Briefing Paper
The Importance of Reforming the
EU Benchmarks Regulation
June 2020

Table 1. High level comparison of the reforms proposed within this paper against the existing provisions of
the European Benchmark Regulation.
Characteristics

Existing BMR

Reformed BMR

Use ofbenchmarks

Prohibited unless specifically qualified

Permitted unless specifically prohibitedScope

All benchmarks regardless of size or
systemic importance with very limited
exemptions

Only benchmarks whose failure would threaten thesystemic stability of the EU (based on qualitative
assessment) would be subject to mandatorycompliance via designation by the appropriate
central authority (such as the EC or ESMA)
Non-significant and potentially significant
benchmarks, public policy and regulated data
benchmarks and their third country equivalents
removed from scope for mandatory compliance
Voluntary regime for non-designated benchmarks

Means ofqualification

EU: authorization or registration byNCAs

EU and Third Country: Authorization, Registration,
Equivalence, reformed Endorsement or reformed
Recognition

Third country: Equivalence,
Endorsement, Recognition

Powers to prohibit
use of nonqualifying
benchmarks andpowers to allow
continued use forlegacyPowers to allow continued use inlegacy contracts provided that poorly
defined contingencies are met(frustration, force majeure, breach)

BMR to allow continued use of non-qualifying
benchmarks (including in new transactions) to
manage or reduce existing exposure but not (subject
to the below) to acquire new exposure

Powers do not encompass all
circumstances in which a benchmark
may become prohibited

Use of such non-qualifying benchmarks to bepermitted for such purposes without any need for an
NCA to exercise power and without need to show
frustration, force majeure or breach. This removes
cliff-edge risks for EU investors

Inability to use non-qualifying
benchmarks in new transactions tomanage legacy risk creates cliff-edge
risks for EU investors

End user visibilityof application
process for
qualifying
benchmarks

Very limited data on ESMA’s register,insufficient to allow end users tounderstand whether the benchmark
they want to use qualifies or has
become prohibited2

Client-facing entities allowed to acquire new
exposure but only to facilitate their client’s use of
non-qualifying benchmarks to manage or reduce
exposure

Enhanced visibility for end users with morecomprehensive data on ESMA’s register

Introduction
European retail and institutional investors use European Union (EU) and third-country benchmarks
for a variety of critical commercial purposes, from hedging their exposures to converting overseas
revenue and repatriating funds. The EU Benchmarks Regulation (BMR) was intended to protect
European investors from the risks and disruption posed by poorly governanced or failing benchmarks.
Instead, fundamental flaws in its conception have made the Regulation itself a threat to the financial
well-being of benchmark-users in the EU and put them at a significant competitive disadvantage.
The current BMR Review1 process represents a vital opportunity to reform the BMR so that it:provides protection to investors on a proportionate basis, in alignment with global standards;



imposes the highest compliance burdens in respect of the most important benchmarks;



encourages administrators with benchmarks that are used on a more minor scale in the EU toadopt similarly high standards without creating unwarranted barriers to entry;



ensures EU investors have visibility over the application process to allow them to reduce
their exposures to non-qualifying benchmarks ahead of and/or over time.

Proposal for Reformed BMR
We propose that BMR is reformed so as to:(1) Allow benchmarks to be used in the EU unless specifically prohibited (i.e., a reversal of thecurrent general prohibition of benchmarks unless specifically authorized).
(2) Provide designatory powers to an appropriate central authority (such as the European
Commission (EC) or the European Securities and Markets Authority (ESMA)) to mandate
compliance for those EU and third-country benchmarks that are most systemically important
to investors in the EU.
(3) Allow third-country administrators to obtain authorization from an appropriate central
authority (such as the EC or ESMA), or to qualify via Equivalence, or via reformed
Endorsement or Recognition processes, each within a fixed period of time.
(4) Exempt EU non-significant benchmarks and their equivalent third-country benchmarks
from mandatory designation.
(5) Consider exempting EU significant benchmarks and their equivalent third-country
benchmarks from mandatory designation in order to better align the BMR with the scope ofbenchmark regulations globally.
(6) Exempt public policy benchmarks (e.g., FX rates used in non-deliverable forwards (NDFs)
and certain interest rate swaps) and regulated data benchmarks.

