The International Organisation of Securities Commissions (IOSCO), representing the world’s securities regulators, has issued its final principles for financial market benchmarks, which have been issued in response to the Libor manipulation scandal, but do not insist upon transaction-based data in favour of a survey-based submitter model as was widely expected.
Those providing benchmark data for the reformed Libor regime, which will be controlled by NTSE Euronext in future, or commodities or other benchmarks have 1.5 years to comply with the heightened governance and methodology standards being recommended by IOSCO.
The head of the US Commodity Futures Trading Commission (CFTC), Gary Gensler, was pushing for a transaction-based approach, but the IOSCO taskforce he co-chaired with UK regulator Martin Wheatley has favoured the more relaxed submitter-type model.
“A benchmark should be based on prices, rates, indices or values that have been formed by the competitive forces of supply and demand and anchored by observable transactions [but] . . . this does not mean that individual benchmark determinations must be constructed solely or even predominantly by transactions,” the IOSCO statement read.
According to Wheatley: “Benchmarks are a useful and important tool in many financial markets. These principles set out clear and robust standards that will improve their construction and oversight of benchmarks, and form an important step in restoring their credibility.”