Associates in Capital Markets (ACAPM) today, provided its response to the Benchmark Regulation Discussion Paper issued for feedback on 15th Feb 2016. It is published by European Securities and Market Authority (ESMA), under the auspices of the European Parliament and the Council, with the goal developing a consistent methodology to regulate indices used as benchmarks in financial instruments and financial contracts in the European Markets.
The following text sets the tone for the response provided by ACAPM.
"We are of the view that a uniform regulation for benchmarks is necessary for ensuring that the benchmarks produced and used in EU are “robust, reliable and representative” of the market/economic reality while maintaining a high level of consumer and investor protection.
A comprehensive regulation such as this would ensure that the benchmarks are not subjected to manipulation - through improved oversight, governance and control. This is a welcome sign especially in the wake of siloed national level legislations across Europe which tend to be fragmented and show divergence in various aspects of application. This makes it cumbersome for the administrators, contributors and users of the benchmark to effectively, track, implement or monitor.
While a harmonised benchmark regulation is a step in right direction for ensuring accuracy and integrity of benchmark, it is important that it should not be an overburden to the parties involved. The regulatory framework should be streamlined and consolidated where possible. This can be done through supervisory discretion where possible based on the nature, scale and complexity of the benchmark. However, it is also equally essential that the core principles of the proposed regulation should not be compromised in a way that the credibility of the benchmark may be put at risk. The regulation would achieve maximum effectiveness when there is optimum balance between regulatory oversight and ease of implementation. It is necessary to highlight this point since there are a number of nuances which need to be finalised before the release of the draft technical standards and technical advice.
It is also important to ensure that the regulation acts as a superset of all the regulations in the EU such as IOSCO principles, ESMA-EBA principles etc. to ensure a unified overarching regulation."