AIMA

Indices as Benchmarks

The recent alleged manipulation of LIBOR, EURIBOR and TIBOR has highlighted the importance and vulnerabilities of indices used as benchmarks.  The integrity of benchmarks is central to the pricing of many financial instruments - such as IRSs, FRAs - and also plays an important role in risk management.  It is considered that any doubts about the accuracy and integrity of indices could undermine market confidence, cause significant among consumers and investors, as well as distort the real economy.  A number of initiatives have already been launched globally to help deal with issues in relation to benchmark manipulation, including the UK Wheatley Review of LIBOR and IOSCO work relating to oil price reporting.

At EU level, the European Commission (EC) has amended its MADII/MAR proposals to clarify the unequivocal illegality of any manipulation of benchmarks, subject to administrative or criminal sanctions.  It, nonetheless, believes that further work beyond sanctioning is necessary and is currently considering a potential framework directive which will harmonise the method of production and use of benchmarks across the EU.

In September 2012, the EC issued a Consultation which sought to assess how to improve the production and governance of benchmarks at so that they accurately reflect the economic realities that they are intended to measure and are used appropriately.  AIMA submitted a response.

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Key legislative documents

ESMA and EBA Principles on Benchmarks (June 2013)

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Relevant consultations

IOSCO

IOSCO Consultation on Principles for Financial Benchmarks (April 2013) 

IOSCO Consultation on Financial Benchmarks (January 2013)

EC

EC Consultation on a Possible Framework for the Regulation of the Production and Use of Indices as Benchmarks (September 2012)

ESAs

ESMA-EBA Consultation on Principles for Benchmarks-Setting Processes in the EU (January 2013)

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AIMA documents

Response to EC Consultation on Possible Framework for the Regulation of the Production and Use of Indices as Benchmarks (November 2012)

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Other documents

The Wheatley Review of Libor - Final Report (September 2012)