learnings and best practice across multiple benchmarks and jurisdictions.”

Forming the new subsidiary enables Thomson Reuters to strengthen and evolve its benchmark governance and compliance activities across jurisdictions and work with global regulators to obtain accreditation for other benchmarks that are chosen for regulation.

Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio