IOSCO Publishes Numerous Comments in Response to its Report on Financial Benchmarks (with Lofchie Comment)
The International Organization of Securities Commissions ("IOSCO") published comments received in response to its report on financial benchmarks today. The European Central Bank ("ECB") favored IOSCO's call for greater regulation in the production of benchmark rates. The ECB stated, however, that the principles IOSCO adopts must be commensurate with the risk associated with producing the benchmark to prevent imposing unnecessary burdens on rate contributors. The ECB also stated that, in order for regulatory reform to be effective, the rules must be uniformly applied internationally to prevent regulatory arbitrage. The ECB agreed with IOSCO's principle that benchmark rates should be tied, where possible, to observable arm's length transactions.
Finally, the ECB suggested that any transition in rate calculations needed to be transparent, with contingency plans in place in the event a benchmark rate becomes unviable.
As of March 11, the following public comments were received by IOSCO on the "Financial Benchmarks - Consultation Report":
- ACT - Association of Corporate Treasurers
- AFMA, Australian Financial Markets Association
- Amundi
- Argus Media
- Association Francaise des Investisseurs Institucionnels AF2i
- Association Française de la Gestion Financière AFG
- Baltic Exchange
- Barclays, London
- BlackRock
- Bourse Africa Limited - Ms Bopelokgale Soko
- California Public Employees' Retirement System
- CFA Institute, London
- CME Group, Chicago
- Colorado Public Employees' Retirement Association
- Depository Trust Clearing Corporation DTCC
- EDHEC-Risk Institute
- Eurex, Frankfurt
- Euribor-EBF, Brussels
- European Central Bank
- European Federation of Energy Traders, Brussels
- European Structured Investment Products Association Eusipa, Brussels
- Federation of European Securities Exchanges, Brussels
- Financial Services Board, South Africa
- German Banking Industry Committee (sent their response to ESMA)
- Global Financial Markets Association GFMA
- Hong Kong Monetary Authority HKMA
- ICAP
- ICE Futures Europe/ICE Clear Europe Ltd
- ICIS, London
- IEA-IEF-OPEC
- Index Industry Association IIA
- ING
- Institute of Chartered Accountants in England and Wales ICAEW
- International Capital Market Association, London
- International Swaps and Derivatives Association ISDA
- Investment Company Institute and ICI Global
- Investment Management Association, London
- IPD, London
- Japanese Bankers Association, Tokyo
- Johannesburg Stock Exchange
- LCH Clearnet, London
- London Stock Exchange Group, London
- Markit, London
- MSCI Inc
- Nasdaq OMX
- Platts
- Prof. Rosa Abrantes Metz NYU
- Rate Validation Services
- Russel Investments, Seattle
- S&P Dow-Jones
- Standard Chartered Bank
- STOXX Ltd
- Thomson Reuters
- Vanguard Asset Management, Ltd, London
- VDP - Association of German Pfandbrief Banks, Berlin
- Wholesale Market Brokers Association London Energy Brokers Association
Lofchie Comment: I note that many of the commenters raised what seemed very reasonable objections to requiring that all benchmarks be based entirely on actual transactions applied in a mechanistic fashion. These objections seemed most significant in respect of benchmarks where there is a limited volume of trading. Hopefully, the regulators will take note of these objections, which were raised by both sell- and buy-side firms or groups of firms.
Click here to view announcement in full (links externally to IOSCO website).Related News Story: IOSCO Report on Financial Benchmarks; e.g., LIBOR (with Lofchie Comment).