There will be equivalence between EU and UK benchmark administrators that are registered under the benchmark regulation (BMR) once the Brexit transition period ends on 31 December.
In an announcement last week, the UK government has said benchmark administrators can have their benchmarks used within the UK with only a notification requirement to the Financial Conduct Authority (FCA) needed.
As a result, benchmark administrators from the European Economic Area (EEA) do not have to carry out the complex process of applying for recognition or endorsements that need to be approved in the UK.
This enables index providers based in the EU to provide benchmarking services to firms based in the UK if they are already authorised to do so under the EU’s BMR.
Furthermore, the UK government has extended the transitioning period applicable to third country administrators, index providers based outside of the UK, by three years to the end of 2025.
The EU Council has also proposed this for non-EU/EEA administrators which are currently subject to BMR after the end of 2021.
The UK’s equivalence announcement does not apply to third-country administrators, however.
Therefore, any benchmark provider based outside of the EU that is recognised as an administrator under EU BMR must still seek separate registration in the UK.
Similarly, UK and non-EU administrators must still register under EU BMR even if they are recognised within the UK.
“They are not planning to take advantage of the transition period extension. Instead, they are continuing to seek recognition or endorsement – but they are arranging to benefit from the lower risk exposure their UK and EU-based legal representatives or endorsers now have, by negotiating lower service pricing from their legal representatives/endorsers.”