Scrutiny

This section of the website details the methods that are used to check bbalibor contributions and how this works in practice. 

As far as is possible, for each data point or series there is a proposal for acceptable tolerances. If these tolerances are exceeded, the contributor will be queried by the rate setting team at Thomson Reuters (the Designated Distributor of bbalibor) or the FX&MM secretary, and if there is no satisfactory explanation given, this will be brought to the attention of the FX&MM Committee. Queries are made by telephone to the individual in each bank responsible for setting the rate.

Data to be collected

Events that would trigger a query from Thomson Reuters to a bbalibor contributor bank are as follows:

- Submissions more than 2 standard deviations from the bbalibor calculation for that currency and maturity on that particular day.

- Submissions that move the contributor's rate from above to below the calculated bbalibor rate - or vice versa - vs. the previous day

- Submissions that are more than 5bp higher or lower than the previous day submission, unless the majority of the rest of the bank panel have also moved more than 5bp in the same direction. In this latter case, Thomson Reuters and the bbalibor manager should investigate the nature of such a market moving event and discuss with the FX&MM Committee.

A call to a contributor to query a rate is in no way an accusation of inaccuracy or manipulation - it is a request for confirmation and does not in any way stigmatise that contributor. 

If there are factors that will affect a contributor’s rates in the medium to long term, once these have been made clear to the bbalibor manager he may take these into account and elect not to contact the contributor each day if a quote falls outside of the parameters laid out above, but only if the reasons previously provided by the bank are consistent with the observed quoting pattern.

bbalibor vs. dealt rates

It has been suggested that bbalibor contributions could be compared with the indicative rates from brokers as shown for example on Thomson Reuters and Bloomberg screens.  However, this in unlikely to provide any useful insights as it is a comparison of a bank’s perceived cost of funding against a broker’s perception of where a bank could access funds, and neither of these need to be tied to an actual dealt rate.

Audit

Contributors undertake to have their internal processes for submitting rates audited as part of their firm’s annual compliance procedures and provide written confirmation to the FX & MM Committee that this audit has been completed. 

Analysis of data

Day to day monitoring of internal consistency of submissions as laid out will be carried out by the rate setting team at Thomson Reuters.

If a submitted rate triggers a query before the bbalibor release, Thomson Reuters will immediately contact the bank in question and ask them to confirm their rate.  Contributions that do not conform to the expected norms are usually a result of an error that is quickly rectified.  This is an extension of current practice.  If a bank confirms that it intends to submit a rate that would still trigger an alert, Thomson Reuters will contact the bbalibor manager after the bbalibor release who will then ask the bank their reasoning for the submission. There are time limitations and so a query raised from Thomson Reuters to the bbalibor manager will occur after the rates have been released into the market.

Each time this occurs, the bbalibor manager will log the circumstances and include full details in a regular report to the FX&MM Committee, and discussions of this report are a standing agenda item at Committee meetings.  Details of the report and discussions thereof will be confidential, and members may not disclose any information outside of committee meetings. 

If, in the view of the bbalibor manager, a bank’s submitted rate is aberrant or the bank’s explanation for their submission is unsatisfactory, the bbalibor manager will inform the Fixings sub-committee who will meet to consider the issue.

As part of the required procedures for contributors, all contributors agree that:        

      - The bbalibor manager will visit all contributors regularly - at a minimum of once a year - in order to discuss the bbalibor process and get a contributor’s views on market conditions and address any areas of concern.  These comments will be fed back to the FX&MM Committee.

      - The bbalibor manager may visit a contributor’s office on an ad hoc basis to discuss their rate submissions with named contributors if their submissions are queried by the FX&MM committee or subcommittees.   These discussions may involve a request for the bank to provide evidence to support their quotes.  Any such evidence which includes sensitive information will be held in absolute confidence by the bbalibor manager and will not be shared with FX&MM Committee members.  

Input from market

As bbalibor is used by participants from a wide cross section of the market, it is appropriate that all participants should be allowed to comment on bbalibor rates.  The BBA therefore has a secure page which will enable interested parties to comment on rates.  Please go the Contact Us section of the bbalibor website for more information.

All queries will receive a substantial reply after initial examination and discussion by the FX&MM Committee, and in most cases an acknowledgment will be provided that the BBA are in the process of investigating the issue.