See the European Commission’s recent Public Consultation Document – Review of the EU Benchmark Regulation athttps://ec.europa.eu/info/sites/info/files/business_economy_euro/banking_and_finance/documents/2019-benchmark-reviewconsultation-document_en.pdf
13

(7) Provide a voluntary labelling regime to allow administrators to comply with the BMR andmarket their benchmarks as BMR-compliant.
(8) Provide regulators with the power to prohibit the acquisition of new exposure to benchmarksthat fail to comply with the BMR, but permit the use of such benchmarks for managing or
reducing legacy positions (including undertaking new transactions for such purposes).
(9) Provide end users with greatly enhanced visibility on whether benchmarks have qualified (orbeen disqualified) for use under the regime via a more usable ESMA register.
These proposals represent a practical, proportionate regime that respects the overarching aims of the
EU BMR, as further detailed in the rest of this paper.
Problems with the EU BMR
The BMR was introduced to complement the civil and criminal sanctioning regime provided by theMarket Abuse Directive, the Market Abuse Regulation and member state legislation that together
outlaw and punish attempts to manipulate benchmarks. Nothing in this proposal is designed to weaken
or narrow the laws relating to manipulation of benchmarks. They provide vital protection for investors
and users of financial products, and the broad application of these laws should remain as currently inforce.
The BMR set out to protect European investors and users of the estimated 3 million benchmarks inexistence worldwide2 by enhancing the governance and oversight of benchmark production, as well as
promoting transparency on the construction and evolution of benchmark methodologies. To thisextent, it represents a codification of the widely implemented International Organization of Securities
Commissions’ (IOSCO) Principles for Financial Benchmarks (IOSCO Principles).
However, the BMR also regulates use of benchmarks by supervised entities in the EU by:

Requiring them to have contingency plans (reflected in their client contracts) against materialchange to a benchmark or its cessation (referred to in this paper as the Contingency Plan
Requirement); andProhibiting the use of benchmarks that have failed to qualify under the BMR (referred to inthis paper as the General Prohibition on Use).

IOSCO subsequently published a recommendation replicating the Contingency Plan Requirement in
its Statement on Matters to be Considered for Use of Benchmarks3.
However, as illustrated in Table 1, the General Prohibition on Use is unique to the BMR. It does notfeature in any recommendation by IOSCO and no other jurisdiction globally has introduced it.

2

http://www.indexindustry.org/2019/10/15/index-industry-associations-third-annual-survey-finds-2-96-million-indexesglobally/3

https://www.iosco.org/library/pubdocs/pdf/IOSCOPD589.pdf
4

Table 1
Major Features of Benchmark Reform

BMR

IOSCO
Principles

Governance procedures for Administrators (including conflict of interest
management)Benchmark methodology design, evolution and transparencyQuality of data sources

Submitter code of conductContingency Plan Requirement



General Prohibition on Use of benchmarks unless they qualify

Scope of the BMR
The Index Industry Association estimates that there are 2.96 million benchmarks in use globally, thevast majority of which pose no systemic or material risk.
The extremely broad scope of the BMR, combined with its considerable extraterritorial reach, hasresulted in a disproportionate compliance burden being placed upon benchmark users, administratorsand contributors.
The benefits of regulating against a benchmark’s potential future development do not justify the costand complexity for those the regulation is intended to protect.
Adverse impact of the General Prohibition on EU investors
The effect of the General Prohibition on Use has been to turn the BMR from an important regulatory
protection for European investors into a source of uncertainty, disruption, competitive disadvantage
and potential systemic risk.
(a) Disruptive Effect of Prohibition of a Benchmark
Cessation of a benchmark has been flagged by global regulators as a source of disruption anduncertainty and could pose a threat to financial stability if it happens to widely used benchmarks.
There is no reason why prohibition on use of a benchmark would be less disruptive or dangerous
than its cessation – in fact, it could be worse.
Prohibition of a benchmark that continues to be published could leave prohibited parties stuck ina position of limbo, unable to:5-

Use the benchmark to perform their obligations or receive performance of theircounterparty’s obligations;-

Terminate their transactions or use the benchmark to calculate the termination
amounts payable;-

Value their positions, meaning they are unable to margin them or calculate any
capital requirements attributable to them.

