07 April 2016

ESMA publishes responses to the Discussion Paper Benchmarks Regulation

According to the Benchmarks Regulation, some of the ESMA technical standards will not be applicable to a subset of benchmarks, namely the non-significant benchmarks. ESMA may issue guidelines specifying how such provisions could be applied in the context of non-significant benchmarks.

European Banking Federation (EBF)

EBF agrees with ESMA’s proposal for critical and significant benchmarks. However EBF believes that for efficiency purposes the Administrator should be able to report the required information for non-significant benchmarks on a summary basis, rather than individually. That applies to benchmarks statements, “comply or explain” templates etc. EBF would also seek clarity on how often those documents should be refreshed.

EBF suggests that ESMA take a proportionate approach to record keeping in that the competent authority can require the contributor to provide access to this information upon request from the administrator for the purposes of an investigation, however that the information is not required to be provided on a regular basis. In addition, administrators should face clear restrictions on sharing that information with staff in their organisation beyond those immediately involved in the investigation. Thiss can be communicated to the contributors via the code of conduct.

Full response

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CNMV

As CNMV points out, the BMR contains a very broad definition of monitoring indexes function, including some aspects that may not fully match the standard monitoring activities, so that it could be a variety of entities affected by this oversight and they may be called to participate in some aspects.

In the same vein, the BMR supports different ways of structuring and managing the oversight function of these indexes, so it is not necessary to use standard formulas as to integrate, in any case, contributors in organs typical exercise oversight functions, especially because those formulas uniforms may compromise the independence of such bodies.

Full response

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ICE

ICE considers that the business activities of market operators and CCPs could and should fall under the specification of "issuance of a financial instrument which references an index or a combination of indices," for the reasons set out above. Failure to include such activities within this specification would give rise to legal uncertainty as to whether a major category of users of benchmarks is excluded from the regime or only covered in particular circumstances, such as if they become party to a contract. Such an approach would also be contrary to the way in which the market operates, as reflected in current licensing arrangements between benchmark operators and trading venues or CCPs.

ICE also believes it would make sense to have different oversight committee(s) for non-significant benchmarks since Administrators of critical and significant benchmarks are required to comply with the full requirements of Article 5a and will be subject to the RTS regarding the procedures for the oversight function, as well as the standards on the composition of an oversight function and the positioning within the organisation.

Full response

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Nasdaq

Nasdaq is concerned that whereas financial instruments are defined in MiFID II, ‘single reference prices’ are not. Nasdaq is concerned that the inclusion of “reference” introduces ambiguity to the application of the Level 1 text as ‘single price’ is a well-established concept, the term ‘single reference price’ is not. Nasdaq consider that the ambiguous drafting could potentially open up for unintended consequences, as the text could be interpreted as only excluding prices being created solely ‘for reference’ and actually including ‘single prices’ within the scope of the regulation.

Moreover, while Recital 15a clarifies that single reference prices should apply to “where a single price or value is used as a reference to a financial instrument, for example where the price of a single security is the reference price for an option or future, there is no calculation, input data or discretion”, the legal impact of recitals is disputed. It would be helpful to include a clarification in line with the stated intention of the co-legislators, and not allow the inclusion of ‘single prices’ within the scope of the regulation.

Full response

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European Money Markets Institute (EMMI)

EMMI believes that in order to ensure an effective oversight function, the oversight function must be composed of members that can provide with technical input and market expertise to ensure that the Steering Committee’s decision are in line with the market reality. To this end, EMMI believes that oversight functions should be adapted to the benchmarks’ characteristics in particular with regards to input data, methodology and the underlying market (i.e. secured, unsecured…) it seeks to measure.

While EMMI agrees there are records which need to be retained to ensure future verifiability of past contributions and the audibility of the determination process and that the administrator must be able to access the relevant information in the event of misconduct, we would like to stress that the primary responsibility with regard to the verifiability and record-keeping of relevant aspects of a contributor’s submissions should rest with the contributor.

Full response

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Press release

Full Discussion Paper

All responses

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