11 February 2013

ICMA submits comments regarding benchmarks to IOSCO

The ICMA notes that IOSCO seeks the views of stakeholders on the questions posed in this report to inform its final Principles on Financial Benchmarks; and that the formulation of any specific recommendations relating to any given benchmark it is not an objective of this work.

In overall terms, the ICMA considers that:

(i) the authorities' focus in reforming indices should be on regulating the governance of the process for setting indices to ensure that it cannot be manipulated and to prevent market abuse;

(ii) it is important that any reform of rate-setting processes for existing transactions referenced to indices does not disrupt the international capital market;

(iii) it is for the market to choose, as a commercial matter, which reference rates to use for new transactions;

(iv) if powers to compel participants in financial markets to make submissions to benchmarks exist, they should only be used as a last resort, and where there is a significant risk of widespread disruption to the international capital market;

(v) any market abuse should be covered by appropriate market abuse regulation; and

(vi) regulators should distinguish between public “benchmarks” and other “indices” when designing regulation.

In its response, ISDA focuses on points (ii) and (iii), particularly commenting on the question of how changes to, or transition from, existing indices could affect certain types of financial contract.

Full response

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