By their nature, benchmarks tend to be constructed using unique methodologies and on the basisof particular sources of data. This means that alternative rates are rarely available. Prohibition ofa non-IBOR benchmark would require EU supervised entities to engage in a similar effort but
without the kind of global co-ordination and resourcing that has been dedicated to the IBOR
transition process.
In contrast, competitors in other jurisdictions that are not subject to a prohibition would continue
to be able to use the benchmark for any of these purposes. This will negatively impact EU firms,
who will be unable to service their clients’ needs, and their clients (including retail investors andinstitutional investors such as insurers and pension funds).
(b) Scaling Up the Disruptive Effect of Prohibition
Prohibition of a benchmark would be a poor outcome for EU users, particularly if it is asystemically important benchmark. The BMR defines such ‘critical’ benchmarks as those that are
directly or indirectly used in financial instruments with a total value of at least €500 billion.
Fortunately, all EU critical benchmarks have now complied with the BMR, and will therefore be
permitted for use after the end of the transition period at the end of 2021.
However, there are a number of third-country benchmarks which are not expected to qualify for
use under the BMR that would exceed the quantitative threshold applicable to criticalbenchmarks under BMR if they were administered by EU institutions. For example, GFMA
recently analyzed figures from the 2019 BIS Triennial Survey and found that transactions
referencing the US dollar/Korean won spot FX rate had open interest attributable to EU
counterparties of US$931 billion, while the US dollar/Taiwanese dollar spot FX rate had open
interest attributable to EU counterparties of US$585 billion.
On this basis, both rates would exceed the current threshold required to be designated as critical ifthey were administered by EU institutions. Neither are expected to qualify for use in the EU after
the end of the extended transition period on January 1, 2022. Their prohibition would expose EU
investors to exactly the risks of uncertainty and disruption that the BMR was intended to avoid.
The expiry of the transition period is unlikely to result in only these benchmarks becoming
prohibited. The GFMA is monitoring five other spot FX benchmarks used in NDFs that would
likely become prohibited4. Given the all-encompassing scope of the BMR, many other large andsmall benchmarks across FX, interest rates, equities, commodities, credit and other asset classes

4

FX rates for the currencies of the Philippines, Argentina, Nigeria and Kazakhstan, in addition to South Korea and Taiwan.
The Indian rupee was also considered to be at risk, but regulations introduced by the competent authorities in India mean it
may benefit from any equivalence decision provided by the EU6are at risk of the General Prohibition on Use because of the flaws in the third-country
benchmarks regime that mean they are unlikely to be willing or able to qualify in time.
The effect on end users of prohibiting a large number of benchmarks at the same time isunknown, but is likely to be serious. For example, the GFMA estimates that prohibiting EU useof the eight benchmarks identified in its paper is likely to have a similar impact on thosebenchmarks to the observed impact of the corona virus in terms of their liquidity. Multiplied
across the unknown population of benchmarks at risk, this could represent a very significant
issue.
(c) Failure of Mitigating Provisions
The BMR contains provisions that were designed to mitigate these issues. National competentauthorities have the power to permit supervised entities to continue to use a prohibited
benchmark in legacy transactions. However, there are some significant shortcomings.
-

These powers are only available in limited circumstances (for example, where abenchmark administrator’s authorization has been suspended, but not where it has
been withdrawn entirely5).

-

They are subject to poorly defined contingencies – for example, the requirement todemonstrate that ‘cessation of the benchmark would result in a force majeure event,or frustrate or otherwise breach the terms of any…financial instrument’. It is unclear
how the competent authority with responsibility for the benchmark administrator
would determine whether those events would occur in relation to users of thebenchmark (who may not be located in their jurisdiction). For instance, it is uncertain
whether the competent authority would take a contract-by-contract approach, whether
a single instance of one contract would suffice, or whether an abstract analysis should
be undertaken. It is also unclear whether a legal opinion would be required (which nolaw firm would provide cleanly for frustration or force majeure) and, if so, whether
this would need to be under the laws of all 27 member states plus the governing lawsof affected contracts (which may not be the laws of European member states).

