The FCA has published a speech by Edwin Schooling Latter (Head of Markets Policy, FCA) entitled Do I need to worry about benchmark regulation?
At the beginning of his speech Mr Latter briefly discusses why benchmark regulation is needed. He then turns to the EU Benchmarks Regulation, setting out its key requirements. He then discusses what firms should be doing and this includes:
- firms are urged not to wait until the Level 2 process is finished before taking steps to focus on the risks the Regulation is seeking to address. Firms are also urged not to only focus on what is now set to be the scope of the Regulation. Indices that are outside the perimeter of the Regulation may also present risks for which controls could be important;
- the Regulation is not only a matter for benchmark administrators and submitters. Users will also be affected. Where administrators fail to become authorised or registered in the EU, their benchmarks will no longer be available for use;
- users should make sure they are aware of which benchmarks they use and seek assurance from the administrators of these benchmarks that they are aware of the Regulation and have plans to comply with it. This is particularly important where the benchmarks are provided by smaller administrators, especially third countries; and
- users should start thinking about potential alternative benchmarks in case any benchmark they currently use becomes unavailable. Contingency plans such as robust contractual fall back clauses are necessary in case a benchmark cannot be used, or is no longer available.
View FCA speech on UK impact of Benchmark Regulation, 4 February 2016