A revised methodology for setting Australia's bank bill swap rate could include reference to a broader underlying market and a wider rate-setting window, but the fundamentals of the system would remain unchanged.The Council of Financial Regulators has released a proposal to "evolve" of Australia's BBSW methodology. The CFR released a consultation paper last October and has incorporated feedback from the industry into its latest paper.The discussion paper comes as the Australian Securities and Investments Commission is concluding an investigation into alleged BBSW rigging.BBSW is a key financial benchmark, serving as a reference rate for the pricing of many debt securities and loan transactions, and is administered by the Australian Financial Markets Association.To ensure that BBSW remains a trusted, reliable and robust financial benchmark, the council has set three objectives: BBSW should be anchored to transactions in an active underlying market; the BBSW calculation mechanism should be robust enough to handle changing market conditions; and the fundamental properties of BBSW should be maintained.The CFR said the existing definition of eligible securities as negotiable certificates of deposit and bank accepted bills should be retained.It said BBSW should be calculated by the administrator as the volume weighted average price of NCD and BAB transactions during the rate-setting window.The inclusion of instruments such as term deposits, which would increase the volume of activity in the market, was ruled out on the basis that it could have an adverse effect on existing contracts that reference BBSW.AFMA's existing process for designating prime banks was considered appropriate.Prime banks provide the basis for discovery of short-term interbank interest rates, including BBSW. The main criterion for prime bank status is that a bank's short-term securities are recognised as being of the highest quality with regard to liquidity, credit and consistency of yield.The current prime banks are ANZ, Commonwealth Bank, National Australia Bank and Westpac.However, the CFR said the definition of the underlying market should be broadened to include transactions where a prime bank was not a counterparty. Broadening the market would see the rate-setting window widened.Transactions in offshore jurisdictions would not be included.