-

They are unfit for purpose. For example, typically users of benchmarks need to beable to undertake new transactions in order to manage or reduce their legacy
exposures. One of the most common ways of exiting a position is to enter into a newtransaction that has an equal and offsetting exposure. This is not possible under thecurrent provisions of the BMR.

(d) Investors Unable to See Which Benchmarks Will Qualify
Given the likely disruption, it might be expected that investors would use the extended transition
period to reduce their exposure to benchmarks under threat of prohibition. However, there is novisibility over which administrators will be likely apply under the BMR. In relation to third
country benchmarks, there is no transparency over whether administrators have applied and if so,whether their application is pending or has been rejected. In many cases, alternative benchmarks
In this regard, we welcome the proposal in the EC’s Consultation on the Review of the EU Benchmarks Regime thatwithdrawal of authorization also triggers this power, although note our proposal in this paper that permission to use aprohibited benchmark should not be subject to any contingencies (including the exercise of any power) and should cover allof the circumstances in which a benchmark may become prohibited and not just withdrawal or suspension of an EU
administrator’s registration or authorisation
5

7

may not exist or may not comply with the BMR, or alternatives may not be comparable in termsof liquidity, providing little option for investors looking to transfer positions. European investors
may therefore be in a position where they are unable to adequately mitigate their risks ahead of
the relevant benchmarks becoming prohibited.
It was in recognition of these issues that the transition period for EU critical and third-country
benchmarks was extended by two years in 20196. This provided a period of calm during which
EU critical benchmark administrators were able to ensure the benchmarks qualified for use underthe BMR. However, flaws in the third-country benchmark regime mean that time alone will not
resolve the problems faced by European investors.
Why Will Third-country Administrators Not Comply with the BMR?
Under the BMR’s third-country benchmark regime, benchmarks can qualify for use in the EU under
one of three routes: Equivalence, Endorsement or Recognition. This regime was constructed on thebasis of some underlying assumptions that have turned out to be incorrect, as acknowledged by the
EC in its recent draft Inception Impact Assessment in relation to the Review of the BMR.
First, it was assumed that the EU was leading the way with an all-encompassing benchmark
regulation and that other jurisdictions would follow suit.
Second, it was assumed that benchmark administrators would want to comply with the BMR in orderto have their benchmarks used in Europe.
Third, it was assumed that Equivalence would provide a scalable regime that could be used to qualify
the majority of third-country benchmarks for the purposes of BMR.
In reality, many jurisdictions (such as the US) have not introduced any such framework, and thosejurisdictions that have developed benchmark regulations have tended to limit them to cover only theirown critical benchmarks. For example, Japan has introduced regulations that only cover major interest
rate benchmarks. The draft equivalence decision for Japan7 that has was released on April 4, 2020
would not benefit their equity benchmarks, such as the Topix indices, at all.
While some third-country administrators derive significant financial gain from having theirbenchmarks used in the EU, others do not. The EC’s consultation on the BMR Review says “inabsence of licensing income from EU users, many third-country benchmark administrators might nothave the incentive to seek…[to qualify]…their benchmarks for use in the Union. This would meanthat many third-country benchmarks could no longer be used in the Union after the expiry of the(extended transition period, by the end of 2021)”8.
These administrators are therefore unlikely to qualify by means of Equivalence and are notincentivized to go through the significant cost and administrative burdens associated with6

By means of the Regulation on Low Carbon Benchmarks that entered into application on December 10, 2019 (https://eurlex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32019R2089&from=EN)7

https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/12330-Equivalence-decision-for-a-third-countryJapan-under-the-Benchmarks-regulation-BMR8

https://ec.europa.eu/info/sites/info/files/business_economy_euro/banking_and_finance/documents/2019-benchmarkreview-consultation-document_en.pdf
8Endorsement or Recognition. Even those that do have incentives face significant impediments tousing them.
Endorsement requires a third-country administrator to have its benchmarks endorsed by an EU
supervised entity as being compliant with the BMR on an ongoing basis. In the absence of asupervised affiliate to perform this role, Endorsement effectively requires third-country administrators
to divulge information to third party EU firms who may be competitors, or even effectively cede
control of their benchmark governance process.
Recognition requires the appointment of a legal representative in the administrator’s ‘member state ofreference’. This suffers from two distinct problems:This is a complex regime that relies on administrators having access to trade volume
or licensing data that does not exist in any reliable form. In the absence of such data,
administrators that do not have EU-supervised affiliates are unable to use
Recognition. While the European supervisory authorities’ review offers a welcome
simplification of the recognition process by transferring responsibility for recognition
decisions to ESMA, the proposal is not expected to be adopted before the transition
period is due to expire.



