Principles for Financial Benchmarks

Final Report

THE BOARD

OF THE

INTERNATIONAL ORGANIZATION OF SECURITIES COMMISSIONS

FR07/13 JULY 2013
ii

Copies of publications are available from:

The International Organization of Securities Commissions website www.iosco.org

© International Organization of Securities Commissions 2013. All rights reserved. Brief 

excerpts may be reproduced or translated provided the source is stated.
iii

Foreword

The Board of the International Organization of Securities Commissions (IOSCO) has published 

this Final Report. 

This Report, which has been prepared by the IOSCO Board Level Task Force on Financial 

Market Benchmarks (Task Force), sets out IOSCO’s final Principles on Financial Benchmarks. 

This report also summarizes and discusses the comments received on a Consultation Report: 

Principles for Financial Benchmarks,

1

published by IOSCO on 16 April 2013.

Key terms are defined in the Glossary in Annex A.

Contents

Chapter Page

1. Introduction 1 

2. The Principles for Financial Benchmarks 9

3. Discussion of Consultation Feedback 30

Annex

A Glossary of Terms 35

B Feedback Statement 38

C Guidance on Principle 9 Transparency of Benchmark 44

 1 See CR04/13 Principles for Financial Benchmarks, Consultation Report, The Board of IOSCO, 16 April 

2013, available at: http://www.iosco.org/library/pubdocs/pdf/IOSCOPD409.pdf.
1

Chapter 1 Introduction

Background 

On 16 April 2013 the International Organization of Securities Commissions published a

Consultation Report: Principles for Financial Benchmarks

2 (April Consultation Report), which 

requested comments from the public on proposed final Principles for Financial Benchmarks. The 

principles were developed by IOSCO’s Board Level Task Force on Financial Market 

Benchmarks. The IOSCO Board created the Task Force in light of investigations and 

enforcement actions regarding attempted manipulation of major interest rate Benchmarks 3 . 

Those investigations and enforcement actions raised concerns over the fragility of certain 

Benchmarks – in terms of both their integrity and their continuity of provision - that has the

 2 Principles for Financial Benchmarks, IOSCO, April 2013, supra fn No 1 

3 Japan Financial Services Agency (JFSA) took administrative action against RBS Securities Japan Limited

(12 April 2013): http://www.fsa.go.jp/en/news/2013/20130412.html

US Commodity Futures Trading Commission (CFTC) Order against UBS AG and UBS Securities Japan 

Co. Ltd to pay a $700 million penalty to settle charges of manipulation, attempted manipulation and false 

reporting of certain global benchmark interest rates (19 December 2012):

http://www.cftc.gov/PressRoom/PressReleases/pr6472-12 and

http://www.cftc.gov/ucm/groups/public/@lrenforcementactions/documents/legalpleading/enfubsorder1219

12.pdf

UK Financial Services Authority (FSA), fined UBS AG £160 million for significant failings in relation to 

the London Interbank Offered Rate (LIBOR) and the Euro Interbank Offered Rate (EURIBOR) (19 

December 2012: http://www.fsa.gov.uk/library/communication/pr/2012/116.shtml and 

http://www.fsa.gov.uk/static/pubs/final/ubs.pdf

Swiss Financial Market Supervisory Authority (FINMA) ordered UBS AG to disgorge CHF 59 million in 

profits to the Swiss Confederation for seriously violating financial market legislation in connection with the 

submission of interest rates, particularly LIBOR (19 December 2012):

http://www.finma.ch/e/aktuell/Pages/mm-ubs-libor-20121219.aspx

US CFTC Order against Barclays PLC, Barclays Bank PLC and Barclays Capital Inc. to pay a $200 million 

penalty for attempted manipulation of and false reporting concerning LIBOR and EURIBOR (27 June 

2012): http://www.cftc.gov/PressRoom/PressReleases/pr6289-12 and 

http://www.cftc.gov/ucm/groups/public/@lrenforcementactions/documents/legalpleading/enfbarclaysorder

062712.pdf

UK FSA fined Barclays Bank PLC £59.5 million for misconduct relating to LIBOR and EURIBOR (27 

June 2012): http://www.fsa.gov.uk/library/communication/pr/2012/070.shtml and

http://www.fsa.gov.uk/static/pubs/final/barclays-jun12.pdf. 

JFSA took administrative action against UBS Securities Japan Ltd and UBS AG, Japan branches, (16 

December 2011): http//www.fsa.go.jp/en/news/2011/20111216-3.html

JFSA took administrative action against Citigroup Global Market Japan Inc. (16 December 2011):

http://www.fsa.go.jp/en/news/2011/20111216-2.html

JFSA took administrative action against Citibank Japan Ltd. (16 December 2011): 

http://www.fsa.go.jp/en/news/2011/20111216-1.html
2

potential to undermine market confidence potentially harming both investors and the real 

economy.

The April Consultation Report was informed by the comments received to IOSCO’s initial 

Consultation Report in January 2013 (January Consultation Report),

4 as well as by comments 

received at stakeholder meetings on 21 February 2013 at the Financial Services Authority (FSA)

(the predecessor organisation to the UK Financial Conduct Authority (FCA) in London and on

26 February 2013 at the US Commodity Futures Trading Commission (CFTC). 

During the course of this work, the Task Force also has taken into consideration the related work 

undertaken within a variety of regulatory and industry fora. These include:

Regulatory Work streams:

• The IOSCO Principles for Oil Price Reporting Agencies (PRA Principles) which was 

undertaken by IOSCO Committee 7 on Commodity Futures Markets;

• Significant reviews of domestic interbank Benchmarks, notably the CFTC UBS Order, 

the CFTC Barclays Order 5and FSA Order, and The Wheatley Review of LIBOR: final 

report;

6

 

• The European Commission’s Consultation on the Regulation of Indices;

7

• The European Securities and Markets Authority/European Banking Authority’s

Principles for Benchmark-Setting Processes in the EU;

8 and

• The Bank for International Settlements’ Board of Governors Economic Consultative 

Committee report.

9

Industry Work streams: 

 4 CR01/13 Financial Benchmarks: Consultation Report, Report of the IOSCO Board 10 Jan. 2013: 

http://www.iosco.org/library/pubdocs/pdf/IOSCOPD399.pdf 

5 See Principles for Financial Benchmarks, IOSCO, April 2013, supra fn No 1 

6 The Wheatley Review of LIBOR: Final Report (Sept 2012): http://cdn.hmtreasury.gov.uk/wheatley_review_libor_finalreport_280912.pdf

7 European Commission, consultation document on The Regulation of Indices: a Possible Framework for the 

Regulation of the Production and Use of Indices serving as Benchmarks in Financial and other Contracts

(5 September – 29 November 2012):

http://ec.europa.eu/internal_market/consultations/2012/benchmarks_en.htm

8 European Securities and Markets Authority (ESMA) and European Banking Authority (EBA), Principles 

for Benchmarks-Setting Processes in the EU, ESMA/2013/658 (5 June 2013 : 

http://eba.europa.eu/documents/10180/217545/2013-658+ESMAEBA+Principles+on+Benchmarks+Final+Report.pdf

9 See press release: http://www.bis.org/press/wnew.htm and Bank for International Settlements report 

Towards better reference rate practices: a central bank perspective (18 March 2013): 

http://www.bis.org/publ/othp19.pdf.
3

• Best practice standards for conducting Benchmark price assessments issued by the Global 

Financial Markets Association (GFMA);

10 and

• The proposal by Argus Media, ICIS and Platts for a price reporting code for independent 

price reporting agencies (IPRO).

11

Objective of IOSCO’s Work on Benchmarks

As stated in the January Consultation Report, IOSCO’s objective is to create an overarching 

framework of Principles for Benchmarks used in financial markets12. Specifically, the IOSCO 

Board seeks to articulate policy guidance and principles for Benchmark-related activities that 

will address conflicts of interest in the Benchmark-setting process, as well as transparency and 

openness when considering issues related to transition. 

To inform this work, IOSCO’s Task Force initially reviewed a selection of Benchmarks, 

representing a number of asset classes in different jurisdictions. That review, as well as 

IOSCO’s consideration of Benchmark issues in the context of oil price reporting agencies and in 

work being conducted in other fora, helped identify certain broad, generic risks to the credibility 

of Benchmarks arising from vulnerabilities in the Benchmarks’ Methodology, transparency and 

governance arrangements.13

As discussed in both consultation reports, these risks arise from incentives stemming from 

conflicts of interests, which may be amplified when Expert Judgement is used in Benchmark

determinations. The following factors should be taken into account when assessing the risk of a

Benchmark:

1. Submissions to Benchmarks: As described in the January Consultation Report, there are a 

variety of methods by which different forms of data are developed, collected and 

transmitted to Administrators. The Submission process may create additional 

vulnerabilities to the determination process if not addressed by appropriate controls and 

policies. For example, there may be conflicts of interests in and incentives to manipulate 

the determination process where the Submitters are also Market Participants with stakes 

in the level of the Benchmarks. Furthermore, there may be other conflicts of interests and 

opportunities for manipulative conduct created by the possibility of voluntary and/or 

selective Submissions, the varied composition of Submitters, and discretion in the 

selection of data to be submitted. 

2. Content and transparency of Methodologies: If the procedures and policies concerning 

the Methodology do not contain adequate detail, the ability of Stakeholders to evaluate

 10 Global Financial Markets Association (GFMA), Principles for Financial Benchmarks (November 2012)

and

GFMA Updated Principles for Financial Benchmarks (November 2012)

11 The Price Reporting Code for Independent Price Reporting Organizations (Draft) 30 April 2012:

http://platts.com/IM.Platts.Content/aboutplatts/mediacenter/mediakits/draftiprcode30apr12.pdf

12 CR01/13 Financial Benchmarks, Consultation Report, IOSCO, 10 Jan. 2013, supra fn 4. 

13 See Id. at Appendix B. As stated in the January 2013 Consultation Report at p.8, IOSCO’s Task Force did 

not make recommendations relating to any given Benchmark
4

the credibility of a Benchmark may be restricted. Furthermore, a lack of transparency 

may allow abusive conduct to influence Benchmark determinations. Low transparency in 

the absence of strong internal controls may also create opportunities for gaming 

Submissions to influence a Benchmark.

