Industry Updates

ESMA registers Solactive as benchmark administrator under BMR

Tom Eckett

a man smiling for the picture

The European Securities and Markets Authority (ESMA) has registered Solactive as a benchmark administrator under the European Benchmarks Regulation (BMR).

The firm was published in the ESMA Benchmark Administrators Register on 9 April, eight months before the end of the 1 January 2020 transitional period. The firm said the registration was a culmination of an 18 months project.

ESMA created the register in January 2018, following the launch of the BMR on 30 June 2016, a set of rules which index providers must comply with to be authorised within the European Union.

The transitioning period was initially set for 1 January 2018, however an extension was required due to index providers failing to be ready to be fully compliant with the regulation.

Steffen Scheuble (pictured), CEO of Solactive, commented: “We regard the BMR as important legislation that helps ensure the avoidance of potential conflicts of interest in the indexing business.

Christian Vollmuth, Chief Risk Officer of Solactive comments: “Working in conjunction with the regulator, we have established a solid foundation for compliance with the BMR, which will also help to ensure the accuracy and integrity of our benchmarks.”

The BMR was introduced to tackle the risk that indices were open to manipulation, as highlighted by the EURIBOR and LIBOR scandals. It forces the benchmark index to improve its governance, become more transparent and have clear methodologies in place.

Under the new rules, every benchmark needs an administrator and the administrator will need to be regulated. The administrator is typically the provider that controls the index methodology.

ESMA said at the time: "ESMA believes that the potential risk of collaborative manipulation by different functions within an administrator is particularly high and, hence, that the requirement for operational separation of the benchmark administration from the remaining business should generally be applied unless the administrator can demonstrate that there is no potential for a conflict of interest, particularly that the administrator does not have a financial interest in any instruments or contracts referencing the administrator’s benchmark."

In March, the Financial Conduct Authority introduced its own UK benchmark register, which will replace ESMA’s BMR, in its bid to prepare for a no-deal Brexit.

Solactive has around 1,700 indices registered with the German Federal Financial Supervisory Authority (BAFin).


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