The purpose of the Financial Markets Law Committee (FMLC) is to identify issues of legal uncertainty, or misunderstanding, present and future, in the framework of the wholesale financial markets which might give rise to material risks, and to consider how such issues should be addressed.

The FMLC has recently published a letter that it has sent to Rupert Thorne, Deputy to the Secretary General, Financial Stability Board (FSB) which discusses certain reform initiatives in the field of commodity benchmarks. Points the FMLC raise include:

• the FMLC endorse the initiatives concerning the International Organization of Securities Commissions’ final reports entitled Principles for Financial Benchmarks and Principles for Oil Price Reporting Agencies. However, the FMLC notes that these Principles are drafted at a high level and whilst their application may be desirable, detailed implementation may bear practical challenges and may require the development of separate regulatory tools;
• there are a number of measures being taken at the national or regional level in relation to the regulation of commodities benchmarks. However, unilateral national or regional action can lead to inconsistencies, gaps, overlaps, duplicative requirements and other legal uncertainties. In such circumstances the FMLC states that an overarching international enquiry into the appropriate objectives to be pursued by regulatory reform initiatives can assist in promoting inter-jurisdictional cohesion and legal certainty; and
• the FMLC believes that the FSB is well-placed to undertake such an inquiry and consideration should be given to adopting the approach that was taken in relation to the study on LIBOR benchmarks. In this instance, the FSB worked through the agency of the Official Sector Steering Group (which comprises capital markets regulators and representatives of central banks and garnered relevant industry experience by establishing the Market Participants Group) to undertake research. The FSB therefore benefitted from input and guidance from another international standard-setting body and a wide array of regulators and supervisors from multiple jurisdictions, as well as from industry participants.

View FMLC – The regulation of commodity benchmarks, 2 April 2015