3. Governance processes: The enforcement cases reviewed by the Task Force illustrate that 

conflicts of interest at both the Submitter and Administrator levels can create incentives 

for abusive conduct. These conflicts can arise within the variety of structures that may 

exist in the Benchmark Submission and compilation processes. For example, Submitters, 

Administrators, Calculation Agents or other third parties may attempt to manipulate a 

Benchmark by submitting false or misleading data or by attempting to influence 

personnel at the Administrator level who are responsible for the exercise of Expert 

Judgment. 

The final Principles have been developed, and should be read collectively, to address these

vulnerabilities. 

Scope

As noted above, IOSCO’s objective is to create an overarching framework of Principles for 

Benchmarks used in financial markets. Consistent with this objective, the definition of 

Benchmark that has been adopted for these Principles is very broad. 

Benchmark Administration by a National Authority used for public policy purposes (e.g., labour, 

economic activity, inflation or consumer price indices) is not within the scope of the Principles. 

However, Benchmarks where a National Authority acts as a mechanical Calculation Agent are 

within the scope of the Principles. The Principles also exclude reference prices or settlement 

prices produced by Central Counterparties (CCPs), provided that they are produced solely for the 

purposes of risk management and settlement. The prices of single financial securities (e.g.,

equity securities underlying stock options or futures) are not considered Benchmarks for the 

purposes of these Principles.

However, because the universe of Benchmarks is large and diverse - a point repeatedly stressed 

in the comment letters and Stakeholder meetings - the Task Force has first developed a set of 

high level Principles that would be applicable to all Benchmarks. A subset of more detailed 

Principles also has been developed that address Benchmarks having specific risks arising from 

their reliance on Submissions (Principles 4, 5, 11, 14 and 18) and/or ownership structures 

(Principles 3 and 5), as set out below.

Benchmark Administrators Should Adopt the Recommended Practices 

The Principles should be understood as a set of recommended practices that should be 

implemented by Benchmark Administrators and Submitters. The application of these Principles 

should be proportional to the size and risks posed by each Benchmark and/or Administrator and 

the Benchmark-setting process. 

Implementation
5

The consultation feedback brought to light a number of questions regarding the application of the 

Principles, in particular about the more detailed Administrators’ and Submitters’ control 

framework, accountability and transparency requirements.

IOSCO recognized in its April Consultation Report that “although the Principles set out uniform 

expectations, IOSCO does not expect a one-size-fits-all method of implementation to achieve the 

objectives of the Principles.” Given the large universe of Benchmarks in scope of this work, 

IOSCO believes the implementation of the Principles will not be identical for each Benchmark. 

Rather, the Principles provide a framework of standards, which might be met in different ways 

depending on the specificities of each Benchmark. In particular, the application and 

implementation of the Principles should be proportional to the size and risks posed by each 

Benchmark and/or Administrator and the Benchmark-setting process. This would also include 

the proportional application to new or emerging Benchmarks, in order to avoid material 

regulatory barriers to entry. 

The proportional implementation of Principles should also take into account the source of 

underlying data inputs14. In particular, the application of the Principles to Benchmarks that are 

derived from data sourced from Regulated Markets or Exchanges with mandatory post-trade

transparency requirements could be less intensive.

15 This is justified by the nature of checks and 

monitoring in place at the Regulated Markets or Exchanges, as well as an IOSCO member’s 

authority over rules governing the listing and trading of financial instruments referencing these 

Benchmarks. 

As examples, complying with the Principles in a proportional manner could mean for some 

Benchmarks:

• For Principle 3(c): Explaining why segregation of reporting lines may not be feasible, for 

instance because of limited staff numbers, and explaining the control measures that can 

mitigate this.

• For Principle 3(d): Explaining why the individual sign-off of each Benchmark 

determination is not possible, for instance because of the large numbers of 

determinations. Instead a general framework to validate determinations could be 

proposed. This might include sampling, such as regular or random manual validation of 

individual Benchmark determinations.

• For Principle 5: Clearly explaining to Stakeholders in a Benchmark how the oversight 

functions described in the Principle are performed, and explaining why, if a specific 

oversight committee is not used, the type of governance structure in place is appropriate. 

If the full terms and individual membership (including names) cannot be made public for 

confidentiality reasons, the Administrator should explain the composition in terms of 

positions, skills and experience.

 14 The concept of proportionality is not intended to affect the requirement in Principle 7 that a Benchmark 

must be anchored in an active market having observable, Arms-length Transactions. 

15 For example, Benchmarks that regularly publish their Methodologies would satisfy Principle 9 when 

derived from data sourced from Regulated Markets or Exchanges with mandatory post-trade transparency 

requirements would satisfy Principle 9. See Principle 9. 
6

• For Principle 17: Explaining why the form of audit (internal, external or independent) is 

adequate for the size of the operation and the risk features it displays.

In some of the examples above, general procedures may be used by the Administrator to comply 

with those Principles as long as they demonstrate that the functions required by the Principles are 

met. 

Benchmark Administrators Should Disclose Compliance with Principles

Benchmark Administrators should publically disclose the extent of their compliance with the 

Principles annually. If implementation in any way deviates from the Principles, the 

Administrator should explain why it believes it meets the objectives and functions of the 

Principles, including to the extent they are relying on a proportionate view of the Principles (as 

that concept has been described above). 

Benchmark Administrators should publically disclose their compliance with the Principles within 

twelve months of the publication of this report.

Specific Application for Oil PRAs

In October 2012, IOSCO adopted the PRA Principles, which were developed in collaboration 

with the International Energy Agency (IEA), International Energy Forum (IEF), and the 

Organization of Petroleum Exporting Countries (OPEC) 16 . IOSCO recommended voluntary 

adoption and implementation of the PRA Principles and established a review process over the 18 

months following their publication, pursuant to which IOSCO, in collaboration with the IEA, 

IEF and OPEC, will evaluate the degree to which the PRA Principles have been implemented by 

PRAs. IOSCO further stated that it will seek the input of market authorities, stakeholders and 

PRAs and make further recommendations as appropriate at the end of the evaluation period. 

As noted above, IOSCO took into consideration the PRA Principles during the development of 

these Principles for Financial Benchmarks17. Moreover, the PRA Principles were developed with 

due regard to the specifics of the oil markets, while these Principles for Financial Benchmarks 

focus on Benchmarks generally. As a result, while both sets of principles reflect similar highlevel concerns, they differ in specifics. 

In order to respect the circumstances under which these two sets of principles have been adopted,

as well as the on-going evaluation process of the PRA Principles, IOSCO expects that the oil 

PRAs should continue to comply with and implement the PRA Principles. 

IOSCO will, in the context of its collaboration with the IEA, IEF and OPEC, consider the need in 

due course for any modification of the PRA Principles to align them more closely with these

Principles for Financial Benchmarks.

 16 FR06/12 Principles for Oil Price Reporting Agencies, Report of the Board of IOSCO, October 2012, 

http://www.iosco.org/library/pubdocs/pdf/IOSCOPD391.pdf

17 For example, Principle 9 of the principles for Financial Benchmarks is based on principle 2.3 of the oil 

PRA Principles. 
7

IOSCO members should encourage implementation of the Principles including through 

regulatory action where appropriate.

This Report does not make specific recommendations with respect to any particular Benchmarks. 

The majority of IOSCO members do not regulate Benchmark Administrators or Submitters. 

Nonetheless, IOSCO members should consider whether regulatory action (or recommendations 

for action by other relevant National Authorities in their own jurisdiction) may be appropriate to 

encourage implementation of the Principles. A policy decision in this regard will depend upon, 

many factors, including: 

• Facts and circumstances of Benchmark activity in a particular IOSCO member’s 

jurisdiction;

• Impact of such activity on the IOSCO member’s regulatory responsibilities;

• Investor and retail usage;

• Economic and financial stability impacts of such activity;

• Existing review and approval authority over rules governing the listing and trading of 

securities and derivatives that reference Benchmarks; 18 

• Allocation of regulatory responsibility within the jurisdiction; and 

• An IOSCO member’s determination as to the need for, and effectiveness of, any policy 

changes. 

The factors discussed in the January Consultation Report on drawing regulatory distinctions are 

also pertinent to this inquiry.

19 Moreover, different approaches may be appropriate for different

Benchmarks. 

IOSCO Statement on Appropriate Enforcement Powers 

An effective and credible enforcement programme should include robust powers over market 

manipulation, including attempted manipulation and securities fraud. These powers might be 

general in their application or they might relate directly to Benchmark activity. 

In practice, despite not commonly having express powers to take action for Benchmark

misconduct, Regulatory Authorities have deployed their existing powers in relation to securities 

breaches in order to bring cases against manipulation and attempted manipulation of 

 18 The January 2013 Consultation Report noted that the IOSCO Objectives and Principles of Securities 

Regulation provide that a regulator should be informed of the types of securities and products to be traded 

on an exchange or trading system and review or approve the rules governing the trading of the 

product. FRO8/11 Methodology for Assessing Implementation of the IOSCO Objectives and Principles of 

Securities Regulation (October 2011), Principle 33, key issue 4, products and participants at p. 207.

