In this special series, we’re reporting on the highlights of the RIMES II Client Conference EMEA 2018, which took place in London on May 2.
For the sixth session of the RIMES Client Conference 2018, Jochem Kimman, Senior Supervision Officer at the Dutch Authority for the Financial Markets (AFM), joined us to discuss benchmarks identification and transparency in relation to the EU Benchmarks Regulation (BMR).
Jochem started his presentation by highlighting that BMR is at the forefront of supervisory efforts in the Netherlands. One of the key challenges he is seeing in the market relates to indices that are not clearly identified, such as cryptocurrency. For Jochem, it is essential that financial sector firms know exactly which indices they use, which are classified as benchmarks, and whether their use is regulated under BMR.
When it comes to identifying indices, regulatory reporting in the EU currently calls for the International Securities Identification Number (ISIN) of an index, or the name of the index. However, Jochem explained that this approach can be challenging, not least because there can be many different names for the same index. For example, the most commonly reported equity index under the EMIR regulation is the ‘S&P 500 index’, but this can also appear as ‘SP500’.
Creating a standard name for each index can be problematic for several reasons. As Jochem set out, these include knowing whether to use a trademarked name or a full name, how to deal with special characters and managing challenges that stem from reporting standards – for example, the reporting standards for MAR only allow 25 characters to name an index.
When it comes to BMR, these considerations are important as they relate to ESMA’s register of authorized benchmarks. Currently, the name and ISIN of benchmarks by EU administrators are not included in the register. Additionally, the register does not include the name of failed applicants, and entries on the register can be withdrawn. As a result, the register should be seen as a tool rather than as a solution to benchmarks identification challenges.
For Jochem, discipline is key. Firms should use the ISIN as much as possible and always be precise with naming conventions in their IT systems and documentation. Meanwhile, benchmark Administrators should look to publish complete lists of indices they produce. From there, authorities should take it as their responsibility to make sure the names on the ESMA register are accurate and up-to-date. Jochem finished his presentation by reminding the audience that ESMA is due to publish guidance on how to report indices, which should help improve the overall quality of the resulting compliance data.
Join us again for the next blog in this series, where we will look at the topic of trade surveillance and compliance in a post-MAR world.
The content provided in these articles is intended solely for general information purposes, and is provided with the understanding that the authors and publishers are not herein engaged in rendering regulatory or other professional advice or services. Consequently, any use of this information should be done only in consultation with qualified legal counsel. The information in these articles was posted with reasonable care and attention. However, it is possible that some information in these articles is incomplete, incorrect, or inapplicable to particular circumstances or conditions. We do not accept liability for direct or indirect losses resulting from using, relying or acting upon information in these articles.
- ESMA Consults on Broadening the Scope of MAR
- EU Regulators Turn Tough on Market Surveillance Compliance
- SOTERIA and RIMES Technologies Partner to Provide a Real-Time Integrated Trade and Communication Surveillance Solution for Financial Services Firms
- The ETF Market is About to Explode: Is Your Firm Ready?
- RIMES Hires New Head of Sales for Asia