IOSCO published a statement setting out matters for users of financial benchmarks to consider in selecting an appropriate benchmark and in contingency planning, particularly for scenarios in which a benchmark is no longer available.
The statement sets out matters for users of benchmarks to consider, which fall into two categories. First, there are matters related to assessing the appropriateness of a benchmark, in both its initial selection and ongoing use. Second, there are matters related to contingency planning, such as if the selected benchmark becomes unavailable. In both cases, the statement recognizes user reliance on benchmarks, aims to increase awareness of the risks involved, and encourages their mitigation, where appropriate. The statement recognizes that, in many instances, users of benchmarks may not be able to provide any input to the characteristics of a benchmark or the terms of existing financial instruments which reference them. In cases where a benchmark is used in a contract between a financial firm and a retail client, for example, the retail client is likely to have little ability to change contractual terms. The financial firm is likely to have responsibilities toward that client.
In July 2013, IOSCO had published the Principles for Financial Benchmarks, which addressed conflicts of interest in benchmark-setting processes as well as other matters related to benchmarks. The statement does not supersede existing laws, regulations, guidance, or standards or relevant regulatory or supervisory frameworks in specific jurisdictions, including any IOSCO Principles or undertakings agreed with regulators related to a specific type of benchmark or related action. Rather, the statement is intended to help inform benchmark users and to complement the existing IOSCO Principles.
Related Link: Press Release and Statement (PDF)
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