The legal representative is required to perform the oversight function of an
administrator and is held accountable to the competent authority of the member stateof reference, but precise responsibilities and potential liabilities are unclear.

Breaches of the regulation are accompanied by fines of up to 10% of global annual turnover. While
we understand commercial providers are ready to provide Endorsement and Recognition services, wecannot be sure that third-country benchmark administrators will be willing to pay the price of usingthem.
Two and a half years after the main provisions of the BMR became effective, only two Equivalence
determinations (for Singapore and Australia) have been made, which together cover sevenbenchmarks. One draft Equivalence determination was published in respect of Japan on April 4, 2020,
which will cover a further two benchmarks. Seven administrators have qualified their benchmarks via
recognition, while two have qualified their benchmarks via Endorsement. The fact that the sevenadministrators that have used Recognition account for 19,781 benchmarks and the two administratorsthat have used Endorsement account for 65,564 benchmarks suggest that only large global
administrators have so far managed to navigate the complexities and cost of the regimes, and that they
represent a significant barrier to entry for less well-resourced administrators.
Although these may seem like issues for third-country administrators, it is actually EU investors suchas retail investors, pension funds, EU manufacturers and other financial and non-financial institutions
that will be the major casualties because of the General Prohibition on Use. It was for this reason thatthe transition period applicable to third-country benchmarks required the two-year extension. Without
reform, the same risks are likely to require an additional extension to the transition period at the endof 2021.

9

The Problem with Data
Industry associations have been consistently asked by European regulatory authorities for data that
illustrates the adverse impacts of an unreformed BMR.
However, reliable publicly available data on how benchmarks are used in the EU is not available. For
example, there is no data on how many benchmarks are used by which EU institutions and for what
purposes. There is also no data on the number of benchmarks that are on track to qualify under the
BMR by the end of the transition period, and very little information on how the prohibition on using
benchmarks that will fail to qualify will impact EU investors and end users.
For example, the Bank for International Settlements (BIS) publishes a survey on benchmark use for
the FX and interest rate markets, but the complexity of compiling this information means it is only
completed every three years. The survey requires the involvement of central banks globally and 1,300
dealers. Some of the published data is useful in setting out the issues caused by the BMR, but most is
not.
These issues are exacerbated by fundamental uncertainties over what is in and out of scope of BMR,
and whether that status can change during the lifetime of a financial instrument. For example, an
index is deemed to have been ‘made available to the public’ (and, therefore, potentially a‘benchmark’) if it can be reverse engineered from the coupon payable on a financial instrument.
Every user of such a rate must make its own determination as to whether this is possible. In the face ofsuch uncertainty, it is difficult to conduct a data collection exercise.
This data would also have been absent at the time of the original impact assessment for the BMR.
Lack of data, therefore, should not be used to fight reform – it should be a strong reason not to allow
expiry of the BMR’s transition period to change the status quo.

Proposal to Reform BMR
The BMR urgently needs to be reformed. In particular, the General Prohibition on Use should bereversed in order to protect EU investors, and the scope of the BMR needs to be narrowed so that thecompliance burdens fall where there is most risk.
The following proposal represents a practical, proportionate regime that respects the overarching aimsof the EU BMR, while allowing EU investors to continue to use benchmarks to hedge their naturally
occurring risks or make investments in the same way as their non-EU peers:General Permission for Use. EU and third country benchmarks should be permitted to be
used in the EU unless specifically prohibited. This reverses the current regulation’s General
Prohibition.



In-scope benchmarks.


Mandatory compliance by designation. An appropriate central authority, such as the EC
or ESMA, should be given the power to designate EU and third-country benchmarks as
being in scope based upon their use or the potential impact of their failure on users in the
EU using pre-defined qualitative criteria.