19 See discussion at pages 34-37 in CR01/13 Financial Benchmark’s, Report of the Board of IOSCO (10 

January 2013). Supra fn 4. 
8

Benchmarks. For example, the US CFTC and the UK FSA have fined three banks in aggregate 

more than US$ 2.6 billion between June 2012 and February 2013. These investigations involved 

significant information-sharing and cooperation under the IOSCO Multilateral Memorandum of 

Understanding (MMoU) in accordance with the paragraph 7 of the IOSCO MMoU stating that 

signatories provide one another with the “fullest assistance permissible” to secure compliance 

with the securities laws applicable in their jurisdictions. 

The momentum of these recent events has led to a number of proposals for regulators to be given 

express powers to take action against Benchmark misconduct. For example, with effect from 1 

April 2013 the UK FCA has the power to prosecute a new criminal offence, which has been 

introduced if a person makes false or misleading statements in relation to LIBOR-setting (section 

91, Financial Services Act 2012). In the European Economic Area, the new Market Abuse 

Regulation (expected to come into force by 2014) introduces provisions specifying that 

manipulation of the calculation of a Benchmark constitutes misconduct under the European 

Market Abuse regime.

20 These developments are welcome.

Accordingly, IOSCO Members should initiate action (or recommendations for action by other 

relevant National Authorities in their own jurisdiction), appropriate to their jurisdiction’s legal 

and regulatory structure, to adopt enforcement regulations that make manipulation and attempted 

manipulation of a Benchmark an offense where such Benchmark is referenced in a financial 

contract or financial instrument.

Principles are Not Intended to Supersede Existing National Laws

The Principles are not intended to supersede existing laws, regulations or relevant regulatory or 

supervisory frameworks in specific jurisdictions, including any IOSCO Principles or 

undertakings agreed with Regulatory Authorities relating to a specific type of Benchmark, or a 

related activity. Rather, these Principles are intended to provide guidance to Administrators, 

Submitters and regulators and supplement existing IOSCO Principles. 

Evaluation

Following the publication of the Principles, IOSCO intends to review within an 18-month period 

the extent to which the Principles have been implemented by obtaining the input of Stakeholders, 

Market Authorities and, as appropriate, Benchmark Administrators. 

 20 http://ec.europa.eu/internal_market/securities/abuse/index_en.htm
9

Chapter 2 –Principles for Financial Benchmarks

Summary of the Principles 

These Principles are intended to promote the reliability of Benchmark determinations, and 

address Benchmark governance, quality and accountability mechanisms. Although the Principles 

set out uniform expectations, IOSCO does not expect a one-size-fits-all method of 

implementation to achieve these objectives. The Principles provide a framework of standards 

that Administrators should implement according to the specificities of each Benchmark. In 

particular, the application and implementation of the Principles should be proportional to the size 

and risks posed by each Benchmark and/or Administrator and the Benchmark-setting process. 

Moreover, nothing in these Principles is intended to restrict an Administrator from adopting its 

own unique Methodology or from adapting their Methodologies to changing market conditions

in order to meet the Principles.

Governance:

These Principles are intended to ensure that Administrators will have appropriate governance 

arrangements in place in order to protect the integrity of the Benchmark determination process 

and to address conflicts of interest. Specifically, these Principles address:

• The retention by the Administrator of primary responsibility for all aspects of the 

Benchmark determination process, such as the development and determination of a 

Benchmark and establishing credible and transparent governance, oversight and 

accountability procedures. This Principle makes clear that, regardless of the particular 

structure for Benchmark determination and administration, there should be an overall 

entity which is responsible for the integrity of the Benchmark. [1. Overall Responsibility 

of the Administrator]

• The adoption by the Administrator (and its oversight function) of clearly defined written 

arrangements setting out the roles and obligations of the parties involved in the 

Benchmark determination and the monitoring of any third party’s compliance with those 

arrangements. This Principle reflects the concern that any outsourcing of functions should 

be subject to oversight by the Administrator. This Principle applies only where activities 

relating to the Benchmark determination process are undertaken by third parties, for 

example with respect to collection of inputs, or where a third party acts as the Calculation 

Agent or Publisher of the Benchmark. [2. Oversight of Third Parties]

• The documentation, implementation and enforcement of policies and procedures for the 

identification, disclosure, management and avoidance of conflicts of interest, including 

the disclosure of any material conflicts of interest to Stakeholders and any relevant 

Regulatory Authority. This framework should be appropriately tailored to the level of 

existing or potential conflicts of interest identified by the Administrator and should seek 

to mitigate existing or potential conflicts of interest created by the ownership or control 

structure or due to other interests arising from the Administrators’ staff or wider group in 

relation to Benchmark determinations. This Principle is intended to address the 
10

vulnerabilities that create incentives for Benchmark manipulation. [3. Conflicts of 

Interest for Administrators]

• An appropriate control framework at the Administrator for the process of determining 

and distributing the Benchmark, which should be appropriately tailored to the materiality 

of the potential or existing conflicts of interest identified, and to the nature of Benchmark

inputs and outputs. The control framework should be documented, available to any 

relevant Regulatory Authority and Published or Made Available to Stakeholders. Among 

other things, a control framework should include an effective whistleblowing mechanism 

in order to facilitate early awareness of potential misconduct. [4. Control Framework 

for Administrators]

• An oversight function to review and provide challenge on all aspects of the Benchmark

determination process, which should be appropriate to the Benchmark in question (i.e.,

including its size, scale and complexity) and provide effective oversight of the 

Administrator. The oversight function and its composition should include consideration 

of the features and intended, expected or known usage of the Benchmark and the 

materiality of existing or potential conflicts of interest identified. A separate committee 

or other appropriate governance arrangements should carry out the oversight function. [5. 

Internal Oversight]

Quality of the Benchmark:

These Principles are intended to promote the quality and integrity of Benchmark determinations 

through the application of design factors that result in a Benchmark that reflects a credible 

market for an Interest measured by that Benchmark. The Principles also clarify that a variety of 

data may be appropriately used to construct a Benchmark, as long as the Data Sufficiency 

Principle is met (i.e., based on an active market). Specifically, these Principles address:

• The design of a Benchmark should take into account generic design factors that are 

intended to result in a reliable representation of the economic realities of the Interest that

the Benchmark seeks to measure and to eliminate factors that might result in a distortion 

of the price, rate, index or value of that Benchmark. The factors presented are generic 

and non-exclusive illustrations. [6. Benchmark Design]

• The data used to construct a Benchmark should be based on prices, rates, indices or 

values that have been formed by the competitive forces of supply and demand (i.e., in an 

active market) and be anchored by observable transactions entered into at arm’s length 

between buyers and sellers in the market for the Interest the Benchmark measures.

21 This 

Principle recognizes that Bona Fide observable transactions in active markets provide a 

 21 The term “active market” is not defined, as this is a determination that is made by the Administrator during 

the design of the Benchmark (Principle 6) as well as in its periodic review of the selected reference market 

(Principle 10). The January Consultation Report discusses a variety of factors, such as size, liquidity, 

market concentration and market dynamics that will be relevant to this inquiry. See discussion at pages 40-

42 in CR01/13 Financial Benchmarks, Report of the Board of IOSCO 10 Jan. 2013, supra fn 4. 
11

level of confidence that the prices or values used as the basis of the Benchmark are 

credible. Principle 7 does not mean that every individual Benchmark determination must 

be constructed solely from transaction data. Provided that an active market exists, 

conditions in the market on any given day might require the Administrator to rely on 

different forms of data tied to observable market data as an adjunct or supplement to 

transactions.

22 Depending upon the Administrator’s Methodology, this could result in an 

individual Benchmark determination based predominantly, or exclusively, on bids and 

offers or extrapolations from prior transactions.

• Provided that an active market exists, Principle 7 does not preclude Benchmark 

Administrators from using executable bids or offers as a means to construct Benchmarks 

where anchored in an observable market consisting of Bona Fide, Arms-length

transactions. For example, this approach might be appropriate in a market where overall 

transaction volume is high over sustained periods, though on any given day there might 

be more firm bids and offers than posted transactions taking place.

• The Principle also recognizes that various indices may be designed to measure or reflect 

the performance of a rule-based investment strategy, the volatility or behaviour of an 

index or market or other aspects of an active market. The Principle also does not preclude 

the use of non-transactional data for indices that are not designed to represent 

transactions and where the nature of the index is such that non-transactional data is used 

to reflect what the index is designed to measure. For example, certain volatility indices, 

which are designed to measure the expected volatility of an index of securities 

transactions, rely on non-transactional data, but the data is derived from and thus

anchored in an actual functioning securities or options market. [7. Data Sufficiency]

• The establishment of clear guidelines regarding the hierarchy of data inputs and the 

exercise of Expert Judgment used for the determination of Benchmarks. This Principle is 

intended to make transparent to users the manner in which data and Expert Judgment may 

be used for the construction of a Benchmark. This Principle is not intended to create a 

rigid checklist or otherwise restrict an Administrator’s flexibility to use inputs consistent 

with the Administrator’s approach to ensuring the quality, integrity, continuity and 

reliability of its Benchmark determinations, set out in the Benchmark Methodology, 

provided that the Data Sufficiency Principle is met. [8. Hierarchy of Data Inputs]

• The publication with each Benchmark determination, to the extent reasonable without 

delaying the Administrator’s publication deadline, of a concise explanation sufficient to 

facilitate a Subscriber’s or Market Authority’s ability to understand how the Benchmark 

determination was developed, as well as a concise explanation of the extent to which and 

the basis upon which judgment, if any, was used by the Administrator in establishing a 

 22 As noted in the January Consultation Report, a low liquidity market that reflects the commercial realities of 

a market and functions as a price discovery market could support a Benchmark consistent with this 

Principle, even though non-transactional data such as verifiable (firm) bids and offers might be used as an 

adjunct to the low number of transactions in compiling a Benchmark. See id. at 41.
12

benchmark determination. Benchmarks that regularly publish their Methodologies would 

satisfy principle 9 when derived from data sourced from Regulated Markets or Exchanges

with mandatory post-trade transparency requirements. In addition, a Benchmark that is 

based exclusively on executable quotes as contemplated by Principle 7 would not need to 

explain in each determination why it has been constructed with executable bids or offers, 

provided there is disclosure in the Methodology. [9. Transparency of Benchmark 

Determinations]

• The periodic review by the Administrator of the conditions in the underlying Interest that 

the Benchmark measures to determine whether the Interest has undergone structural 

changes that might require changes to the design of the Methodology (e.g., the Interest 

has diminished to the extent that it can no longer function as the basis for a credible 

Benchmark). In order to facilitate Stakeholders’ understanding of the viability of a 

Benchmark, a summary of such reviews should be Published or Made Available when

material revisions have been made to a Benchmark, including the rationale for the 

revisions. [10. Periodic Review]

Quality of the Methodology:

These Principles are intended to promote the quality and integrity of Methodologies by setting 

out minimum information that should be addressed within a Methodology, which should be 

Published or Made Available so that Stakeholders may understand and make their own 

judgments concerning the overall credibility of a Benchmark. The Methodology should also 

address the need for procedures that control when material changes are planned, as a means of 

alerting Stakeholders to these changes that might affect their positions, financial instruments or 

contracts. 

