The administration of indices used as benchmarks is subject to Regulation (EU) 2016/1011 of the European Parliament and of the Council of 8 June 2016. The Benchmarks Regulation aims to restore confidence in financial benchmarks by laying down a regulatory framework at European Union level covering the provision, contribution and use of benchmarks.
The Benchmarks Regulation defines an index as any figure:
A benchmark means any index "by reference to which the amount payable under a financial instrument or a financial contract, or the value of a financial instrument, is determined, or an index that is 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".
A benchmark administrator within the meaning of the Benchmarks Regulation is a "natural or legal person that has control over the provision of a benchmark".
Provision of a benchmark means "administering the arrangements for determining a benchmark, collecting, analysing or processing input data for the purpose of determining a benchmark; and determining a benchmark through the application of a formula or other method of calculation or by an assessment of input data provided for that purpose".
The Benchmarks Regulation introduces requirements for benchmark administrators who must comply with rules on governance, conflicts of interest, the introduction of controls, benchmark transparency to users and investors and the introduction of a code of conduct for contributors.
Benchmarks Regulation requirements reflect the importance of the benchmark concerned, i.e. on whether the benchmark is critical, significant or non-significant. Special requirements also apply to interest rate and commodity benchmarks, supplementing or replacing the main requirements of the Benchmarks Regulation.
Critical and significant benchmarks are defined in articles 20 and 24 of the Benchmarks Regulation. A benchmark is non-significant if it does not fulfil the conditions for consideration as a critical or significant benchmark.
Administrators must be authorised or registered by their competent national authority if they are located in the European Union, or via one of the three third country methods if they are established outside the European Union, to ensure that the indexes they provide can be used in the European Union. AMF is the competent authority for France.
Before a benchmark provided by a benchmark administrator located in a third country can be used in a Member State of the European Union, the European Commission must adopt an equivalence decision for its country of origin, pursuant to article 30 of the Benchmarks Regulation.
If there is no equivalence decision:
Article 51 of the Benchmarks Regulation also includes transitional provisions that allow benchmarks provided by an administrator located in a third country and already in use in the European Union to continue to be used in new contracts, financial instruments and investment funds until 31 December 2021 while awaiting an equivalence decision or preliminary recognition or endorsement.
As of 1 January 2018, ESMA will maintain a public register on its website that contains:
The register will enable supervised entities that use benchmarks to check that, pursuant to article 29 of the Benchmarks Regulation, those benchmarks have been provided by administrators that are authorised or registered by ESMA or, if the benchmark is provided by an administrator located in a third country, that the benchmark itself is registered by ESMA.
Metori Capital Management
Compass Financial Technologies
Napoleon Index SAS
Scientific Beta France SAS
Epex Spot SE