10





This would recalibrate the BMR to ensure only the benchmarks whose failure
would pose a systemic threat to users in the EU are mandatorily subjected to themost burdensome aspects of the regime.

Administrators of systemically important benchmarks tend to be those most able
to cope with the compliance burden.

This approach would mean Equivalence decisions would likely cover most inscope benchmarks for jurisdictions in which benchmarks are regulated.

Voluntary compliance by election. Administrators of benchmarks that would otherwise
be out-of-scope should be able to elect for their benchmarks to comply and be labelled assuch.
This would promote higher standards of governance and compliance by
incentivizing administrators that will then be able to use the labelling in theirmarketing.

It would provide investors with confidence that benchmarks they use meet thosehigh standards.



It would provide recognition of the efforts and investment that EU and thirdcountry administrators have already made to comply with the BMR.

The Australian and New Zealand benchmark regulations both contain an elective regime ofthis nature.


Exempt Benchmarks.
‘Non-significant’ EU and equivalent third country benchmarks should not be inscope for mandatory designation since these pose the least risk of systemic
disruption. Administrators that only produce such benchmarks (rather than moresophisticated administrators that also produce critical benchmarks) are least equipped
to qualify their benchmarks by means of the costly and burdensome Recognition orEndorsement routes and cannot benefit from Equivalence decisions.

Consideration should be given to removing significant EU and equivalent thirdcountry benchmarks from scope of mandatory designation to ensure parity withbenchmark regimes in other jurisdictions.

Regulated data benchmarks should not be in-scope of mandatory designation. Where
the input data is regulated at its source, then it is appropriate to reduce the regulatoryburdens applicable to these benchmarks under the BMR. The regulated data
benchmark exemption should extend to include indices that rely on inputs frommajor global exchanges.



Public utility benchmarks – for example, FX rates used in NDFs and interest rates(including restricted or pegged rates) used in dollar-settled swaps (e.g., NIRDS) –should not be in scope of mandatory designation because they are pseudogovernmental and their prohibition would be disproportionately disadvantageous to
end users.
11







Quantitative Thresholds.


If significant benchmarks remain capable of being brought into scope, thequantitative threshold should be increased to €100 billion over six months.

Given the unreliability of the data, any quantitative thresholds should be used asindicators within the qualitative criteria rather than as hard thresholds.

Reforming the Third-country Benchmark Qualification Routes


Third-country benchmark administrators should be able to apply for authorization orregistration for their benchmarks from ESMA, following a similar process to thatapplicable for EU administered benchmarks. Consideration should also be given to
allowing EU administrators to have their benchmarks qualify by means ofEndorsement.

The role and responsibilities of the legal representative should be clarified, alongwith their potential liability (which should be proportionate to their role andresponsibilities).

No New Flow.


If the administrator of a designated in-scope benchmark fails to gain qualification
within a fixed period of time, or to maintain qualification thereafter, it would becomea ‘non-qualifying benchmark’.

Supervised entities would only be permitted to continue using non-qualifying
benchmarks in new and lifecycle transactions for ‘permitted purposes’ (i.e., totransition to new benchmarks or to service, hedge, reduce or close out existing
exposures) and not, subject to the below, for the purpose of acquiring new exposures.



Client-facing supervised entities such as central counterparties and market makers
would be permitted to acquire new exposures to non-qualifying benchmarks but
solely to facilitate their clients’ permitted purposes.

This provision should not be subject to any contingencies (such as the need todemonstrate frustration, force majeure or breach) or require any regulatory authority
to exercise any power in order for users of the non-qualifying benchmark to benefit
from it.



The provision should cover all circumstances in which a supervised entity that has
been using a benchmark would otherwise be prohibited from using that benchmark.
This should include:Withdrawal or suspension of an administrator’s registration or
authorization under Article 35;Withdrawal of an Equivalence decision, or a third-country
administrator’s Recognition or Endorsement;

12







Failure by an administrator or its benchmark to comply with the
BMR before expiry of the relevant transition period;Prohibition on use of a benchmark for any other reason.

This approach provides users of benchmarks that fail to become compliant or
become non-compliant with the ability to manage or reduce their exposuresin a safe and efficient way, avoiding the current risk of a cliff edge. This will
become critically important in advance of any discontinuation of any
systemically important benchmarks like LIBOR.

