Memo #
26893

IOSCO and ESMA/EBA Consultations on Financial Benchmarks; Member Call Jan. 24 at 11 a.m. (EST)
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[26893]

January 16, 2013

TO: ETF (EXCHANGE-TRADED FUNDS) COMMITTEE No. 4-13
ETF ADVISORY COMMITTEE No. 4-13
ICI GLOBAL EXCHANGE TRADED FUNDS COMMITTEE No. 1-13
ICI GLOBAL MEMBERS
INTERNATIONAL COMMITTEE No. 3-13
SEC RULES COMMITTEE No. 6-13 RE: IOSCO AND ESMA/EBA CONSULTATIONS ON FINANCIAL BENCHMARKS; MEMBER CALL JAN. 24 AT 11 A.M. (EST)

 

Following on the release by the European Commission of its “Consultation on the Regulation of Indices” last fall, the International Organization of Securities Commissions (“IOSCO”) recently released a “Consultation Report on Financial Benchmarks” (“IOSCO Consultation”). [1]  At the same time, the European Securities and Markets Authority (“ESMA”), in conjunction with the European Banking Authority (“EBA”), issued a “Consultation on Principles for Benchmarks-Setting Processes in the EU” (“ESMA Consultation”). [2]  Each of these consultations is described briefly below.

Comments are due on the IOSCO Consultation on February 11, 2013, and on the ESMA Consultation on February 15, 2013.  We will hold a joint call for members of ICI and ICI Global on Thursday, Jan. 24 at 11 a.m. Eastern US time to discuss possible joint comment letters on each of these consultations.  Please let Jennifer Odom (jodom@ici.org) know if you would like to attend the call.  Dial-in information will only be sent to those who RSVP.

IOSCO Consultation

The IOSCO Consultation explains that recent investigations and enforcement action regarding attempted benchmark manipulation have generated unprecedented regulatory and public focus on certain benchmarks, and that concerns over the fragility of certain benchmarks have the potential to undermine market confidence, which may affect the real economy and investors.

Based on these concerns, IOSCO constituted a board-level task force, which is seeking to articulate policy guidance and principles for benchmark-related activities.   To inform this work, the Consultation seeks to identify benchmark-related issues across securities and derivatives and other financial sectors.  The IOSCO Consultation has identified the following issues:

  • Methodology
  • Transparency
  • Governance
  • Accountability
  • Role and responsibilities of benchmark administrators. 

The IOSCO Consultation also seeks to identify the relevant policy issues, including:

  • The appropriate level of regulatory oversight of the process of benchmarking;
  • The standards that should apply to methodologies for benchmark calculation, and credible governance structures to address conflicts of interest in the benchmark setting process; and
  • The appropriate level of transparency and openness in the benchmarking process.

ESMA Consultation

The ESMA Consultation explains that ESMA and EBA have established a Joint Task Force on Principles for Reference Rates and Other Benchmarks-Setting Processes in the EU.  Its objective is to establish Principles of Good Conduct to address the activities of reference-rate and other benchmark administrators, publishers and market participants submitting data to the administrators and/or publishers.  The Principles are designed to bridge the interim period until a potential formal regulatory and supervisory framework for benchmarks has been devised in the EU. 

 

Mara Shreck
Associate Counsel

endnotes

[1] IOSCO Financial Benchmarks Consultation Report, CR01/13, January 2013, available at http://www.iosco.org/library/pubdocs/pdf/IOSCOPD399.pdf. 

[2] ESMA and EBA Consultation Paper: Principles for Benchmarks-Setting Processes in the EU, 11 January 2013, available at http://esma.europa.eu/system/files/2013-12.pdf.