The Principles also establish that Administrators should have credible policies in case a 

Benchmark ceases to exist or Stakeholders need to transition to another Benchmark. These 

policies are intended to encourage Administrators and Stakeholders to plan prospectively for the 

possible cessation of a Benchmark. 

These Principles also address vulnerabilities in the Submission process (e.g., conflict of interest, 

improper communication between Submitters and Administrators, selective Submission of data) 

by outlining the responsibilities that should be undertaken by Submitters (i.e., a Submitter Code

of Conduct). These Principles also make clear the Administrator’s responsibilities to have 

internal controls over the collection of data from regulated sources. Specifically, these Principles 

address:

• The documentation and publication of the Methodology used to make Benchmark

determinations, with sufficient detail to allow Stakeholders to understand how the 

Benchmark is derived and to assess its representativeness, its relevance to particular 

Stakeholders, and its appropriateness as a reference for financial instruments. [11. 

Content of the Methodology]

• The publication of the rationale of any proposed material change in its Methodology, and 

procedures for making such changes. These procedures should clearly define what 

constitutes a material change, and the method and timing for consulting or notifying 
13

Subscribers (and other Stakeholders where appropriate, taking into account the breadth 

and depth of Benchmark use) of changes. [12. Changes to the Methodology] 

• Clearly written policies and procedures that address the need for possible cessation of a 

Benchmark, due to market structure change, product definition changes, or any other 

condition, which makes the Benchmark no longer representative of its intended function. 

These policies and procedures should be proportionate to the estimated breadth and depth 

of contracts and financial instruments that reference a Benchmark and the economic and 

financial stability impact that might result from the cessation of the Benchmark. The 

Administrator should take into account the views of Stakeholders and any relevant 

Regulatory and National Authorities in determining what policies and procedures are 

appropriate for a particular Benchmark. Administrators should encourage Subscribers and 

Stakeholders to have robust fall-back provisions in contracts or financial instruments that 

reference a Benchmark. [13. Transition] 

• The development of guidelines for Submitters (“Submitter Code of Conduct, which 

should be available to any relevant Regulatory Authorities and Published or Made 

Available to Stakeholders. Note: This Principle is only applicable to a Benchmark based 

on Submissions. [14. Submitter Code of Conduct]

• Appropriate internal controls over the Administrator’s data collection and transmission 

processes – when an Administrator collects data directly from a Regulated Market, 

Exchange or other data aggregator, which address the process for selecting the source, 

collecting the data and protecting the integrity and confidentiality of the data. [15. 

Internal Controls over Data Collection]

Accountability:

These Principles establish complaints processes, documentation standards and audit reviews that

are intended to provide evidence of compliance by the Administrator with its quality standards, 

as defined by these Principles and its own policies. The Principles also address making the 

foregoing information available to relevant Market Authorities. Specifically, these Principles 

address:

• The establishment and publication of a written complaints policy by which Stakeholders 

may submit complaints concerning whether a specific Benchmark determination is 

representative of the underlying Interest it seeks to measure, application of the 

Methodology to a specific Benchmark determination and other Administrator decisions in 

relation to a Benchmark determination. This Principle is intended to promote the 

reliability of Benchmark determinations through Stakeholder input and alert Market 

Authorities to possible factors that might affect the reliability of determinations. [16. 

Complaints procedures]

• The appointment of an independent internal or external auditor with appropriate 

experience and capability to periodically review and report on the Administrator’s 

adherence to its stated criteria and the requirements of the Principles. The frequency of 

audits should be proportionate to the size and complexity of the Administrator’s 

operations. Under certain circumstances (i.e., appropriate to the level of existing or 
14

potential conflicts of interest identified by the Administrator) an Administrator should 

appoint an independent external auditor to periodically review and report on the 

Administrator’s adherence to its stated Methodology criteria. These provisions are 

intended to promote compliance with the Principles and provide confirmation to relevant 

Market Authorities and Stakeholders of such compliance. [17. Audits] 

• The retention of written records by the Administrator for five years, subject to applicable 

national legal or regulatory requirements. This Principle is intended to safeguard 

necessary documents for Audits. Additional requirements apply for Benchmarks based 

on Submissions. [18. Audit Trail] 

• Relevant documents, Audit Trails and other documents addressed by these Principles 

shall be made readily available by the relevant parties to the relevant Regulatory 

Authorities in carrying out their regulatory or supervisory duties and handed over 

promptly upon request. This is intended to facilitate a Regulatory Authority’s ability to 

access information that might be needed to determine the reliability of a given 

Benchmark determination or to access information that might be needed to investigate 

misconduct. [19. Cooperation with Regulatory Authorities] 
15

Principles for Benchmarks

Governance 

A Benchmark should have appropriate governance arrangements in place to protect the integrity 

of the Benchmark and to address conflicts of interests.

1. Overall Responsibility of the Administrator 

The Administrator should retain primary responsibility for all aspects of the Benchmark

determination process. For example, this includes:

a) Development: The definition of the Benchmark and Benchmark Methodology;

b) Determination and Dissemination: Accurate and timely compilation and publication and 

distribution of the Benchmark;

c) Operation: Ensuring appropriate transparency over significant decisions affecting the 

compilation of the Benchmark and any related determination process, including 

contingency measures in the event of absence of or insufficient inputs, market stress or 

disruption, failure of critical infrastructure, or other relevant factors; and 

d) Governance: Establishing credible and transparent governance, oversight and 

accountability procedures for the Benchmark determination process, including an 

identifiable oversight function accountable for the development, issuance and operation 

of the Benchmark.

2. Oversight of Third Parties 

Where activities relating to the Benchmark determination process are undertaken by third parties 

- for example collection of inputs, publication or where a third party acts as Calculation Agent -

the Administrator should maintain appropriate oversight of such third parties. The Administrator 

(and its oversight function) should consider adopting policies and procedures that:

a) Clearly define and substantiate through appropriate written arrangements the roles and 

obligations of third parties who participate in the Benchmark determination process, as 

well as the standards the Administrator expects these third parties to comply with;

b) Monitor third parties’ compliance with the standards set out by the Administrator; 

c) Make Available to Stakeholders and any relevant Regulatory Authority the identity and 

roles of third parties who participate in the Benchmark determination process; and

d) Take reasonable steps, including contingency plans, to avoid undue operational risk 

related to the participation of third parties in the Benchmark determination process.

This Principle does not apply in relation to a third party from whom an Administrator sources 

data if that third party is a Regulated Market or Exchange. 
16

3. Conflicts of Interest for Administrators 

To protect the integrity and independence of Benchmark determinations, Administrators should 

document, implement and enforce policies and procedures for the identification, disclosure, 

management, mitigation or avoidance of conflicts of interest. Administrators should review and 

update their policies and procedures as appropriate.

Administrators should disclose any material conflicts of interest to their users and any relevant 

Regulatory Authority, if any.

The framework should be appropriately tailored to the level of existing or potential conflicts of 

interest identified and the risks that the Benchmark poses and should seek to ensure:

a) Existing or potential conflicts of interest do not inappropriately influence Benchmark

determinations;

b) Personal interests and connections or business connections do not compromise the 

Administrator’s performance of its functions;

c) Segregation of reporting lines within the Administrator, where appropriate, to clearly 

define responsibilities and prevent unnecessary or undisclosed conflicts of interest or the 

perception of such conflicts;

d) Adequate supervision and sign-off by authorised or qualified employees prior to releasing 

Benchmark determinations;

e) The confidentiality of data, information and other inputs submitted to, received by or 

produced by the Administrator, subject to the disclosure obligations of the Administrator;

f) Effective procedures to control the exchange of information between staff engaged in 

activities involving a risk of conflicts of interest or between staff and third parties, where 

that information may reasonably affect any Benchmark determinations; and

g) Adequate remuneration policies that ensure all staff who participate in the Benchmark

determination are not directly or indirectly rewarded or incentivised by the levels of the 

Benchmark.

An Administrator’s conflict of interest framework should seek to mitigate existing or potential 

conflicts created by its ownership structure or control, or due to other interests the 

Administrator’s staff or wider group may have in relation to Benchmark determinations. To this 

end, the framework should: 

a) Include measures to avoid, mitigate or disclose conflicts of interest that may exist 

between its Benchmark determination business (including all staff who perform or 

otherwise participate in Benchmark production responsibilities), and any other business 

of the Administrator or any of its affiliates; and

b) Provide that an Administrator discloses conflicts of interest arising from the ownership 

structure or the control of the Administrator to its Stakeholders and any relevant 

Regulatory Authority in a timely manner.
17

4. Control Framework for Administrators

An Administrator should implement an appropriate control framework for the process of 

determining and distributing the Benchmark. The control framework should be appropriately 

tailored to the materiality of the potential or existing conflicts of interest identified, the extent of 

the use of discretion in the Benchmark setting process and to the nature of Benchmark inputs and 

outputs. The control framework should be documented and available to relevant Regulatory 

Authorities, if any. A summary of its main features should be Published or Made Available to 

Stakeholders. 

