Response to the review of the EU Benchmark Regulation

The Benchmarks Regulation applies to all benchmarks regardless of the underlying market. However, we believe different types of benchmarks pose different types of risks to the markets. From a global perspective – where many developments have taken place – IOSCO has recognised that benchmarks based on regulated data could be subject to a proportionate approach. The Benchmarks Regulation acknowledged that regulated data benchmarks are less prone to manipulation. Nevertheless, experience with its application has shown that the framework does not differ much from that of other types of benchmarks. Moreover, the definition of regulated data benchmarks could benefit from clarification related to third-country regulated data.

Among the various other topics raised in the consultation, we would like to highlight some key areas as follows:

Critical benchmarks:

• FESE does not consider that competent authorities should have broader powers regarding methodology modifications for critical benchmarks.
• On the contrary, we consider that this could create uncertainty for users regarding the continued provision of such benchmarks.

Non-significant benchmarks:

• We believe that much of the governance and control requirements would not have to be applied to non-significant benchmarks, especially in cases where there are very little assets under management.

Climate-related benchmarks:

• We strongly support the initiatives to incentivise sustainable investments and enabling the financial community to market these products in a comparable transparent fashion.
• However, we would caution against an approach that would introduce a control framework that could end up disincentivising sustainable investments considering that we are still in the early stages of moving capital towards a sustainable goal.

Commodity benchmarks:

• There is currently a lack of clarity between provisions for regulated data benchmarks and commodity benchmarks and how these overlap for benchmarks that fit into both frameworks.
• FESE would, therefore, see benefits in clarifying the applicable provisions.

FX forwards:

• FESE would support sensible legislation which allows the use of FX spot rates for not fully convertible currencies as reference rates for non-deliverable forward contracts.

Third country regime

• We appreciate the different methods for how third country benchmark providers could bring their benchmarks into the EU.
• However, reality shows that equivalence is not a real option and the recognition process sets up large hurdles due to the need for an establishment of a legal presence in the EU.
• The endorsement process would benefit if the requirements could be described and defined in more details in BMR or via an RTS.

Finally, FESE members have encountered some issues in relation to the application of the BMR definitions. Considering that the review is taking place very early, we would appreciate the opportunity to provide detailed input regarding this at a later stage.