NEW YORK (Reuters) - Two financial industry groups said on Wednesday they would like to see the New York Federal Reserve's newly created funding rate replace the existing one, which is expected to cease near the end of July, as a new benchmark.
The New York Fed's overnight bank fund rate (OBFR)
The Risk Management Association and the Securities Industry and Financial Markets Association that represents Wall Street dealers and large investment firms recommended the change. ICAP planned to cease publication of its federal fund rate index on July 27.
OBFR is seen as a more accurate measure on day-to-day bank funding cost than the federal funds rate because it is calculated from a much larger volume of trades.
A move to a new U.S. rate benchmark is aimed to meet the standards recommended by the International Organization of Securities Commissions (IOSCO) in 2013 in the wake of the rigging scandal of the London interbank offered rate.
Libor is a global rate benchmark for $350 trillion worth of financial products.
"Choosing the OBFR makes sense at a time when industry participants are focused on the IOSCO guidelines and other standards that are attempting to confirm the accuracy and transparency of benchmarks," Fran Garritt, RMA's director of Securities Lending and Market Risk, said in a statement.
On Tuesday, the New York Fed said OBFR was 0.37 percent, matching the average fed funds rate. It was based on $296 billion worth of trades, compared with $61 billion for the fed funds rate calculation.