EUROPEAN UNION: EFAMA issues response to ESMA Consultation Paper on Benchmarks Regulation

Friday July 1 2016

The European Fund and Asset Management Association (EFAMA) has issued its response to the ESMA Consultation Paper on Draft Technical Advice under the Benchmarks Regulation.

The EFAMA response addresses, amongst other issues, the following:

The conditions on the basis of which an index may be made available to the public

EFAMA considers it a pre-condition that the indices would have to be accessible to an indeterminate and open group of recipients in order for them to be considered “made available to the public”. However, they state that it is not fully clear what is meant as “at least potentially accessible”, as any given index is either accessible to/by an open group of recipients or not. EFAMA believes that the mere fact of the availability of the index to one or more supervised entity users cannot imply its availability to the wider public neither can it deem the index as potentially accessible to an open group of recipients.

The use of licensing agreements to identify financial instruments referencing benchmarks and whether this approach would be useful in particular in the case of investment funds

EFAMA considers that the publicly available data is the main and feasible way for a benchmark administrator to have access to data concerning the NAV of a fund. The licensing agreements are not the optimal means of access to such data as they will not necessarily lead to accurate results. The relevant data are not necessarily part of these agreements.

Considering licensing agreements as the optimal way to identify the value of investment funds referencing a benchmark, gives a regulatory priority over other means of identification, such as the latest publicly available NAV and for that reason might have undesirable effects on the pricing of these licensing agreements to the detriment of the users.

Other areas considered by EFAMA in its response include the definition of the “issuance of a financial instrument”, the measurement of the NAV of a fund, the criteria as to the definition of a critical benchmark and the transitional provisions.

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