Benchmarks Regulation

The Benchmarks Regulation introduces a regime for benchmark administrators that will ensure the accuracy and integrity of financial benchmarks in Europe. The Regulation entered into application across the EU on 1 January 2018.

The Regulation defines a benchmark as any index that determines the amount payable under a financial instrument or a financial contract, or the value of a financial instrument. It further includes in the definition indices that are used to measure the performance of an investment fund with the purpose of tracking the return of such index, or of defining the asset allocation of a portfolio, or of computing the performance fees.

The Benchmarks Regulation has the following objectives:

  • Improving governance and controls over the benchmark process, in particular to ensure that administrators avoid conflicts of interest, or at least manage them adequately;
  • Improving the quality of input data and methodologies used by benchmark administrators;
  • Ensuring that contributors to benchmarks and the data they provide are subject to adequate controls, in particular to avoid conflicts of interest;
  • Protecting consumers and investors through greater transparency and adequate rights of redress.
    The scope of the Benchmarks Regulation is broad. Administrators of benchmarks must apply for authorisation and are required to have appropriate governance arrangements and controls to avoid conflicts of interest

The Benchmarks Regulation requires contributors to benchmarks to follow a code of conduct to ensure the use of robust methodologies and sufficient and reliable data. In particular, it calls for the use of actual transaction input data where possible.

Critical benchmarks: Commission Implementing Regulation (EU) 2016/1368 of 11 August 2016 establishing a list of critical benchmarks used in financial markets pursuant to Regulation (EU) 2016/1011 of the European Parliament and of the Council.

Benchmarks deemed critical are subject to stricter rules, including the power for the supervising authority to mandate contributions of input data.

Read more about Benchmarks Legislation.