EUROPEAN UNION: ESMA Updates Q&A’s on the Benchmark Regulation

Monday December 18 2017

On 14^th December 2017, the European Securities and Markets Authority (ESMA) published updated Questions and Answers (Q&As) regarding the implementation of the Benchmarks Regulation (BMR).

Please see below updated questions:

1. Are EU index providers required to comply with the obligations laid down in the BMR before they are authorised or registered?
2. Article 34(2) of the BMR “Authorisation and registration of an administrators” states that “an authorised or registered administrator shall comply ‘at all times’ with the conditions laid down in the Regulation”. This wording suggests that only an authorised or registered administrator is required to comply with the BMR’s conditions. “Conditions”, in this context, should be understood as encompassing the requirements imposed by the BMR on administrators.

Paragraph (4) of the same Article states that “the applicant [index provider] shall provide all information necessary to satisfy the competent authority that the applicant has established, at the time of authorisation or registration, all the necessary arrangements to meet the requirements laid down in this Regulation”. Also this paragraph clearly indicates that index providers, in order to be authorised or registered as administrators, must be in a position to meet the requirements of the BMR at the time of authorisation or registration, i.e. not before that date. Therefore EU index providers are required to comply with the obligations laid down in the BMR only at the time of authorisation or registration.

1. Are supervised entities, other than administrators, required to have robust written plans for cessation or material changes of a benchmark and to reflect them in the contractual relationship with clients as of 1 January 2018?
2. Yes, Article 28(2) of the BMR applies as of 1 January 2018. Therefore, as of this date, supervised entities, other than administrators, are required to produce and maintain robust written plans setting out the actions that they would take in the event that a benchmark they are using materially changes or ceases to be provided.

ESMA considers that supervised entities, other than administrators, are required to reflect such plans in the contractual relationship with clients in contracts entered into after 1 January 2018. In relation to contracts entered into prior to 1 January 2018 and still existing at that date, ESMA expects supervised entities, other than administrators, to amend them where practicable and on a best-effort basis.

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