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Strategies & Market Trends : The coming US dollar crisis -- Ignore unavailable to you. Want to Upgrade?

To: Real Man who wrote (7401)	5/17/2008 4:01:16 PM
From: Giordano Bruno	Read Replies (2) \| Respond to of 71475

On a lighter note: Crude oil futures traded in New York rose yesterday to a record about one hour after Bush landed in Saudi Arabia. bloomberg.com

To: Real Man who wrote (7401)	5/17/2008 5:29:26 PM
From: LTK007	Respond to of 71475

Libor Alternatives Used for Liffe Futures Contracts (Update3) (edit: this is confirmation of what Lee Adler was speaking of--max) bloomberg.com By Nandini Sukumar May 15 (Bloomberg) -- NYSE Euronext's Liffe derivatives market will start trading contracts on alternatives to the London interbank offered rate as the credibility of the benchmark for corporate borrowing is called into question. The plan follows complaints by banks that some participants in the daily Libor-setting process submit inaccurate information to the British Bankers' Association, meaning rates don't reflect true borrowing costs. Libor is used to price company loans worldwide, at least $347 trillion of derivatives and more than 6 million U.S. mortgages. Liffe's new contracts include futures based on the euro overnight interbank average, or Eonia, a borrowing rate calculated by the European Central Bank. The London-based exchange is also offering contracts on the sterling overnight interbank average, or Sonia, compiled by the Wholesale Markets Brokers' Association in London. ``Clearly the BBA have had some concerns about Libor, and we support them,'' Garry Jones, executive director of business development and strategy at Liffe, said in an interview. Liffe's new contracts are ``complementary'' with Libor and not designed to replace the benchmark interest rate, he said. Credit Turmoil Some lenders are understating the information they provide the BBA on concern they will be perceived as weakened by the credit turmoil that forced banks to record $337 billion of losses and writedowns, Citigroup Inc. analysts wrote last month. Banks may have submitted inaccurate rates to keep borrowing costs from rising, the Bank for International Settlements said in March. ``Sonia and Eonia may succeed as a result of the shortcomings that have become evident since last summer,'' said Bruce Weber, a professor at the London Business School. ``The transparency of exchange trading and the counterparty risk reduction from a clearinghouse could drive substantial volumes to these Liffe contracts.'' The BBA publishes Libor rates every day based on a survey of 16 banks including HSBC Holdings Plc, Citigroup and UBS AG on how much it would cost them to borrow from each other in currencies including dollars, euros and pounds. Only three of the member banks are based in the U.S. For the first time since 1998, the BBA is considering changing the way it sets Libor, according to Chief Executive Officer Angela Knight. Libor, Euribor Liffe's second-busiest contract is based on the Libor rate for borrowing in pounds, known as short sterling. It also lists interest-rate contracts based on the Libor rates for dollars and Swiss francs. The exchange's most active futures contract references the three-month euro interbank offered rate, or Euribor, which is calculated by the European Bankers Federation. The new contracts ``will complement our existing three-month Euribor and short-sterling futures contracts,'' Liffe's Jones said. The exchange will also start a three-month Eonia Swap Index futures contract. The new futures will be offered from June, it said. Futures are agreements to buy or sell assets at a set date and price. ICAP Plc, the biggest broker of transactions between lenders, is also planning a U.S. alternative to Libor called the New York Funding Rate. The benchmark will be based on an anonymous daily survey of at least 24 banks, the London-based company said yesterday. The WMBA, whose members include brokers ICAP, GFI Group Inc., Tradition (UK) Ltd., said today that it hasn't entered into agreement with Liffe on the proposed Sonia futures contracts. ``Sonia is a trademark of the WMBA,'' Stewart Lloyd-Jones, chief executive officer of the trade group, said in an interview. ``The Sonia product is the property of WMBA and its members and is used by certain third parties under license.'' James Dunseath, a spokesman for Liffe, declined to comment on the WMBA. To contact the reporters on this story: Nandini Sukumar in London at nsukumar@bloomberg.net