Introduction

The European Securities and Markets Authority (ESMA) has published two papers relating to the Benchmarks Regulation (BMR):

• methodological framework – selection of supervised entities for mandatory contribution under Article 23(7) of the BMR; and
• final report – draft regulatory technical standards (RTS) on cooperation arrangements with third countries under the BMR.

Methodological framework

Article 23 of the BMR provides that under certain circumstances a Member State competent authority can require supervised entities to contribute to a critical benchmark. The selection of the supervised entity shall be made on the basis of the size of a supervised entity’s actual and potential participation in the market that the benchmark intends to measure.

ESMA has developed this methodological framework to promote the convergence of the supervision of specific types of critical benchmarks. The framework may be considered by Member State competent authorities of administrators of the relevant critical benchmarks when they select the supervised entities that are to be required to contribute input data.

Final report and draft RTS on cooperation arrangements with third countries

A benchmark from a third country whose legal framework and supervisory practices has been recognised as equivalent by the European Commission may be used in the EU if the relevant benchmark and its administrator are included in the register referred to in Article 36 of the BMR.

Article 30(4) BMR includes three areas that such cooperation arrangements should cover, i.e. the mechanism for the exchange of information between ESMA and the third country competent authority, the mechanism for prompt notification to ESMA where a third country competent authority deems that a benchmark administrator under its supervision is in breach of the condition of its authorisation or other national legislation in the third country, and procedures concerning the coordination of supervisory activities, including on-site inspections.

The BMR mandates ESMA to develop draft RTS that determine the minimum content of the cooperation arrangements that should allow the competent authority and ESMA to exercise their supervisory powers under the BMR.

ESMA has now published a final report containing draft RTS on the minimum content for cooperation arrangements between ESMA and competent authorities in third countries that have been designated as equivalent under the BMR.

Among other things the draft RTS:

• require that cooperation arrangements at least cover the cooperation on all issues relevant for the activities of benchmark administrators including the relevant laws and regulations and changes thereto;
• require the cooperation arrangements to at least set forth procedures for the request for information and their minimum content, including a description of the subject matter and purpose of the request and the applicable laws and regulations that cover benchmarks activity;
• establish that the cooperation arrangements should at least include a confidentiality regime that requires non-public information to be treated confidentially and that any information obtained under the cooperation arrangements should only be eligible for the purpose it was requested for, unless consented to otherwise by the other signatory; and
• set forth that the cooperation arrangements should contain provisions that ensure the necessary and adequate level of data protection.

View ESMA publishes framework for mandatory benchmarks contributions, 2 June 2017