Introduction

On 12 December 2024, the European co-legislators and the European Commission (Commission) reached an agreement in trilogue negotiations on the amendments to the EU Benchmarks Regulation (EU BMR). By way of background, the Commission published proposed amendments to the EU BMR in October 2023 (see our note), with the main objective to narrow down the scope of benchmarks subject to the legislation and to simplify the rules for in-scope benchmarks. Whilst the formal adoption of the revised EU BMR and publication of the final text in the EU Official Journal are still pending (the latter is expected towards the end of Q1 2025), the following article sets out what firms know about the content of the agreed amendments.

Scope of EU BMR

In line with the Commission’s proposal, the revised EU BMR substantially reduces the number of benchmarks subject to its requirements. The broadest category of non-significant benchmarks is removed, therefore leaving the scope limited to critical and significant benchmarks, as well as EU Climate Transition and EU Paris-aligned benchmarks, and certain commodity benchmarks based on contributions from the majority of non-supervised entities. There are two mechanisms by which benchmarks can be deemed as significant (see more below): threshold-based and designation based on prescribed qualitative criteria.

Significant benchmarks: thresholds

In accordance with the revised EU BMR, a benchmark will be deemed as significant if it is used as a reference for financial instruments, financial contracts or to measure the performance of investment funds, that have a total average value of at least EUR 50 billion. An administrator whose benchmark exceeds this threshold is obliged to notify the competent authority of the Member State (NCA) where it is located, or – in case of third-country benchmarks – the European Securities and Markets Authority (ESMA).  Administrators of newly identified significant benchmarks will have 60 working days from the date they submitted their notification about exceeding the threshold, to seek authorisation or registration. Failure to notify an exceeded threshold by an administrator is not a “way out”: ESMA or an NCA will be able to declare that the threshold has been exceeded and such declaration will trigger the same obligations for the benchmark administrator as a self-notification. In addition, it should be noted that NCAs and ESMA will be able to impose administrative sanctions on administrators that fail to notify that one of their benchmarks exceed the applicable threshold.

Significant benchmarks: designation

As indicated above, the revised legislation foresees the possibility for NCAs to designate, upon consulting ESMA, an EU benchmark as significant based on a set of qualitative criteria. The relevant criteria (cumulative) are as follows:

  • The benchmark has no, or very few, market-led substitutes.
  • Cessation of the provision of the benchmark, or provision of such benchmark being no longer representative of the market, would have a significant and adverse impact on market integrity, financial stability, consumers, the real economy or the financing of households and businesses in that Member State.
  • The benchmark has not been designated by an NCA in another Member State.

The designation process is set out in the revised EU BMR. The legislation also provides for the possibility for NCAs to designate a benchmark as significant based on a voluntary request by an administrator and subject to certain conditions, including a minimum EUR 20 billion threshold of total average value of references in financial instruments, financial contracts or for measuring the performance of investment funds.

Commodity benchmarks

The revised EU BMR distinguishes between two different types of commodity benchmarks: the first category includes commodity benchmarks subject to the same rules as financial benchmarks and based on readily-available data, the second category captures commodity benchmarks based on input data contributed in majority by non-supervised entities. Whilst the former will be treated in the same manner as financial benchmarks, i.e. only in scope if deemed critical or significant, the latter remain within scope of the legislation if they exceed a de minimis threshold of EUR 200 million of the total average notional value of financial instruments referencing the benchmark over a period of 12 months.

Spot foreign exchange benchmarks

The revised EU BMR includes a mandate for the Commission to exempt certain spot foreign exchange (FX) benchmarks to ensure that EU users continue to have access to hedging instruments based on such benchmarks.

The legislation prescribes criteria that will have to be met by benchmarks eligible for exemptions, this includes the following:

  • The spot FX benchmark references a spot exchange rate of a third-country currency to which currency controls apply.
  • The spot FX benchmark either is used on a frequent, systemic and regular basis to hedge against adverse FX rate movements or does not have an equivalent alternative benchmark provided by an EU administrator.

The Commission will be obliged to conduct a public consultation prior to identifying spot FX benchmarks that meet the relevant criteria. Following consultation, the Commission is required to adopt an implementing act to establish and maintain a list of exempted FX benchmarks. Until such time as the Commission has adopted an implementing act to exempt certain FX benchmarks, the application of any usage restrictions will be deferred for spot FX benchmarks provided by administrators located outside the EU.

EU Climate Transition and Paris-aligned Benchmarks

The revised EU BMR deletes a provision that required administrators of significant benchmarks to endeavor to provide an EU Climate Transition or an EU Paris-aligned Benchmark. Instead, the legislation now encourages benchmark administrators to provide such benchmarks in the EU. That said, acknowledging that EU Climate Benchmarks and EU Paris-aligned Benchmarks are specific categories of benchmarks, the legislation submits such benchmarks and their administrators to mandatory registration or authorisation, or – in case of third-country benchmarks – to recognition or endorsement.

Third-country benchmarks

The revised EU BMR seeks to align the treatment of third-country benchmarks with those applicable to EU ones. As such, only administrators of such third-country benchmarks that would be deemed critical or significant in the EU would need to seek a license to provide their benchmarks in the EU. Such requirement will also apply to third-country commodity benchmarks.

ESMA will be given powers to designate a third-country benchmark, which does not meet the threshold criteria, as significant based on a cumulative set of criteria:

  • The benchmark has no, or very few, market-led substitutes.
  • Cessation of the provision of the benchmark, or provision of such benchmark being no longer representative of the market, would have a significant and adverse impact on market integrity, financial stability, consumers, the real economy or the financing of households and businesses in one or more Member States.

The procedure for designating third-country benchmarks is set out in the revised EU BMR.

The revised EU BMR makes recognition of third-country benchmarks a permanent measure by which administrators of such benchmarks will be able to secure access to the EU markets. It also aligns the recognition and endorsement regimes by making ESMA a single competent authority for third-country benchmarks, therefore applications for endorsements will also have to submitted to ESMA. The revised EU BMR makes targeted changes to the procedure for recognition, notably requiring that a legal representative of a third-country administrator in the EU be a legal person located in the EU (currently legal representative function can be performed by a natural person) and allows ESMA to impose supervisory measures on the legal representative and the administrator alike, for infringements of the EU BMR and/or for failure to cooperate with ESMA in an investigation, inspection or request for information. An equivalence regime remains in place but – as has been the case to date – it is expected to have limited application.

Benchmarks identification

Although not a mandatory provision, the revised EU BMR encourages administrators to obtain a legal entity identifier (LEI) and an International Securities Identification Number (ISIN) for the benchmarks they provide, and to communicate such identifiers to the relevant NCAs. In addition, the revised EU BMR sets out an expectation for the entities in charge of issuing LEIs and ISINs to provide access to them on a fair and non-discriminatory basis.  

Regulatory powers

The NCAs and ESMA will be able to issue warnings concerning significant benchmarks that do not comply with the relevant requirements. Following the issuance of such a warning, supervised entities will no longer be allowed to add new references to such benchmarks or combination of benchmarks, and for exiting references they will have to replace such benchmark with an alternative within a limited period of time. The same regulatory powers apply in relation to the EU Climate Transition Benchmarks and EU Paris-aligned Benchmarks.

Next steps

The revised EU BMR is set to become applicable, subject to transitional provisions, on 1 January 2026.

For any additional information or assistance concerning EU BMR please contact anna.carrier@nortonrosefulbright.com