This control framework should be reviewed periodically and updated as appropriate. The 

framework should address the following areas:

a) Conflicts of interest in line with Principle 3 on conflicts of interests; 

b) Integrity and quality of Benchmark determination:

i. Arrangements to ensure that the quality and integrity of Benchmarks is maintained, 

in line with principles 6 to 15 on the quality of the Benchmark and Methodology;

ii. Arrangements to promote the integrity of Benchmark inputs, including adequate due 

diligence on input sources;

iii. Arrangements to ensure accountability and complaints mechanisms are effective, in 

line with principles 16 to 19; and

iv. Providing robust infrastructure, policies and procedures for the management of risk, 

including operational risk.

c) Whistleblowing mechanism:

Administrators should establish an effective whistleblowing mechanism to facilitate early 

awareness of any potential misconduct or irregularities that may arise. This mechanism 

should allow for external reporting of such cases where appropriate.

d) Expertise:

i. Ensuring Benchmark determinations are made by personnel who possess the 

relevant levels of expertise, with a process for periodic review of their competence; 

and

ii. Staff training, including ethics and conflicts of interest training, and continuity and 

succession planning for personnel.

Where a Benchmark is based on Submissions: Administrators should promote the integrity of 

inputs by:
18

a) Ensuring as far as possible that the Submitters comprise an appropriately representative 

group of participants taking into consideration the underlying Interest measured by the 

Benchmark;

b) Employing a system of appropriate measures so that, to the extent possible, Submitters 

comply with the Submission guidelines, as defined in the Submitter Code of Conduct and 

the Administrators’ applicable quality and integrity standards for Submission;

c) Specifying how frequently Submissions should be made and specifying that inputs or 

Submissions should be made for every Benchmark determination; and

d) Establishing and employing measures to effectively monitor and scrutinise inputs or 

Submissions. This should include pre-compilation or pre-publication monitoring to 

identify and avoid errors in inputs or Submissions, as well as ex-post analysis of trends 

and outliers.

5. Internal Oversight

Administrators should establish an oversight function to review and provide challenge on all 

aspects of the Benchmark determination process. This should include consideration of the 

features and intended, expected or known usage of the Benchmark and the materiality of existing 

or potential conflicts of interest identified.

The oversight function should be carried out either by a separate committee, or other appropriate 

governance arrangements. The oversight function and its composition should be appropriate to 

provide effective scrutiny of the Administrator. Such oversight function could consider groups of 

Benchmarks by type or asset class, provided that it otherwise complies with this Principle.

An Administrator should develop and maintain robust procedures regarding its oversight 

function, which should be documented and available to relevant Regulatory Authorities, if any. 

The main features of the procedures should be Made Available to Stakeholders. These

procedures should include:

a) The terms of reference of the oversight function; 

b) Criteria to select members of the oversight function;

c) The summary details of membership of any committee or arrangement charged with the 

oversight function, along with any declarations of conflicts of interest and processes for 

election, nomination or removal and replacement of committee members.

The responsibilities of the oversight function include: 

a) Oversight of the Benchmark design:

i. Periodic review of the definition of the Benchmark and its Methodology; 

ii. Taking measures to remain informed about issues and risks to the Benchmark, as 

well as commissioning external reviews of the Benchmark (as appropriate); 
19

iii. Overseeing any changes to the Benchmark Methodology, including assessing 

whether the Methodology continues to appropriately measure the underlying 

Interest, reviewing proposed and implemented changes to the Methodology, and 

authorising or requesting the Administrator to undertake a consultation with 

Stakeholders where known or its Subscribers on such changes as per Principle 12; 

and

iv. Reviewing and approving procedures for termination of the Benchmark, including 

guidelines that set out how the Administrator should consult with Stakeholders 

about such cessation.

b) Oversight of the integrity of Benchmark determination and control framework:

i. Overseeing the management and operation of the Benchmark, including activities 

related to Benchmark determination undertaken by a third party;

ii. Considering the results of internal and external audits, and following up on the 

implementation of remedial actions highlighted in the results of these audits; and 

iii. Overseeing any exercise of Expert Judgment by the Administrator and ensuring 

Published Methodologies have been followed.

Where conflicts of interests may arise in the Administrator due to its ownership structures 

or controlling interests, or due to other activities conducted by any entity owning or 

controlling the Administrator or by the Administrator or any of its affiliates: the 

Administrator should establish an independent oversight function which includes a balanced 

representation of a range of Stakeholders where known, Subscribers and Submitters, which is 

chosen to counterbalance the relevant conflict of interest. 

Where a Benchmark is based on Submissions: the oversight function should provide suitable 

oversight and challenge of the Submissions by:

a) Overseeing and challenging the scrutiny and monitoring of inputs or Submissions by the 

Administrator. This could include regular discussions of inputs or Submission patterns, 

defining parameters against which inputs or Submissions can be analysed, or querying 

the role of the Administrator in challenging or sampling unusual inputs or Submissions;

b) Overseeing the Code of Conduct for Submitters; 

c) Establishing effective arrangements to address breaches of the Code of Conduct for 

Submitters; and

d) Establishing measures to detect potential anomalous or suspicious Submissions and in 

case of suspicious activities, to report them, as well as any misconduct by Submitters of 

which it becomes aware to the relevant Regulatory Authorities, if any.
20

Quality of the Benchmark

6. Benchmark Design

The design of the Benchmark should seek to achieve, and result in an accurate and reliable

representation of the economic realities of the Interest it seeks to measure, and eliminate factors 

that might result in a distortion of the price, rate, index or value of the Benchmark.

Benchmark design should take into account the following generic non-exclusive features, and 

other factors should be considered, as appropriate to the particular Interest:

a) Adequacy of the sample used to represent the Interest;

b) Size and liquidity of the relevant market (for example whether there is sufficient trading 

to provide observable, transparent pricing);

c) Relative size of the underlying market in relation to the volume of trading in the market 

that references the Benchmark;

d) The distribution of trading among Market Participants (market concentration);

e) Market dynamics (e.g., to ensure that the Benchmark reflects changes to the assets 

underpinning a Benchmark).

7. Data Sufficiency

The data used to construct a Benchmark determination should be sufficient to accurately and 

reliably represent the Interest measured by the Benchmark and should:

a) Be based on prices, rates, indices or values that have been formed by the competitive 

forces of supply and demand in order to provide confidence that the price discovery 

system is reliable; and

b) Be anchored by observable transactions entered into at arm’s length between buyers and 

sellers in the market for the Interest the Benchmark measures in order for it to function 

as a credible indicator of prices, rates, indices or values. 

This Principle requires that a Benchmark be based upon (i.e., anchored in) an active market 

having observable Bona Fide, Arms-Length Transactions. This does not mean that every 

individual Benchmark determination must be constructed solely of transaction data. Provided 

that an active market exists, conditions in the market on any given day might require the 

Administrator to rely on different forms of data tied to observable market data as an adjunct or 

supplement to transactions. Depending upon the Administrator’s Methodology, this could result 

in an individual Benchmark determination being based predominantly, or exclusively, on bids 

and offers or extrapolations from prior transactions. This is further clarified in Principle 8.
21

Provided that subparagraphs (a) and (b) above are met, Principle 7 does not preclude Benchmark 

Administrators from using executable bids or offers as a means to construct Benchmarks where 

anchored in an observable market consisting of Bona Fide, Arms-Length transactions.23

This Principle also recognizes that various indices may be designed to measure or reflect the 

performance of a rule-based investment strategy, the volatility or behaviour of an index or

market or other aspects of an active market. Principle 7 does not preclude the use of nontransactional data for such indices that are not designed to represent transactions and where the 

nature of the index is such that non-transactional data is used to reflect what the index is 

designed to measure. For example, certain volatility indices, which are designed to measure the 

expected volatility of an index of securities transactions, rely on non-transactional data, but the 

data is derived from and thus “anchored” in an actual functioning securities or options market. 

8. Hierarchy of Data Inputs

An Administrator should establish and Publish or Make Available clear guidelines regarding the 

hierarchy of data inputs and exercise of Expert Judgment used for the determination of 

Benchmarks. In general, the hierarchy of data inputs should include:

a) Where a Benchmark is dependent upon Submissions, the Submitters’ own concluded 

arms-length transactions in the underlying interest or related markets; 

b) Reported or observed concluded Arm’s-length Transactions in the underlying interest;

c) Reported or observed concluded Arm’s-length Transactions in related markets;

d) Firm (executable) bids and offers; and

e) Other market information or Expert Judgments. 

Provided that the Data Sufficiency Principle is met (i.e., an active market exists), this Principle is 

not intended to restrict an Administrator’s flexibility to use inputs consistent with the 

Administrator’s approach to ensuring the quality, integrity, continuity and reliability of its 

Benchmark determinations, as set out in the Administrator’s Methodology. The Administrator 

should retain flexibility to use the inputs it believes are appropriate under its Methodology to 

ensure the quality and integrity of its Benchmark. For example, certain Administrators may 

decide to rely upon Expert Judgment in an active albeit low liquidity market, when transactions 

may not be consistently available each day. IOSCO also recognizes that there might be 

circumstances (e.g., a low liquidity market) when a confirmed bid or offer might carry more 

meaning than an outlier transaction. Under these circumstances, non-transactional data such as 

bids and offers and extrapolations from prior transactions might predominate in a given 

Benchmark determination. 

