This month, the UK’s Financial Conduct Authority (FCA) launched an early draft application process for organizations that wish to be authorized or registered as a benchmark administrator under the EU’s Benchmark Regulation (BMR).
Ahead of the formal BMR application process, which commences on January 1, 2018, UK-based administrators can now complete and submit draft application forms on the FCA’s online system, right up until December 31, 2017. The FCA has opened this early registration period to streamline the process for benchmark administrators, and to help ensure registration proceeds in a straightforward and efficient manner. However, the FCA warns administrators that subsequent changes may be required for the final BMR registration process, pending publication of its final rules.
BMR ushers in a new and more stringent benchmark regime in Europe. Under the Regulation, firms that offer high-value ‘Critical’ or ‘Significant’ benchmarks such as commodity and interest rate benchmarks must seek full authorization, while registration will be required for ‘supervised entities’ such as banks, credit institutions, investment firms, and others offering ‘Non-Significant’ benchmarks.
Buy-Side firms in the UK must look to their operations and seek to understand whether they need to register as administrators under the Regulation. While most buy-side firms will be defined as benchmark users under BMR, some that blend or tailor benchmarks may well be considered administrators and therefore compelled to register. For more information on whether your firm needs authorization, or registration, you can visit the FCA’s dedicated page.
It should be noted that most buy-side firms will still be affected by the Regulation regardless of whether they are benchmark administrators or not. As users of benchmarks, buy-side firms have their own set of obligations, such as the need to ensure replacement benchmarks are identified and available for use in the event an existing benchmark is withdrawn. RIMES is therefore advising all buy-side firms to inventory their benchmarks ecosystem to identify their risk exposure under BMR. To find out if you’re going to be affected by the BMR, you can complete our questionnaire.
The FCA’s latest intervention is welcome news for benchmark users and administrators in the UK. Not only will it help administrators transition to the new regime with greater ease, but it will help benchmark users by providing new clarity over where the benchmarks market is heading as a result of BMR.
With the enforcement date for BMR approaching fast, RIMES is advising buy-side firms to audit how they use benchmarks to determine their risk exposure under the new regime. Similarly, firms should inventory the benchmarks they use to understand how they will be affected by the Regulation, and put in place a list of potential replacement benchmarks to mitigate the consequences of any market withdrawal.
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