Europe moves ahead
Europe continues to move forward on establishing a regulatory framework for benchmarks used in financial and commodity markets, with legislation moving through the European Parliament and new rules implemented in the U.K.
On March 31, after weeks of negotiations, the European Parliament’s ECON Committee voted in favor of a report on the European Commission’s proposal for a regulation on indices used as benchmarks. The main changes to the text include:
- Wider exemptions for securities market indexes, oilprice reports and other commodity indicators
- Certain commodity market indicators to be exempt from record-keeping, oversight, control and auditing obligations
- Qualifying commodity benchmarks to be free from the requirement to adhere to codes of conduct for their data contributors
- Benchmarks based on “regulated data” to be excluded from the definition of “critical” indexes
- The setting of critical benchmarks affecting more than one country to be overseen by a “college” of supervisors
- A national authority can deem a benchmark administered within its territory to be critical if it has a “significant” impact on the national market
- All benchmark administrators to be registered with the ESMA and to publish a “benchmark statement”
The committee action paves the way for a vote by the full Parliament, which was scheduled to take place as this issue of MarketVoice was going to print. The first trilogue negotiations with the Commission and the Member States are expected to begin in early June.
On April 1, the U.K.’s Financial Conduct Authority extended its current oversight of the London Interbank Offered Rate to include a further seven U.K.-based financial benchmarks. This means that the administrators of these benchmarks must be FCA-regulated firms if they are not already, and firms that contribute towards a benchmark must also be authorized by the regulator.
The seven benchmarks are:
- Sterling Overnight Index Average (SONIA)
- Repurchase Overnight Index Average (RONIA)
- ISDAFIX
- WM/Reuters (WMR) London 4pm Closing Spot Rate
- LBMA Gold Price
- LBMA Silver Price
- ICE Brent Index