 23 For example, this approach might be appropriate in a market where overall transaction volume is high over 

sustained periods, though on any given day there might be more firm bids and offers than posted 

transactions taking place. 
22

9. Transparency of Benchmark Determinations 24

The Administrator should describe and publish with each Benchmark determination, to the 

extent reasonable without delaying an Administrator publication deadline: 

a) A concise explanation, sufficient to facilitate a Stakeholder’s or Market Authority’s 

ability to understand how the determination was developed, including, at a minimum, the 

size and liquidity of the market being assessed (meaning the number and volume of 

transactions submitted), the range and average volume and range and average of price, 

and indicative percentages of each type of market data that have been considered in a

Benchmark determination; terms referring to the pricing Methodology should be 

included (i.e., transaction-based, spread-based or interpolated/extrapolated); 

b) A concise explanation of the extent to which and the basis upon which Expert Judgment 

if any, was used in establishing a Benchmark determination. 

10. Periodic Review

The Administrator should periodically review the conditions in the underlying Interest that the 

Benchmark measures to determine whether the Interest has undergone structural changes that 

might require changes to the design of the Methodology. The Administrator also should 

periodically review whether the Interest has diminished or is non-functioning such that it can no 

longer function as the basis for a credible Benchmark.

The Administrator should Publish or Make Available a summary of such reviews where material 

revisions have been made to a Benchmark, including the rationale for the revisions.

Quality of the Methodology

11.Content of the Methodology

The Administrator should document and Publish or Make Available the Methodology used to 

make Benchmark determinations. The Administrator should provide the rationale for adopting a 

particular Methodology. The Published Methodology should provide sufficient detail to allow 

Stakeholders to understand how the Benchmark is derived and to assess its representativeness, its 

 24 See Annex C for further elaboration of this Principle. Benchmarks that regularly publish their 

Methodologies would satisfy Principle 9 when derived from data sourced from Regulated Markets or 

Exchanges with mandatory post-trade transparency requirements. In addition, a Benchmark that is based 

exclusively on executable quotes as contemplated by Principle 7 would not need to explain in each 

determination why it has been constructed with executable bids or offers, provided there is disclosure in the 

Methodology. 
23

relevance to particular Stakeholders, and its appropriateness as a reference for financial 

instruments. 

At a minimum, the Methodology should contain: 

a) Definitions of key terms; 

b) All criteria and procedures used to develop the Benchmark, including input selection, the 

mix of inputs used to derive the Benchmark, the guidelines that control the exercise of 

Expert Judgment by the Administrator, priority given to certain data types, minimum 

data needed to determine a Benchmark, and any models or extrapolation methods; 

c) Procedures and practices designed to promote consistency in the exercise of Expert 

Judgment between Benchmark determinations; 

d) The procedures which govern Benchmark determination in periods of market stress or 

disruption, or periods where data sources may be absent (e.g., theoretical estimation 

models);

e) The procedures for dealing with error reports, including when a revision of a Benchmark

would be applicable; 

f) Information regarding the frequency for internal reviews and approvals of the 

Methodology. Where applicable, the Published Methodologies should also include 

information regarding the procedures and frequency for external review of the 

Methodology;

g) The circumstances and procedures under which the Administrator will consult with 

Stakeholders, as appropriate; and

h) The identification of potential limitations of a Benchmark, including its operation in 

illiquid or fragmented markets and the possible concentration of inputs.

Where a Benchmark is based on Submissions, the additional Principle also applies: 

The Administrator should clearly establish criteria for including and excluding Submitters. The 

criteria should consider any issues arising from the location of the Submitter, if in a different 

jurisdiction to the Administrator. These criteria should be available to any relevant Regulatory 

Authorities, if any, and Published or Made Available to Stakeholders. Any provisions related to 

changes in composition, including notice periods should be made clear. 

12.Changes to the Methodology

An Administrator should Publish or Make Available the rationale of any proposed material 

change in its Methodology, and procedures for making such changes. These procedures should 

clearly define what constitutes a material change, and the method and timing for consulting or 

notifying Subscribers (and other Stakeholders where appropriate, taking into account the breadth 

and depth of the Benchmark’s use) of changes. 
24

Those procedures should be consistent with the overriding objective that an Administrator must 

ensure the continued integrity of its Benchmark determinations. When changes are proposed, the 

Administrator should specify exactly what these changes entail and when they are intended to 

apply.

The Administrator should specify how changes to the Methodology will be scrutinised, by the 

oversight function.

The Administrator should develop Stakeholder consultation procedures in relation to changes to 

the Methodology that are deemed material by the oversight function, and that are appropriate and 

proportionate to the breadth and depth of the Benchmark’s use and the nature of the 

Stakeholders. Procedures should:

a) Provide advance notice and a clear timeframe that gives Stakeholders sufficient 

opportunity to analyse and comment on the impact of such proposed material changes, 

having regard to the Administrator’s assessment of the overall circumstances; and

b) Provide for Stakeholders’ summary comments, and the Administrator’s summary 

response to those comments, to be made accessible to all Stakeholders after any given 

consultation period, except where the commenter has requested confidentiality. 

13.Transition

Administrators should have clear written policies and procedures, to address the need for 

possible cessation of a Benchmark, due to market structure change, product definition change, or 

any other condition which makes the Benchmark no longer representative of its intended Interest. 

These policies and procedures should be proportionate to the estimated breadth and depth of 

contracts and financial instruments that reference a Benchmark and the economic and financial 

stability impact that might result from the cessation of the Benchmark. The Administrator should 

take into account the views of Stakeholders and any relevant Regulatory and National 

Authorities in determining what policies and procedures are appropriate for a particular 

Benchmark.

These written policies and procedures should be Published or Made Available to all 

Stakeholders. 

Administrators should encourage Subscribers and other Stakeholders who have financial 

instruments that reference a Benchmark to take steps to make sure that:

a) Contracts or other financial instruments that reference a Benchmark, have robust fall-back

provisions in the event of material changes to, or cessation of, the referenced Benchmark; 

and

b) Stakeholders are aware of the possibility that various factors, including external factors 

beyond the control of the Administrator, might necessitate material changes to a 

Benchmark.
25

Administrators’ written policies and procedures to address the possibility of Benchmark

cessation could include the following factors, if determined to be reasonable and appropriate by 

the Administrator:

a) Criteria to guide the selection of a credible, alternative Benchmark such as, but not limited 

to, criteria that seek to match to the extent practicable the existing Benchmark’s 

characteristics (e.g., credit quality, maturities and liquidity of the alternative market), 

differentials between Benchmarks, the extent to which an alternative Benchmark meets 

the asset/liability needs of Stakeholders, whether the revised Benchmark is investable, the 

availability of transparent transaction data, the impact on Stakeholders and impact of 

existing legislation; 

b) The practicality of maintaining parallel Benchmarks (e.g., where feasible, maintain the 

existing Benchmark for a defined period of time to permit existing contracts and financial 

instruments to mature and publish a new Benchmark) in order to accommodate an orderly 

transition to a new Benchmark;

c) The procedures that the Administrator would follow in the event that a suitable alternative 

cannot be identified; 

d) In the case of a Benchmark or a tenor of a Benchmark that will be discontinued 

completely, the policy defining the period of time in which the Benchmark will continue 

to be produced in order to permit existing contracts to migrate to an alternative 

Benchmark if necessary; and 

e) The process by which the Administrator will engage Stakeholders and relevant Market 

and National Authorities, as appropriate, in the process for selecting and moving towards 

an alternative Benchmark, including the timeframe for any such action commensurate 

with the tenors of the financial instruments referencing the Benchmarks and the adequacy 

of notice that will be provided to Stakeholders.

14.Submitter Code of Conduct

Where a Benchmark is based on Submissions, the following additional Principle also 

applies:

The Administrator should develop guidelines for Submitters(“Submitter Code of Conduct”), 

which should be available to any relevant Regulatory Authorities, if any and Published or Made 

Available to Stakeholders. 

The Administrator should only use inputs or Submissions from entities which adhere to the 

Submitter Code of Conduct and the Administrator should appropriately monitor and record 

adherence from Submitters. The Administrator should require Submitters to confirm adherence 

to the Submitter Code of Conduct annually and whenever a change to the Submitter Code of 

Conduct has occurred.
26

The Administrator’s oversight function should be responsible for the continuing review and 

oversight of the Submitter Code of Conduct.

The Submitter Code of Conduct should address: 

a) The selection of inputs;

b) Who may submit data and information to the Administrator;

c) Quality control procedures to verify the identity of a Submitter and any employee(s) of a 

Submitter who report(s) data or information and the authorization of such person(s) to 

report market data on behalf of a Submitter;

d) Criteria applied to employees of a Submitter who are permitted to submit data or 

information to an Administrator on behalf of a Submitter;

e) Policies to discourage the interim withdrawal of Submitters from surveys or Panels;

f) Policies to encourage Submitters to submit all relevant data; and

g) The Submitters’ internal systems and controls, which should include:

i. Procedures for submitting inputs, including Methodologies to determine the type of 

eligible inputs, in line with the Administrator’s Methodologies;

ii. Procedures to detect and evaluate suspicious inputs or transactions, including intergroup transactions, and to ensure the Bona Fide nature of such inputs, where 

appropriate;

iii. Policies guiding and detailing the use of Expert Judgment, including documentation 

requirements;

iv. Record keeping policies;

v. Pre-Submission validation of inputs, and procedures for multiple reviews by senior 

staff to check inputs;

vi. Training, including training with respect to any relevant regulation (covering 

Benchmark regulation or any market abuse regime);

vii. Suspicious Submission reporting;

viii. Roles and responsibilities of key personnel and accountability lines;

ix. Internal sign off procedures by management for submitting inputs;

x. Whistle blowing policies (in line with Principle 4); and 

xi. Conflicts of interest procedures and policies, including prohibitions on the 

Submission of data from Front Office Functions unless the Administrator is satisfied 

that there are adequate internal oversight and verification procedures for Front 

Office Function Submissions of data to an Administrator (including safeguards and 

supervision to address possible conflicts of interests as per paragraphs (v) and (ix) 

above), the physical separation of employees and reporting lines where appropriate, 

the consideration of how to identify, disclose, manage, mitigate and avoid existing 

or potential incentives to manipulate or otherwise influence data inputs (whether or 

not in order to influence the Benchmark levels), including, without limitation, 

through appropriate remuneration policies and by effectively addressing conflicts of 
27

interest which may exist between the Submitter’s Submission activities (including 

all staff who perform or otherwise participate in Benchmark Submission 

responsibilities), and any other business of the Submitter or of any of its affiliates or 

any of their respective clients or customers. 