Improving End-user Visibility
In order to allow end users of benchmarks visibility over whether benchmarks have or are
likely to qualify for use at the end of the transition period or have become non-qualifying
third country benchmarks, ESMA should publish details of each application received,
including the name and location of the administrator or the benchmark, the name and ISIN
and other unique identifiers of the benchmark, the status of the application(received/approved/rejected/withdrawn/suspended), whether the benchmark has been
designated for mandatory compliance as a critical or potentially significant benchmark orwhether its administrator has elected for voluntary compliance, whether any relevant
Equivalence, Recognition or Endorsement has been withdrawn, and provide contact
information for the administrators . This will allow EU end users to reduce their exposures tothird-country benchmarks ahead of a failure to qualify under the EU BMR.

Conclusion
There are many other technical improvements that can be made to the BMR to enable users,
administrators, contributors and regulators to understand what is in and out of scope, and whether thatstatus can change over the lifetime of a financial instrument. The proposals set out in this paper
represent the most fundamental and critical reforms. Their implementation would result in abenchmark regulation that protects investors without stifling their bona fide use of more minor
benchmarks.

13About ISDA and the basis for this paper in relation to ISDA members’ views
Since 1985, ISDA has worked to make the global derivatives markets safer and more
efficient. Today, ISDA has over 900 member institutions from 74 countries. These members
comprise a broad range of derivatives market participants, including corporations, investment
managers, government and supranational entities, insurance companies, energy andcommodities firms, and international and regional banks. In addition to market participants,
members also include key components of the derivatives market infrastructure, such as
exchanges, intermediaries, clearing houses and repositories, as well as law firms, accounting
firms and other service providers. Information about ISDA and its activities is available on
the Association’s website: www.isda.org. Follow us on Twitter, LinkedIn, Facebook andYouTube. ISDA’s membership is diverse and includes firms that use benchmarks but do notadminister or contribute to them; firms that administer benchmarks but do not contribute to or
use them; and firms that administer, use and contribute to benchmarks. The proposals set out
in this paper were supported by a significant majority of the ISDA members who provided
feedback as part of its response to the EC’s consultation on the Benchmark Regulation
Review and subsequently. For example, 92% of those responding supported the proposal thatthird-country equivalents of non-significant benchmarks be removed from scope of the BMR
and 85% of those responding supported the proposal that non-significant EU benchmarks beremoved from scope. However, divergent minority views were also put forward in respect tothe above proposals. They are reflected in the feedback that ISDA submitted as its responseto the EC’s consultation here but have not been reflected in this paper.
About ASIFMAThe Asia Securities Industry and Financial Markets Association (ASIFMA) is anindependent, regional trade association with over 100 member firms comprising a diverse
range of leading financial institutions from both the buy and sell side, including banks, asset
managers, professional service firms, law firms and market infrastructure service providers. It
harnesses the shared interests of the financial industry to promote the development of liquid,
deep and broad capital markets in Asia. ASIFMA advocates stable, innovative, competitiveand efficient Asian capital markets that are necessary to support the region’s economic
growth. It drives consensus, advocates solutions and effects change around key issues
through the collective strength and clarity of one industry voice. ASIFMA is based in Hong
Kong and is the Asia member of the GFMA.
About FIAFIA is the leading global trade organization for the futures, options, and centrally cleared
derivatives markets, with offices in London, Brussels, Singapore and Washington, DC. FIA’s
mission is to support open, transparent and competitive markets; protect and enhance theintegrity of the financial system; and promote high standards of professional conduct. FIA’s
membership includes clearing firms, exchanges, clearing houses, trading firms andcommodities specialists from about 50 countries, as well as technology vendors, law firms
and other professional service providers..
About GFXDThe Global Foreign Exchange Division (GFXD) was formed in co-operation with the
Association for Financial Markets in Europe, Securities Industry and Financial Markets
Association and ASIFMA. Its members comprise 24 global foreign exchange (FX) market
participants, collectively representing a significant portion of the FX inter-dealer market.
Both the GFXD and its members are committed to ensuring a robust, open and fairmarketplace and welcome the opportunity for continued dialogue with global regulators.
14