2023/0379/COD: Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulation (EU) 2016/1011 as regards the scope of the rules for benchmarks, the use in the Union of benchmarks provided by an administrator located in a third country, and certain reporting requirements

The European Commission (EC) has published a new draft on proposed revisions to the Benchmark Regulation (BMR). The suggested modifications seek to simplify the regulation and reduce burdens for all stakeholders involved, including benchmark administrators, users, and supervisors. Additionally, the proposed changes are aimed at increasing competition among benchmark administrators by reducing entry barriers for smaller, non-significant benchmarks in the EU.
Specifically, the Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulation (EU) 2016/1011 as regards the scope of the rules for benchmarks, the use in the Union of benchmarks provided by an administrator located in a third country, and certain reporting requirements would, among others
– explicitly define the scope of benchmarks subject to the ENTIRE Benchmark regulation, namely: critical benchmarks, significant benchmarks, EU Paris-aligned Benchmarks and EU Climate Transition Benchmarks. It shall be noted in this context, that EU Paris-aligned Benchmarks and EU Climate Transition Benchmarks would thus be subject to authorization, irrespective their significance.
– align the „designation“ as significant benchmarks along the following two lines – irrespective of the benchmark administrator’s home jurisdiction:
1. by law: the index references financial instruments and contracts whose value exceeds EUR 50 billion in reference assets (this rule already applies); or
2. by designation: the index does not meet the EUR 50 billion threshold, but is explicitly designated by the EU due to its significance in any one member state.
– specify the criteria national competent authorities (NCAs) shall apply when seeking to designate a benchmark as significant despite the fact that the benchmark has not reached the noted threshold;
– specify the administrative procedure NCAs shall follow when seeking such designation and the factors ESMA shall apply when evaluating the designation measure of an NCA;
– require that only significant benchmarks as defined above obtain authorization or registration in accordance with Article 34 of the BMR and are listed within ESMA’s register of significant benchmarks. Accordingly, smaller, non-significant administrators would be entirely exempt from the registration requirement.
– stipulate further that non-significant benchmarks would also be exempt from requirements set out in Titles II (Benchmark integrity and reliability), III (Requirement for different types of benchmarks), IV (Transparency and consumer protection), besides the authorization and registration requirement in Title VI as mentioned before. Consequently, administrators of non-significant benchmarks would no longer be obligated to adhere to organizational requirements in the following areas: governance and conflicts of interest, oversight functions, hierarchy, and input data monitoring, the establishment of codes of conduct concerning input data, reporting infringements, and disclosing methodological and benchmark statements.
– remove the requirement for third-country significant benchmark providers, where the home country’s regulation has been assessed to be equivalent to EU regulation in terms of supervision, to seek endorsement or recognition in the EU.
– remove the obligation for EU benchmark users to individually verify the regulatory status of indices they wish to use as benchmarks by consulting websites and public registers; instead users only have to consult ESMA’s register for verification purposes.
The regulation would also implement various regulatory powers for ESMA, e.g. to take appropriate action if an administrator fails to register in the EU despite meeting any of the above noted thresholds.
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As these are only the key proposals outlined in the draft, please review the original legal document for more detailed, comprehensive information.