Index provider ICE buys AFX and its Ameribor rate

The financial data firm Intercontinental Exchange said Wednesday that it has bought the American Financial Exchange, which offers an interbank lending service and runs the Ameribor interest rate. 

The deal will pair the upstart AFX with one of the world’s leading market data companies, potentially smoothing widespread adoption of Ameribor by the banking industry.

Ameribor has gotten some traction among regional and community banks, which have argued that the regulator-favored Secured Overnight Financing Rate is a better fit for megabanks than for smaller ones. The SOFR rate has rapidly become the new standard in the United States to replace the once-ubiquitous LIBOR, which was phased out globally after a scandal over traders rigging the interest rate.

ICE’s acquisition marks an “extraordinary opportunity for AFX” to expand Ameribor’s reach, said Carsten Kengeter, CEO at 7RIDGE, the firm that owned AFX.

“We are confident that ICE’s leadership will amplify AFX’s success and its purpose to serve regional and local American banks by creating a transparent, robust and efficient interbank lending ecosystem,” Kengeter said. 

The companies did not disclose the terms of the deal, though ICE said it’s not expected to materially impact its 2025 financial results or capital distribution plans. ICE also owns 10 exchanges, including the New York Stock Exchange, as well as market clearinghouses.

AFX is a “natural fit to ICE,” said Christopher Edmonds, president of the company’s fixed income and data services division. ICE offers mortgage technology services to regional and community banks — the same pool of customers as Ameribor.

“We look forward to continuing to serve this important market, delivering innovation and new product development made possible through the addition of AFX to our portfolio,” Edmonds said in a news release.

AFX, founded by the futures markets pioneer Richard Sandor, got its start in 2015. At the time, global financial firms and their regulators were discussing ways to replace LIBOR, the London Interbank Offered Rate. 

In the U.S., a private-sector group convened by the Federal Reserve explored LIBOR alternatives and landed on SOFR, a rate that’s based on overnight transactions for the massive U.S. Treasury market. One of the criticisms of LIBOR is that its small base of transactions — estimates for how much a handful of global banks would charge to lend to each other — opened it up to manipulation. 

But some regional and community bank leaders had expressed consternation that SOFR didn’t adequately reflect their funding costs. Unlike LIBOR, SOFR is not “credit-sensitive,” so it doesn’t rise or fall depending on whether banks see lending conditions getting trickier. 

Ameribor, by contrast, is based on a marketplace that AFX developed for U.S. banks to borrow from each other. They reflect the “actual overnight borrowing costs of America’s banks,” AFX says on its website.

Bloomberg L.P. had also attempted to set up its own credit-sensitive interest rate benchmark called BSBY. 

Both rates failed to get much traction at the start of 2022, when U.S. banks were no longer supposed to be making new loans tied to LIBOR. 

SOFR had quickly become the new standard in a variety of business loans, though both BSBY and Ameribor saw some room for another alternative depending on borrowers’ specific needs — and others were eyeing developing their own rate options.

In November 2023, Bloomberg said it was shutting down its BSBY interest rate. That rate had drawn the ire of Securities and Exchange Commission Chairman Gary Gensler, who had warned in September 2021 that “a crisis will reveal BSBY’s flaws all too clearly.”

Gensler did not make similar comments about Ameribor, whose proponents tended to be smaller banks. One major supporter of BSBY had been Bank of America, which last year said it would take a $1.6 billion temporary hit tied to BSBY’s premature end.

AFX has stuck to its Ameribor business after BSBY’s demise, with its leader saying in November 2023 that the AFX marketplace “and supporters of Ameribor are undaunted.” 

The AFX exchange has more than 240 banks and nonbank members, the company said in Wednesday’s press release. The Ameribor rate reflects the costs of funding for more than 1,000 U.S. banks and financial institutions, making up a quarter of the country’s banking sector assets, AFX said.