The International Organization of Securities Commissions (IOSCO) has published a statement on setting out matters for users of financial benchmarks to consider in selecting an appropriate benchmark and in contingency planning, particularly for scenarios in which a benchmark is no longer available.

Among other things, the IOSCO statement notes that examples of relevant considerations of appropriateness for a user could be, to the extent they are applicable:

• the way in which the benchmark is determined, including the size, liquidity and potential evolution of the market being measured by the benchmark and other aspects of the relevant methodology, along with the transparency of the methodology;
• whether the benchmark provides an appropriately accurate and reliable representation of the market it seeks to measure, and is likely to remain so, and how factors that might result in a distortion of the price, rate, index or value of the benchmark are eliminated or reduced;
• in the case of interest rate benchmarks, whether or not it is desirable or necessary for the benchmark to include a term risk or credit risk element;
• how the benchmark is disseminated to users;
• the governance of, and accountability for, the benchmark determination process;
• the process by which changes to the benchmark’s methodology can be made, e.g. relevant consultation procedures;
• how the administrator deals with significant decisions affecting the compilation of the benchmark and any related determination process, including contingency measures in the event of insufficient or no inputs (e.g. the use of expert judgment), market stress or disruption, and failure of critical infrastructure;
• the provisions which could apply in the event of material changes to the benchmark and how they would operate in practice; and
• whether, and under what circumstances, provisions relating to cessation of the benchmark should apply.

Users of benchmarks are encouraged to consider the matters covered by the statement, as appropriate. However, the IOSCO statement does not supersede existing laws, regulations, guidance or standards or relevant regulatory or supervisory frameworks in specific jurisdictions, including any IOSCO Principles or undertakings agreed with regulators relating to a specific type of benchmark or related action. Rather, the statement is intended to help inform benchmark users and to complement existing IOSCO Principles.

View IOSCO statement on the use of financial benchmarks, 5 January 2018