ESMA seeks input on regulating benchmarks

Added 15th February 2016

The European Securities and Markets Authority (ESMA) is seeking input on the technical implementation of a regulation to improve the governance and control of financial market benchmarking.

ESMA seeks input on regulating benchmarks

Used as a reference to price financial instruments and measure the performance of investment funds; benchmarks first popped up on the European Commission’s (EC) radar screen in September 2013, following the alleged manipulation of various benchmarks to the clear detriment of consumers and companies.  

Benchmarks critical

In November 2015, the European Parliament and the Council of the EU agreed to establish the Benchmarks Regulation (BR).

Jonathan Hill, EU commissioner responsible for financial stability, financial services and capital markets union, at the time, said: "Benchmarks are critical for the functioning of our financial markets. Manipulating benchmarks amounts to stealing from investors and consumers and undermines confidence in markets.”

Reliability and protection

The purpose behind BR is to improve the governance and control over the benchmarking process, thereby ensuring reliability and greater user protection.

ESMA is seeking input to inform its future proposals on draft Regulatory Technical Standards (RTS) and Technical Advice (TA) to the European Commission.

"Benchmarks are critical for the functioning of our financial markets."

The changes outlined in ESMA’s discussion paper aim to:

  • improve the quality of the input data and methodologies used by benchmark administrators;
  • ensure that benchmark contributors provide adequate data and are subject to proper controls; and
  • ensure the supervision and viability of critical benchmarks.

Accuracy, robustness, integrity

Steven Maijoor, ESMA chair, said: “The Benchmark Regulation, once implemented, will ensure the accuracy, robustness and integrity of benchmarks and the benchmark setting process by clarifying the behaviours and standards expected of administrators and contributors.

“These requirements will ensure that benchmarks are produced in a transparent and reliable manner and so contribute to well-functioning and stable markets, and investor protection.

“ESMA, in preparing for its work on regulatory technical standards and technical advice, is keen to ensure that all affected stakeholders have their views heard on this important topic and we hope that all interested parties will take this opportunity to contribute,” Maijoor said.

Next steps

The exact date when the Benchmarks Regulation will enter into force is still unknown, as it has not yet been published in the Official Journal of the EU.

ESMA will hold an open hearing on the discussion paper on 29 February 2016 in Paris. It will use the responses to develop detailed implementing measures. A follow-up consultation paper will be published in Q3 2016.

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About Author

Kirsten Hastings

Senior Reporter

Kirsten is a reporter for International Adviser, covering global news stories about the financial services industry. She joined Last Word Media in October 2015 after two years working as a reporter covering the staffing and recruitment industry. Kirsten has a Masters in Financial Journalism from the University of Stirling. 

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