ICE Benchmark Administration Provides Update Regarding LIBOR Cessation and "Synthetic" LIBOR

Intercontinental Exchange, Inc. (NYSE:ICE), a leading global provider of data, technology, and market infrastructure, today announced that ICE Benchmark Administration Limited (IBA), the authorized and regulated administrator of LIBOR, has provided an update regarding LIBOR cessation and “synthetic” LIBOR.

The UK’s Financial Conduct Authority (FCA) has issued its final messages prior to the end of the U.S. dollar LIBOR panel, and reminded market participants of its March 2021 announcement that publication of the Overnight and 12-Month U.S. dollar LIBOR settings will cease immediately following publication on June 30, 2023.

The FCA previously announced that it has decided to use its powers under the UK Benchmarks Regulation (UK BMR) to require IBA to continue the publication of the 1-, 3- and 6-Month U.S. dollar LIBOR settings using a changed “synthetic” methodology for a temporary period from July 3, 2023, and intends for these settings to cease immediately following publication on September 30, 2024.

The FCA has notified IBA that it has designated these three LIBOR settings as “Article 23A benchmarks” for the purposes of the UK BMR with effect from July 1, 2023, which it must do in order to enable it to require these methodology changes. The FCA has also noted that any settings published under a “synthetic” methodology will no longer be representative of the underlying market or economic reality the setting is intended to measure, as those terms are used in the BMR.

All new use of “synthetic” U.S. dollar LIBOR by UK supervised entities will be prohibited under the UK BMR, which the FCA notes will override the exemptions to the prohibition on the new use of U.S. dollar LIBOR imposed by the FCA on January 1, 2022. The FCA has decided to permit the use of the 1-, 3- and 6-month “synthetic” U.S. dollar LIBOR settings by UK supervised entities in all legacy contracts, except for cleared derivatives.

The FCA has also published a feedback statement on its November 2022 Consultation on “synthetic” U.S. dollar LIBOR, and the modifications it proposes to make to the UK BMR as it will apply to 1-, 3- and 6-Month “synthetic” U.S. dollar LIBOR, having regard to the effects of its designation of these three settings as “Article 23A benchmarks” and the imposition of its proposed changes to the methodology for these settings.