EU Benchmarks Regulation - Financial Conduct Authority

EU Benchmarks Regulation – will it impact you?

Published: 20/01/2016     Last Modified: 22/01/2016
Following the Wheatley Review and the Fair and Effective Markets Review, eight benchmarks are currently regulated in the UK. New European legislation is being developed to regulate the provision of, contribution to and use of a wider set of benchmarks.

The Regulation on indices used as benchmarks in financial instruments and financial contracts or to measure the performance of investment (EU Benchmarks Regulation) will be directly applicable across the EU and aims to introduce a common framework and consistent approach to the provision and the use of benchmarks.

What is considered a benchmark

When an index is used as a reference to determine the amount payable under an financial instrument traded on a trading venue or under mortgage or consumer credit contracts it becomes a benchmark for the purposes of the EU Benchmarks Regulation. Further to this, indices used to measure the performance of investment funds, either to track the return of the fund or to define its asset allocation, are also seen as being benchmarks.

The EU Benchmarks Regulation defines an index as a figure which is publically available and is regularly determined, either by applying a formula to or making an assessment of a representative set of underlying data.

Benchmarks represent a wide range of underlying asset classes including Equity, Fixed Income, Commodity, Forex, as well as alternative, non-financial interests. LIBOR, SONIA, FTSE100 and ICE Brent Index are just a few examples of a large number of benchmarks provided and used in the financial markets.

Next steps

You and your firm may be affected by the EU Benchmarks Regulation if you:

  • provide a benchmark within the EU
  • contribute input data to a benchmark provided in the EU
  • use a benchmark provided in the EU or in a third country

Once the legislation has been finalised, we look forward to engaging with you, as the FCA will be undertaking work around the application of the Regulation in the UK. If you are interested in the FCA’s work in this area, please register your interest via this form.