15.Internal Controls over Data Collection

When an Administrator collects data from any external source the Administrator should ensure 

that there are appropriate internal controls over its data collection and transmission processes. 

These controls should address the process for selecting the source, collecting the data and 

protecting the integrity and confidentiality of the data. Where Administrators receive data from 

employees of the Front Office Function, the Administrator should seek corroborating data from 

other sources.

Accountability

16.Complaints Procedures 

The Administrator should establish and Publish or Make Available a written complaints 

procedures policy, by which Stakeholders may submit complaints including concerning whether 

a specific Benchmark determination is representative of the underlying Interest it seeks to 

measure, applications of the Methodology in relation to a specific Benchmark determination(s) 

and other Administrator decisions in relation to a Benchmark determination.

The complaints procedures policy should:

a) Permit complaints to be submitted through a user-friendly complaints process such as an 

electronic Submission process;

b) Contain procedures for receiving and investigating a complaint made about the 

Administrator’s Benchmark determination process on a timely and fair basis by personnel 

who are independent of any personnel who may be or may have been involved in the 

subject of the complaint, advising the complainant and other relevant parties of the 

outcome of its investigation within a reasonable period and retaining all records 

concerning complaints; 

c) Contain a process for escalating complaints, as appropriate, to the Administrator’s 

governance body; and

d) Require all documents relating to a complaint, including those submitted by the 

complainant as well as the Administrator’s own record, to be retained for a minimum of 

five years, subject to applicable national legal or regulatory requirements. 

Disputes about a Benchmarking determination, which are not formal complaints, should be 

resolved by the Administrator by reference to its standard appropriate procedures. If a complaint 

results in a change in a Benchmark determination, that should be Published or Made Available 

to Subscribers and Published or Made Available to Stakeholders as soon as possible as set out in 

the Methodology.
28

17.Audits 

The Administrator should appoint an independent internal or external auditor with appropriate 

experience and capability to periodically review and report on the Administrator’s adherence to 

its stated criteria and with the Principles. The frequency of audits should be proportionate to the 

size and complexity of the Administrator’s operations. 

Where appropriate to the level of existing or potential conflicts of interest identified by the 

Administrator (except for Benchmarks that are otherwise regulated or supervised by a National 

Authority other than a relevant Regulatory Authority), an Administrator should appoint an 

independent external auditor with appropriate experience and capability to periodically review 

and report on the Administrator’s adherence to its stated Methodology. The frequency of audits 

should be proportionate to the size and complexity of the Administrator’s Benchmark operations 

and the breadth and depth of Benchmark use by Stakeholders. 

18.Audit Trail 

Written records should be retained by the Administrator for five years, subject to applicable 

national legal or regulatory requirements on:

a) All market data, Submissions and any other data and information sources relied upon for 

Benchmark determination;

b) The exercise of Expert Judgment made by the Administrator in reaching a Benchmark

determination;

c) Other changes in or deviations from standard procedures and Methodologies, including 

those made during periods of market stress or disruption; 

d) The identity of each person involved in producing a Benchmark determination; and

e) Any queries and responses relating to data inputs. 

If these records are held by a Regulated Market or Exchange the Administrator may rely on these 

records for compliance with this Principle, subject to appropriate written record sharing 

agreements.

When a Benchmark is based on Submissions, the following additional Principle also 

applies:

Submitters should retain records for five years subject to applicable national legal or regulatory 

requirements on:

a) The procedures and Methodologies governing the Submission of inputs; 

b) The identity of any other person who submitted or otherwise generated any of the data or 

information provided to the Administrator;

c) Names and roles of individuals responsible for Submission and Submission oversight; 

d) Relevant communications between submitting parties; 

e) Any interaction with the Administrator; 
29

f) Any queries received regarding data or information provided to the Administrator; 

g) Declaration of any conflicts of interests and aggregate exposures to Benchmark related 

instruments; 

h) Exposures of individual traders/desks to Benchmark related instruments in order to 

facilitate audits and investigations; and 

i) Findings of external/internal audits, when available, related to Benchmark Submission 

remedial actions and progress in implementing them. 

19.Cooperation with Regulatory Authorities

Relevant documents, Audit Trails and other documents subject to these Principles shall be made 

readily available by the relevant parties to the relevant Regulatory Authorities in carrying out 

their regulatory or supervisory duties and handed over promptly upon request.
30

Chapter 3 – Discussion of Consultation Feedback

Key Issues raised by the consultation feedback and revisions to the final report

The final report has been informed by the public comment letters received as part of the 

consultation process on the draft Principles on Financial Benchmarks, the summary of which can

be found in Annex B.

In general, there was a good level of support for the Principles with the majority of comments on 

the technical detail rather than the substantive policy approach.

Below are a number of common issues raised in the feedback, which IOSCO considers 

warranted further clarifications. These clarifications are designed to help address misconceptions 

about the intended scope and implementation of the Principles and describe in further detail 

some key issues concerning the usage of transactions. 

This chapter also describes how IOSCO has responded to the consultation feedback, both in 

terms of revised Principles and suitable application of the Principles. 

Scope 

The scope of the proposed Principles was deliberately kept very broad in the April Consultation

Report, excluding only publically produced Benchmarks. Given this large scope, the Principles 

propose a multi-tiered approach to capture the particular risks of certain types of Benchmarks. 

This approach and coverage was broadly supported by the public comments, including that the

Principles should apply to equity Benchmarks, a point on which a specific question was asked. 

Nevertheless some respondents argued that certain Principles were not relevant for indices based 

on transaction data obtained from Regulated Markets and Exchanges and queried the definition 

of Submission.

It is therefore important to stress that those Principles or portions of Principles which apply to 

Submission-based Benchmarks (sub-set of Principles under Principles 4, 5, 11, 14 and 18) would 

be less relevant for Benchmarks that are based on prices that are made public (e.g., equity 

indices). As a result, the report has explicitly excluded from the definition of Submissions data 

sourced from Regulated Markets or Exchanges with mandatory post-trade transparency 

requirements.

Related to this, a number of equity and other traded securities Benchmark providers argued that 

certain transparency practices should not apply to them given the strong market incentive to 

provide the best transparency to Stakeholders in their commercial segment of the Benchmark

universe. IOSCO believes that a proportional application of the transparency Principles (as 

explained above) would be beneficial to Stakeholders.

Principles 4, 5 and 12 have therefore been amended to make clear that transparency to 

Stakeholders does not mean full disclosure of proprietary information. In particular, summary 

information and key features may be disclosed to Stakeholders to comply with these Principles.
31

Some commenters also argued that Benchmarks based on transactions in securities on regulated 

markets have not raised the governance and operational concerns associated with some 

Submission based Benchmarks. Moreover, many commenters argued that the some Principles do 

not always fit the practices and structures of index providers. This report is sympathetic to some 

of these points. Principles 2 and 18 were thus refined to reduce practices on such Benchmarks.

IOSCO believes that the objectives set out in the general Principles remain relevant to all 

Benchmark providers, albeit not all details will be relevant to every index provider’s practices 

and structure. 

As set out in the April Consultation Report, IOSCO has developed these Principles as a set of 

recommended practices and all Administrators, including index providers, should apply the 

Principles to the extent that those Principles apply to their practices and structures. In this regard 

IOSCO does not expect a one-size-fits-all method of implementation. See the discussion of 

Proportionality in Chapter 1 in this regard.

Although IOSCO has not made specific recommendations about the practices and structures of 

equity index providers, IOSCO noted in its January Consultation Report that the listing of 

securities and derivatives containing such Benchmarks remain subject to the authority of the 

relevant Market Authority and could form the basis for drawing a regulatory distinction with 

regard to implementation of the Principles

25. The January Consultation Report also took into 

consideration responses which sought to exclude smaller, customised or bilateral Benchmarks 

and Benchmarks used to assess returns against a standardised portfolio (performance 

Benchmarks) from the scope of the Principles. In keeping with the policy put forward by the 

January Consultation Report, it was considered by IOSCO that proportional application of the 

Principles should be sufficient to ensure unnecessary burdens are not borne by the industry,

whilst making sure that confidence is restored in the integrity of Benchmarks used in financial 

markets.

Finally, the report reflects a number of comments in letters that sought to exclude Central 

Counterparty (CCP reference and settlement prices. In IOSCO’s view, prices produced 

exclusively for the purpose of risk management and settlement by regulated CCPs should be 

excluded from the Principles, since those CCPs that are regulated already have to comply with 

stringent governance and risk management requirements. Additional obligations may have the 

impact of reducing the publication of such reference prices and may have impacts on the risk 

management of CCPs which is not the intention of this report. IOSCO notes that broader use of 

such prices and references beyond CCP risk management purposes would fall within the scope of 

the Principles.

As noted above, the consultation feedback questioned the application of certain features of the 

Principles to all Benchmark Administrators. In response, IOSCO has clarified that the 

application of the Principles should be proportional to the size and risk posed by each 

Benchmark and/or Administrator and the Benchmark-setting process. 

 25 Financial Benchmarks, Consultation Report, IOSCO, 10 Jan. 2013, supra fn 4, pp.32-34 and 36 
32

Voluntary Submission

The January Consultation Report illustrated the dependence of many Benchmarks on

Submissions and data provided voluntarily by market participants who are not always regulated. 

