Benchmarks

Steven Maijoor, Chair of the European Securities and Markets Authority (ESMA), has delivered a speech on the Benchmarks Regulation, and related issues, at a conference organised by the Comisión Nacional del Mercado de Valores (CNMV) in Madrid this lunchtime.

In his speech Mr. Maijoor focused on ESMA's role under the Benchmarks Regulation, in particular the implementation of the 3rd country regimes, the advice it provides to national competent authorities and it's role as a member of the colleges of European critical benchmarks - LIBOR, EURIBOR and EONIA. He also outlined ESMA's future supervisory responsibilities relating to 3rd country benchmarks administrators and EU critical benchmarks under the ESAs Review.

He also reflected on ESMA's active participation in the on-going global work in reforming interest rates including its participation in FSB and IOSCO groups along with role in the ​EUR Working Group on euro risk-free rates ​together with the European Central Bank, European Commission and the Belgian Financial Services and Markets Authority. 

The European Securities and Markets Authority (ESMA) and the Australian Securities and Investments Commission (ASIC) are pleased to announce that they have signed a Memorandum of Understanding (MoU) setting out cooperation arrangements in respect of Australian benchmarks.

The EU Benchmarks Regulation (BMR) prescribes a European common framework to ensure the integrity and accuracy of benchmarks used in the EU.

On 29 July 2019, under Article 30 of Regulation (EU) 2016/1011, the European Commission recognised Australia’s legal and supervisory framework applicable to the administrators of certain financial benchmarks as equivalent to the corresponding requirements under the BMR, and recognised that those requirements are subject to effective supervision and enforcement.

This decision will allow benchmarks declared significant by ASIC (BBSW, S&P/ASX200, Bond Futures Settlement Price, CPI, and Cash Rate) to be used in the EU by EU-supervised entities.

The MoU sets out appropriate cooperation arrangements to complement the EU’s equivalence decision, as well as to ensure effective information exchange and supervisory coordination. Under it, both authorities agree to provide each other with the fullest cooperation permissible under their laws and regulations in relation to all relevant information and supervisory activities regarding the covered benchmarks.

Both authorities agree to confidentiality requirements for any information shared, requests made, and contents of the requests made, under the MoU.

The MoU was signed on 9 October 2019 by James Shipton, the Chair of ASIC, and by Steven Maijoor, the Chair of ESMA.

Commenting on the MoU, James Shipton said:

“Enhancing and improving regulatory cooperation with our international counterparts is a priority for ASIC. We are very pleased to announce this agreement and look forward to our cooperation with ESMA in the future.

Benchmarks play a vital role in cross-border financial transactions and international regulators need to work together to ensure their integrity and accuracy.  

When we provide mutual assistance to each other and exchange views and information, this helps ASIC to achieve its vision for a fair, strong and efficient financial system for all Australians”.

Steven Maijoor, ESMA Chair, said:

 “The use of financial benchmarks in global capital markets is important for market participants and their accuracy and reliability needs to be ensured at all times. In order to help regulators achieving these objectives, I am pleased that the ESMA-ASIC Memorandum of Understanding will support European regulators and ASIC to work together on a sound legal basis.”

ASIC is Australia's integrated corporate, markets, financial services and consumer credit regulator. ASIC is an independent Commonwealth Government body. Its vision is for a fair, strong and efficient financial system for all Australians.

ESMA is the European Union’s regulator for securities markets. Its mission is to enhance investor protection and promote stable and orderly financial markets.

Equivalence

Article 30 of Regulation (EU) 2016/1011 (Benchmarks Regulation or BMR) empowers the European Commission to adopt implementing decisions stating that the legal and supervisory framework of a third country with respect to specific administrators or specific benchmarks or families of benchmarks are equivalent to the requirements under BMR.

On 29 March 2017, the United Kingdom of Great Britain and Northern Ireland (UK) invoked Article 50 of the Treaty on European Union (TEU) which triggered the process for its withdrawal from the European Union (EU), or Brexit. The invocation procedure provides that after a negotiation period of up to two years, the TEU cease to apply to the Member State which invoked Article 50.  

ESMA initiated a systematic analysis of the potential impact of a no-deal Brexit for EU securities markets and for ESMA as an organisation, when it was preparing for a potential no deal scenario on 29 March 2019 and 12 April 2019, and communicated to the market on its contingency planning.

On 10 April 2019, the European Council (Council) agreed a further extension to Brexit until 31 October 2019 to allow for the ratification of the Withdrawal Agreement by both Parties. If the Withdrawal Agreement fails to be ratified and no further extension is agreed by the Council, the UK will leave the EU on 31 October 23:00 (UK time).

The reference date for Brexit in all of ESMA’s previously published measures and actions, including public statements, issued regarding the possibility of a no-deal Brexit scenario, should now be read as 31 October 2019. The full list of statements and measures issued previously is available on ESMA’s website and also included in the annex to this statement.

Some of the measures announced need updating in case of a no-deal Brexit on 31 October 2019, so ESMA is issuing today updated measures in the following areas:

-       Public Statement on the Use of UK data in ESMA databases and performance of MiFID II calculations updating the communication issued on 5 February 2019.

-       Public Statement on the Impact of no-deal Brexit on MiFID II/MiFIR and the Benchmark Regulation (BMR) – C(6) carve-out, ESMA opinions on third-country trading venues for the purpose of post-trade transparency and position limits, post-trade transparency for OTC transactions, BMR ESMA register of administrators and 3rd country benchmarks calculations updating the communication issued on 7 March 2019.

-       Public Statement on Operational plans related to ESMA databases and IT systems updating the communication issued on 19 March 2019.

Next steps

There is still a high level of uncertainty as to the final timing and conditions of Brexit, and should these change, ESMA will adjust the approach for its IT applications and databases and will inform the public of the adjusted approach as soon as possible.

 

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