Libor’s days are numbered

CRITICAL steps for replacing Libor could be taken by next year, British industry officials said, increasing the chances of a smooth transition from the interest rate benchmark used to price financial contracts worth tens of trillions of pounds. When regulators announced last month that scandal-plagued Libor would be replaced by the end of 2021, there was scepticism among some industry players over whether such a huge transition could take place on time – or even at all. But preparations are already under way to put in place two essential elements for the planned replacement, Sonia, to assume its role in the market. The clearing arm of the London Stock Exchange, which already clears shortdated Sonia swops – products used to hedge against adverse moves in rates or currencies – said it was planning to clear the kind of longer-dated swops covered by Libor. An industry group, whose members include the 16 top dealers of swops and other derivatives, meanwhile said it aimed to create Sonia futures contracts. Francois Jourdain, who chairs the group set up by the Bank of England to promote adoption of Sonia, said he had no doubt that the transition would take place. “It will happen,” he said. – Reuters