FCA to regulate seven additional financial benchmarks

The Financial Conduct Authority (FCA) will regulate seven additional major UK-based financial benchmarks in the fixed income, commodity and currency markets from 1 April 2015. This extends the FCA’s initial regulation of LIBOR (the London Interbank Offered Rate), as introduced by HM Treasury in 2013, and implements the recommendations of the Fair and Effective Markets Review. 

Today’s action applies the high standards we expect of firms in relation to LIBOR to benchmarks in these vitally important markets, ensuring that market participants can be confident in the fairness and integrity of the benchmarks they use.

Martin Wheatley, Chief Executive of the FCA, said:

“I am determined to ensure that markets work well and preserve the UK’s reputation as a centre of excellence for financial services – today’s announcement is a vital step in achieving this. This builds on our work to strengthen LIBOR, and drive up standards on benchmarks across the board.”

The FCA’s consultation seeks views on extending our approach to regulating LIBOR to the firms that administer, and where appropriate, contribute data or information to the following benchmarks:

  • SONIA (Sterling Overnight Index Average) and RONIA (Repurchase Overnight Index Average), which both serve as reference rates for overnight index swaps
  • WM/Reuters London 4pm Closing Spot Rate, which is the dominant global foreign exchange benchmark
  • ISDAFIX, which is the principal global benchmark for swap rates and spreads for interest rate swap transactions
  • London Gold Fixing and the LMBA Silver Price, which determine the price of gold and silver in the London market
  • ICE Brent Index, traded on the ICE Futures Europe (IFEU) exchange, which acts as the crude oil futures market’s principal financial benchmark.

Benchmark administrators and firms that contribute to benchmarks will be FCA-authorised, and the FCA has proposed a senior individual within each relevant firm should oversee compliance with the FCA’s requirements.

Key requirements include identifying potentially manipulative behaviour, controlling conflicts of interest and implementing robust governance and oversight arrangements. 

These proposals reflect the FCA’s objective to ensure that markets work well and enhance market integrity.

The consultation closes on 30 January 2015, the FCA expect to publish final rules during the first quarter of 2015.

Notes to editors

  1. The consultation paper. This implements underlying legislation made by HM Treasury.
  2. More information on HM Treasury’s legislative changes.
  3. More information on the Fair and Effective Markets Review.
  4. More information on our supervision, enforcement and powers on benchmarks.
  5. On the 1 April 2013 the Financial Conduct Authority (FCA) became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
  6. The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
  7. Find out more information about the FCA.