On 29 September 2020, the European Securities and Markets Authority (ESMA) published a final report containing new sets of draft regulatory technical standards (RTS) under the Benchmarks Regulation (BMR).
The ESMA final report has five chapters covering each of the areas for which ESMA is required to develop draft RTS (see below). Each chapter provides background information on ESMA’s mandate and the feedback it received to an earlier consultation on the draft RTS. ESMA also outlines its approach to the draft RTS following the consultation with the RTS themselves set out in Annex I to the final report.
The draft RTS are produced by ESMA under the following mandates:
- Article 4(9) of the BMR states that “ESMA shall develop draft RTS to specify the requirements to ensure that the governance arrangements referred to in paragraph 1 [of Article 4 of the BMR] are sufficiently robust.”
- Article 12(4) of the BMR states that “ESMA shall develop draft RTS to specify the conditions to ensure that the methodology referred to in paragraph 1 [of Article 12 of the BMR] complies with points (a) to (e) of that paragraph.”
- Article 14(4) of the BMR states that “ESMA shall develop draft RTS to specify the characteristics of the systems and controls referred to in paragraph 1 [of Article 14 of the BMR].”
- Article 5(6)(b) of Regulation (EU) 2019/2175 adds to Article 21 of the BMR, mandatory administration of a critical benchmark, a new paragraph 5 stating that: “ESMA shall develop draft RTS to specify the criteria on which the assessment referred to in point (b) of paragraph 2 [of Article 21 of BMR] is to be based.”
- Article 26(6) of the BMR states that “ESMA shall develop draft RTS to specify the criteria under which competent authorities may require changes to the compliance statement as referred to in paragraph 4 [of Article 26 of the BMR].”
The key benefits of the draft RTS are as follows:
- The main benefit of the proposed draft RTS under Article 4(9) of the BMR is to further specify aspects of the governance arrangements of the administrator, such as the organisational structure and the roles and responsibilities for persons involved in the provision of a benchmark. In this way the draft RTS expand the governance arrangements to provide administrators with a practical indication on how to implement Article 4(1) of the BMR in their organisations.
- The proposed approach of the draft RTS under Article 12(4) of the BMR is to ensure that the methodology complies with the requirements of Article 12(1) of the BMR and promote a consistent methodological framework across different administrators of benchmarks to the benefit of users.
- The proposed approach of the draft RTS under Article 14(4) of the BMR for the characteristics for the systems and controls is to ensure the integrity of input data in order to be able to report to the Member State national competent authority (NCA) any conduct that may involve manipulation or attempted manipulation of a benchmark.
- Both administrators of critical benchmarks and NCAs will benefit from the application of the proposed draft RTS under Article 21(5) of the BMR. The draft RTS contain a set of criteria to be taken into account by NCAs ensuring that Article 21(2)(b) of the BMR is applied consistently throughout the EU.
- Both administrators of non-significant benchmarks and NCAs will benefit from the application of the proposed RTS under Article 26(6) of the BMR. The draft RTS contain a set of aspects to be taken into account by NCAs when reviewing the compliance statement of an administrator of non-significant benchmarks. The application of these elements by NCAs in their review would ensure that Article 26(4) of Regulation (EU) 2016/1011 is applied consistently throughout the EU.
The draft RTS will be submitted to the European Commission. The Commission has three months to decide whether to endorse the regulatory technical standards.