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The ICMA believes that there is value in the development of an internationally agreed set of principles for financial benchmarks and is, accordingly, pleased to see IOSCO’s efforts in this regard. In detail, however, the majority of the matters covered by this work on principles lie beyond the ICMA’s area of core concern and the ICMA will therefore at this stage leave it to others to comment on these matters.
The one particular aspect of IOSCO’s current consultation which is of very direct interest to the ICMA is the strong emphasis that IOSCO’s proposed principle #7 “Data Sufficiency” places on the use of transactional data. The ICMA does not dispute that transactional data has an important role to play in the setting of financial benchmarks, but neither does it consider that the use of such data is a panacea which will automatically ensure the reliability of a financial benchmark. The relevance of this caveat is likely to be most pertinent in situations where there are relatively small volumes of transactional data suitable for use in the setting of a desirable benchmark.
In this context, the ICMA wishes particularly to underscore its clearly stated prior views that:
(i) it is for the market to choose, as a commercial matter, which reference rates to use for new transactions; and
(ii) it is important that any reform of rate-setting processes for existing transactions referenced to indices does not disrupt the international capital market