In what could be a death rattle for the once-hegemonic London interbank offered rate (Libor), a competing index backed by two American companies today announced it would be using the ethereum blockchain.
Libor is a benchmark interest rate controlled by global banks including Barclays, Deutsche Bank, Royal Bank of Scotland and UBS that determines the cost for banks to lend money to each other. Ameribor is an alternative backed by the American Financial Exchange (AFX) and Cboe Futures and will use a permissioned version of ethereum and two tokens to do the same thing.
While the financial institutions behind Libor have been early leaders in exploring blockchain, they have been slow to implement the technology, which some believe could make some of their services unnecessary by directly connecting counterparties in trades. But the Ameribor use of ethereum shows one early instance of how a product previously provided by a group of banks is now being offered by upstarts and startups.
“We learned a great deal about this new and exciting technology and believe the blockchain has the potential to transform electronic trading and financial markets,” said AFX CEO Richar Sandor in a statement. “AFX is committed to remain in the forefront of this new technology.”
AFX was founded in 2015 and now has 150 members, and Cboe Futures is a part of the legacy Cboe Global Markets, founded in 1973 as the Chicago Board Options Exchange. The organizations’ Ameribor index was announced earlier this year, and quietly began trading using traditional technology in August. Previously, Sandor helped create some of the first derivatives on U.S. Treasuries and mortgage-backed securities, and in 2003 he founded the Chicago Climate Exchange for trading greenhouse gas emission…