To ensure benchmarks are robust and reliable, the European Commission implemented the Benchmark Regulation (BMR) on 1 January 2018 with a two-year transitioning period. As the deadline rapidly approaches, there are still a number of big names missing from the European Securities and Markets Authority (ESMA) register to become regulated administrator.
The regulation was introduced following the London Interbank Offering Rate (LIBOR) scandal in 2014 where banks were falsely inflating or deflating their rates to gain profit from trades in addition to a significantly large number or indices and benchmarks being launched.
Earlier this month, ESMA approved the German index provider Solactive as a registered benchmark administrator. Solactive is now part of a 35-strong register, among the likes of FTSE, MSCI and S&P Dow Jones indices.
There are, however, several industry giants missing from the register. Two of these players who are not yet approved by ESMA are Morningstar and Stoxx.
Following Solactive’s successful registration as a benchmark administrator, ETF Stream spoke with Christian Vollmuth, chief risk officer at Solactive. As there is only eight-months left of the transitioning periods, Vollmuth says local regulators are busy working their way through applications for the register. Therefore, it is likely the missing index providers will announce their registration by the year’s end.
If an index provider was to not register by the end of the transitioning period, then any ETFs which uses the provider’s indices as a benchmark would have to close as a result of not being regulatory compliant.
Brexit has also acted as a hindrance in recent months as questions were being asked about UK-based benchmark administrators being included on the ESMA Register or as a third-country benchmark (non-EU) once the nation leaves the EU. In response, the UK regulator, the Financial Conduct Authority, announced it will introduce its own Benchmark Register, copying that of ESMA.
ESMA registered benchmark administrators
|Cboe Europe Limited|
|Cirdan Capital Management Ltd|
|Citigroup Global Markets Limited|
|COMPASS FINANCIAL TECHNOLOGIES|
|Czech Financial Benchmark Facility s.r.o.|
|Elston Consulting Limited|
|Euronext Amsterdam NV|
|Euronext Brussels NV/SA|
|Euronext Lisbon Sociedade Gestora de Mercados Regulamentados- S.A.|
|FTSE International Limited|
|Global Property Research B.V.|
|ICE Benchmark Administration Limited|
|IHS Markit Benchmark Administration Limited|
|METORI CAPITAL MANAGEMENT|
|Morgan Stanley & Co International|
|Napoleon Index SAS|
|New Change Currency Consultants Ltd|
|NEX Data Services Limited|
|Numis Securities Limited|
|Refinitiv Benchmarks Services (UK) Ltd|
|Robeco Indices B.V.|
|S&P DJI Netherlands B.V.|
|S&P Dow Jones Indices LLC|
|Speedwell Settlement Services Limited|
|U2 Diamond Prices Limited|
|Wiener Börse AG|