The European Commission has published a mandate it has sent to the European Securities and Markets Authority (ESMA) requesting technical advice on possible delegated acts concerning the Regulation on indices used as benchmarks in financial instruments and financial contracts (the Benchmarks Regulation).
In particular, the mandate notes that ESMA is invited to provide technical advice on:
- how to specify what constitutes: (i) making available to the public for the purpose of the definition of an index taking into account recital 8 of the Benchmarks Regulation and any other existing EU legislation on this matter; (ii) administering the arrangements for determining a benchmark taking into account different existing business practices; and (iii) the issuance of a financial instrument for the purposes of defining use of a benchmark;
- the appropriate measurement for measuring the nominal amount of financial instruments other than derivatives, the notional amount of derivatives and the net asset value of investment funds in both the direct case and also in the case of indirect reference to a benchmark within a combination of benchmarks for the purposes of assessing benchmarks under the thresholds in Article 13(1) and Article 14b(1)(a) Benchmarks Regulation;
- how the criteria referred in Article 13, paragraph 1(c), subparagraph (iii) of the Benchmarks Regulation are to be applied. The Commission states that consideration should be given to any numerical figure to assess on an objective ground the potential of the discontinuity or unreliability of the benchmark on market integrity, financial stability, consumers, the real economy or the financing of households and corporations in one or more Member States. The Commission adds that when developing its technical advice it should take into account that these criteria might have to be applied to markets and market participants of very different nature and size;
- measures to determine the conditions on which the relevant competent authorities may assess whether there is objective reason for the provision of a benchmark or family of benchmarks in a third country and their endorsement for their use in the EU. The Commission states that the technical advice should take into account issues such as the need for (geographical) proximity, the availability of input data and of the skills necessary for the provision of the benchmark in question; and
- how to determine the conditions on which the relevant Member State competent authority may assess whether the cessation or the changing of an existing benchmark to conform with the requirements of this regulation, could frustrate or otherwise breach the terms of any financial contract or financial instrument which references such benchmark.
The deadline set to ESMA to deliver the technical advice is four months after the entry into force of the Benchmarks Regulation which is expected to take place in late May or early June 2016.