Industry update regarding the European Benchmarks Regulation
We would like to take this opportunity to thank you for your help in securing the clarifications that have recently been provided by the European Securities and Markets Authority in the form of Questions and Answers in relation to the European Benchmarks Regulation. Such clarifications are vital to our members’ ability to design and implement compliance programmes to meet the regulation’s requirements.
We also wanted to provide you with an update in respect of our members’ work towards demonstrating compliance with Article 28(2) of the regulation. This provision requires supervised entities that use a benchmark to produce robust written plans setting out the actions they would take in the event that a benchmark materially changes or ceases to be provided. It provides that, where feasible and appropriate, such plans shall nominate one or several alternative benchmarks that could substitute the benchmarks no longer provided, indicating why such benchmarks would be suitable alternatives. It also requires supervised entities to reflect the plans in the contractual relationship with their clients.
Readiness to demonstrate compliance by 1 January 2018
Where members consider that they and their financial instruments may fall within the scope of the regulation, we understand that they intend to have robust written plans in place by 1 January 2018 setting out the steps they would take in the circumstances referred to in Article 28(2) and that those plans will be consistent with the contractual terms they put in place with their clients. Due to the on-going discussions between industry and the regulatory community regarding the scope of the regulation, we expect that the creation and implementation of plans (including their reflection in contractual terms) will evolve during the course of 2018 as further regulatory clarity is provided.