How Benchmark Competition Would Benefit Financial Markets

In over-the-counter (OTC) markets for assets such as currencies, derivatives, and commodities, staggering sums of money are tied to single, critical financial benchmarks.  The London Interbank Offered Rate (LIBOR), for example – often referred to as “the world’s most important number” – determines interest payments on instruments ranging from student loans and mortgages to synthetic derivatives across the globe.  In 2016, estimates of notional exposure to U.S. dollar LIBOR totaled about $200 trillion – 10 times U.S. GDP that year.  The WM/Reuters foreign exchange benchmark is another example.  Its impact extends to retirement funds and stock markets, where pension funds … Read more