OR02/2015 Review of the Implementation of IOSCO's Principles for Financial Benchmarks

Review of the Implementation of IOSCO's Principles for Financial Benchmarks The Board OF THE INTERNATIONAL ORGANIZATION OF SECURITIES COMMISSIONS OR02/2015 FEBRUARY 2015 ii Copies of publications are available from: The International Organization of Securities Commissions website www.iosco.org © International Organization of Securities Commissions 2015. All rights reserved. Brief excerpts may be reproduced or translated provided the source is stated. Statement by IOSCO: Certain IOSCO authorities may consider rule proposals or standards that relate to the substance of this report. These authorities provided information to IOSCO or otherwise participated in the preparation of this report, but their participation should not be viewed as an expression of a judgment by these authorities regarding their current or future regulatory proposals or of their rulemaking or standards implementation work. This report thus does not reflect a judgment by, or limit the choices of, these authorities with regard to their proposed or final versions of their rules or standards. iii Contents Chapter Page Executive Summary 1 1 Introduction 2 1.1 Background 1.2 Summary of the Principles 1.3 Implementation and Proportionality 1.4 Regulatory Action by IOSCO Members or relevant National Authorities 1.5 Purpose of the Review 1.6 Review Methodology 1.7 Review Team 2 Key Findings 7 2.1. State of Compliance 2.2. Reasons for Non-compliance 2.3. Process to Achieve compliance 2.4. Planned Measures for Future Compliance 2.5. Administrators’ Understanding of Proportionality 3 Conclusions 13 3.1. Level of Implementation and Changes in line with the Principles 3.2. Publication of Information 3.3. Applying the Concept of Proportionality 3.4. Transition of Benchmarks to new Administrators and Cessation of Benchmarks 3.5. Divergences in Implementation across Asset Classes 3.6. Issues for Further Consideration Annex 1 Chart representing the steps towards compliance and detail of compliance statement for each of the reviewed Benchmarks 16 1 Executive Summary The IOSCO Principles for Financial Benchmarks were published in July 2013 with the aim of creating an overarching framework of Principles for Benchmarks used in financial markets, covering governance and accountability as well as the quality and transparency of Benchmark design and methodologies. IOSCO does not expect a “one-size-fits-all” method of implementation to achieve the objectives of the Principles. The Final Report acknowledges that the implementation of the Principles will not be identical for each Benchmark but may be met in different ways depending on the specificities of individual Benchmarks. When adopting the Principles, IOSCO mandated that an implementation Review be carried out within 18 months following the publication of the Principles. This Report sets out the findings of that Review. The Review was conducted by taking a sample of 36 Benchmarks (which are provided by 23 Administrators) that are either widely used or sector-specific Benchmarks, across a variety of regions and assets classes. Information was collected directly from the Administrators through a questionnaire and indirectly though examination of any statements of compliance they had published. As such, this Review is based only on Administrators’ self-assessments of their compliance with the Principles. There was a high rate of response to the Review by the Administrators of the Benchmarks reviewed. In many cases Administrators stated that they have used the Principles in order to perform a gap analysis on their policies and procedures and the majority of Administrators stated that they had taken steps to implement some or all of the Principles, with many reporting ongoing work. The most changes were reported in relation to the implementation of the Principles concerning governance arrangements. There was also a significant amount of work reported around analysing Benchmark design with some Administrators stating that they had moved from a Benchmark based on Submissions to one anchored in transactions. Examples were also found of Administrators electing to wind-down individual tenors or whole Benchmarks where the level of data was not sufficient for the Administrator to be satisfied that the Benchmark would be robust. As noted, the Principles are intended to be applied in a proportionate manner, where appropriate. Around half of the Administrators of the Benchmarks reviewed stated that they had applied proportionality in their implementation of the Principles. This was most frequently applied to Principle 14 which concerns Submitter Codes of Conduct. The level of proportionality was not always clear in statemen