THE regulator for China’s interbank money market will change the way it calculates the opening price for two benchmark interest rates, sources said Tuesday, in a bid to reduce the ability of individual banks to manipulate key rates.

    The National Interbank Funding Center, which is controlled by the central bank, will use a new method to calculate the opening quote for the overnight and seven-day bond repurchase rates, sources said.

    These rates, which measure the cost that banks charge for lending to each other, are considered key benchmarks for domestic liquidity conditions. The plan could eventually be expanded to include other tenors, the sources said.

    Rather than simply publishing the rate for the first trade, the center will use the so-called “call auction” method to calculate the official opening rate, which often serves as a key reference for pricing in the broader bond market.

    The center will seek quotes between 9:00 a.m. and 9:25 a.m. local time each day from a group of 50 banks of various sizes in order to determine the opening price.

    The new system will be introduced soon, according to the sources, but they could not specify a date. The National Interbank Funding Center did not immediately answer calls seeking comment

    The call auction method is also used by stock exchanges around the world to calculate the official opening price of stock indices. The method involves averaging price quotes from multiple market participants, rather than a single bilateral transaction. (SD-Agencies)