By Kirstin Ridley and Steve Slater
LONDON, July 9 (Reuters) - The U.S. owner of the New York Stock Exchange (NYSE) will take over the running of Libor, the benchmark interest rate at the center of a global rigging scandal, wresting control from a British bankers' trade body for a token 1 pound ($1.50).
An important cog in the world financial system, Libor rates are benchmarks for some $550 trillion in contracts from complex derivatives to credit card bills. But Libor's credibility was destroyed by revelations that traders had routinely manipulated them to their own advantage.
NYSE Euronext will from early 2014 take over Libor from the British Bankers' Association (BBA), which had administered the rates since the 1980s, a British committee set up to choose a new operator said on Tuesday.
However, Libor - or London interbank offered rate - will continue to be regulated by Britain's Financial Conduct Authority (FCA), according to the advisory committee chaired by Sarah Hogg, appointed in October last year by the finance ministry to look for a successor to the BBA in taking ownership of setting Libor rates.
A source familiar with the deal said NYSE Euronext would pay a token sum of 1 pound.
The appointment 'is an important step in enhancing the integrity of Libor', said Martin Wheatley, chief executive of the FCA, which started regulating Libor this April after escalating public and political outrage at the scale of the scandal.
But with uncertainty about the future regulation of Libor - and given NYSE Euronext is being bought by U.S. peer IntercontinentalExchange (ICE) for $8.2 billion - not everyone was convinced the appointment was appropriate.
'We had a 'fox guarding the henhouse' issue here, and we should learn from that,' said Bart Chilton, a member of the U.S. Commodity Futures Trading Commission (CFTC) regulator.
Chilton added: 'I firmly believe that having a truly neutral third-party administrator would be the best alternative, and I'm not sure that an exchange is the proper choice.'
British and U.S. regulators have so far fined three banks -Barclays Plc, UBS AG and RBS - a total of $2.6 billion and two men have been charged for manipulating Libor and similar benchmark rates. But more banks and individuals remain under investigation.
Thomson Reuters, parent of Reuters which has calculated Libor and distributed the rates on behalf of the BBA since 2005, had also expressed an interest in a role in running Libor, another source said.
The company said it would continue as calculator and distributor of Libor unless NYSE Euronext decides otherwise.
The FCA's Wheatley had first recommended changes to how the benchmark was set, governed and supervised last September.
But Libor is in flux.
The U.S. CFTC wants it scrapped and replaced with a reference rate based on actual market transactions, but Wheatley argues that a rapid transition to a transaction-only rate is not possible.
Meanwhile, Brussels is also seeking to take on powers held by national regulators. According to an EU law to be proposed shortly, regulation of major benchmarks like Libor and oil indexes - also at the centre of rigging allegations - could be shifted from London to the Paris-based European Securities and Markets Authority (ESMA).
In an effort to bridge the gap between British and U.S. views, the IOSCO group of securities regulators will later this month propose final principles on the governance of benchmarks, which will be reflected in the upcoming EU draft law.
According to a document seen by Reuters, it will recommend using market transactions, but will allow for estimates when markets are illiquid. Trading had dried up between banks at the height of the 2007-2008 credit crunch, making it difficult to calculate accurate interbank rates.
($1 = 0.6695 British pounds)
(Additional reporting by Matt Scuffham and Clare Hutchison; Editing by Matthew Tostevin and David Holmes) Keywords: LIBOR NYSE/
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