The feedback received in the April Consultation Report also mentioned this dependence and 

highlighted risks that excessive requirements on the Submission process could decrease the 

participation in Benchmark Submissions and potentially reduce the representativeness of each 

Benchmark. 

IOSCO recognises the importance of maintaining participation in Benchmarks and recognises 

the risks that degrading Benchmark representativeness may have on the transparency brought by 

Benchmarks to the Interests they seek to measure. However, it also believes that some measures 

are necessary at Submitter level to ensure the robustness of the data submitted.

IOSCO therefore has focused on creating incentives for Administrators to institute processes that 

IOSCO believes will enhance reliability of Benchmarks for the benefit of all Market Participants. 

The Principle on codes of conduct for Submitters (Principle 14) should therefore be seen in light 

of this strengthening of market integrity. IOSCO considers this should provide incentives to 

participate whilst also providing confidence in the integrity of the Benchmark determination 

process.

Front Office Submissions

Some consultation responses argued that it might not always to be possible or desirable to 

prevent front office staff from participating in the Benchmark determination. It was argued that 

smaller organisations may not be able to segregate staff and valuable market information may be 

lost by applying such a ban. However IOSCO is still of the view that the conflicts of interest and 

incentives to manipulate Benchmark Submission are amplified when front office staff are

involved.

In light of this, the Principle 14(g)(xi) has been amended to make clear that Submissions from 

Front Office Functions are disfavoured but permissible, as long as the Administrator is satisfied 

that there are adequate internal oversight and verification procedures, including safeguards and

supervision to address possible conflicts of interest.

Transparency Regarding the Use of Expert Judgment

In response to the specific question in the April Consultation Report, there was a good level of 

support for the general proposition that there should be transparency as to how an individual 

Benchmark was developed and with respect to the use of Expert Judgment (consultation question 

3). Commenters were concerned, however, that such a principle would impose burdens that 

would delay the publication of a Benchmark determination or add undue costs. 
33

IOSCO notes that the proposed requirements to concisely explain the source of the determination 

and to note the usage of Expert Judgment (subsections (a) and (b) of consultation question 3) 

track paragraphs 2.3 (a) and (b) of the PRA Principles. Benchmarks that regularly publish their 

Methodologies would satisfy Principle 9 when derived from data sourced from Regulated 

Markets or Exchanges with mandatory post-trade transparency requirements. In addition, a 

Benchmark that is based exclusively on executable quotes as contemplated by Principle 7 would 

not need to explain in each determination why it has been constructed with executable bids or 

offers, provided there is disclosure in the Methodology. 

Moreover, IOSCO addressed concerns regarding the perceived burdensome scope of these 

requirements in the context of the PRA Principles in a Frequently Asked Questions paper issued 

on 15 March 2013 (Oil PRA FAQ).

26 The specific question and answer from the Oil PRA FAQ 

has been included as part of this Report in Annex C. 

Based on the responses received, IOSCO believes that the information contemplated by the 

addition of Principle 9 will provide material information to Benchmark users and is therefore 

adopting the proposed paragraphs. This is not intended to require disclosure by an Administrator 

of every situation that resulted in the use of discretion nor a detailed explanation. Rather the 

intent is that the use of discretion be noted using standard rationales and descriptions, as 

provided in the Oil PRA FAQ, which has been referenced in this Report as Annex C.

Data Sufficiency and hierarchy of data inputs (Principle 7 and 8)

Commenters generally supported the objective that Benchmarks should be anchored in 

transactions. Cautionary comments that were received on the Data Sufficiency Principle appear 

to be based on perceptions that the Principle required the sole usage of transactions, imposed a 

rigid hierarchy of data use, excluded the consideration of bids and offers or Expert Judgment, 

failed to take into account the characteristics of less transparent or low liquidity market 

characteristics and prohibited adjustments to data based on quality considerations.

IOSCO does not share these interpretations of the Principles.

The Data Sufficiency Principle is based on the underlying concept that Benchmarks should be 

based on prices, rates, indices or values that have been formed by the competitive forces of 

supply and demand (i.e., an active market) in order to provide confidence that the price discovery 

system is reliable. As noted by some commenters, the existence of a market does not preclude 

manipulation. However, the existence of a transparent, active market 27 with observable

 26 See International Organization of Securities Commissions (IOSCO), Frequently Asked Questions on 

IOSCO Principles for Price Reporting Agencies Report (Oil PRA FAQ) (Mar. 15, 2013), 

http://www.iosco.org/library/pubdocs/pdf/IOSCOPD406.pdf.

27 IOSCO made clear in the January Consultation Report that a low liquidity market could function as an 

active market. See discussion in Financial Benchmarks, Consultation Report, IOSCO, 10 Jan. 2013, supra 

fn. No.4, pp. 40-41
34

transactions provides visible evidence of market metrics and commercial practices, which can 

provide confidence to market participants and facilitate surveillance by relevant Market 

Authorities. Accordingly, as stated in the Data Sufficiency Principle a Benchmark should be 

underpinned or anchored by an active market with observable transactions. 

IOSCO reiterates that this does not mean that Benchmarks must be constructed solely of 

transaction data, or that data must always be used in a rigid order. IOSCO recognises that there 

might be circumstances when a confirmed bid or offer might carry more meaning than an outlier 

transaction or when non-transactional data such as bids and offers and extrapolations from prior 

transactions might predominate (e.g., in a low liquidity market). All of these other forms of data 

usage are permissible in line with the Administrator’s Methodology. This is encapsulated in the 

Data Hierarchy Principle which makes clear that provided that the Data Sufficiency Principle is 

met (i.e., data is based on an active market), an Administrator retains flexibility to use inputs 

consistent with the Administrator’s approach to ensuring the quality, integrity, continuity and 

reliability of its Benchmark determinations (as set out in the Administrator’s Methodology). 

Provided that subparagraphs (a) and (b) of Principle 7 are met, Principle 7 does not preclude 

Benchmark Administrators from using executable bids or offers as a means to construct 

Benchmarks where anchored in an observable market consisting of Bona Fide, Arms-length

Transactions. For example, this approach might be appropriate in a market where overall 

transaction volume is high over sustained periods, though on any given day there might be more 

firm bids and offers than posted transactions taking place. 

IOSCO also recognizes that various indices may be designed to measure or reflect the 

performance of a rule-based investment strategy, the volatility or behaviour of an index, market 

or other aspects of an active market. Accordingly, Data Sufficiency Principle 7, has been revised 

to make clear that the Principle does not preclude the use of non-transactional data for such types 

of indices that are not designed to represent transactions and where the nature of the index is 

such that non-transactional data is used to reflect what the index is designed to measure. For 

example, certain volatility indices, which are designed to measure the expected volatility of an 

index of securities transactions, rely on non-transactional data, but the data is derived from and 

thus anchored in an actual functioning securities or options market.
35

ANNEX A

GLOSSARY OF KEY TERMS

Administration: Includes all stages and processes involved in the production and dissemination 

of a Benchmark, including:

a) Collecting, analysing and/or processing information or expressions of opinion for the 

purposes of the determination of a Benchmark; 

b) Determining a Benchmark through the application of a formula or another method of 

calculating the information or expressions of opinions provided for that purpose; and 

c) Dissemination to users, including any review, adjustment and modification to this process. 

Administrator: An organisation or legal person that controls the creation and operation of the 

Benchmark Administration process, whether or not it owns the intellectual property relating to 

the Benchmark. In particular, it has responsibility for all stages of the Benchmark Administration 

process, including:

a) The calculation of the Benchmark; 

b) Determining and applying the Benchmark Methodology; and 

c) Disseminating the Benchmark.

Arm’s-length Transaction: A transaction between two parties that is concluded on terms that 

are not influenced by a conflict of interest (e.g., conflicts of interest that arise from a relationship 

such as a transaction between affiliates).

Audit Trail: For the purposes of the Benchmark-setting process, the documentation and 

retention of all relevant data, Submissions, other information, judgments (including the rationale 

for any exclusions of data), analyses and identities of Submitters used in the Benchmark-setting 

process for an appropriate period.

Benchmark: The Benchmarks in scope of this report are prices, estimates, rates, indices or 

values that are:

a) Made available to users, whether free of charge or for payment; 

b) Calculated periodically, entirely or partially by the application of a formula or another 

method of calculation to, or an assessment of, the value of one or more underlying Interests; 

c) Used for reference for purposes that include one or more of the following: 

• determining the interest payable, or other sums due, under loan agreements or 

under other financial contracts or instruments;

• determining the price at which a financial instrument may be bought or sold or 

traded or redeemed, or the value of a financial instrument; and/or 

• measuring the performance of a financial instrument.
36

Benchmark Publisher: A legal entity publishing the Benchmark values, which includes Making 

Available such values to Subscribers, on the internet or by any other means, whether free of 

charge or not.

Bona Fide: Refers to data where the parties submitting the data have executed, or are prepared 

to execute, transactions generating such data and the concluded transactions were executed at 

arm’s-length from each other.

Calculation Agent: A legal entity with delegated responsibility for determining a Benchmark

through the application of a formula or other method of calculating the information or 

expressions of opinions provided for that purpose, in accordance with the Methodology set out 

by the Administrator.

Expert Judgment: Refers to the exercise of discretion by an Administrator or Submitter with 

respect to the use of data in determining a Benchmark. Expert Judgment includes extrapolating 

values from prior or related transactions, adjusting values for factors that might influence the 

quality of data such as market events or impairment of a buyer or seller’s credit quality, or 

weighting firm bids or offers greater than a particular concluded transaction. 

Front Office Function: This term means any department, division, group, or personnel of 

Submitter or any of its affiliates, whether or not identified as such, that performs, or personnel 

exercising direct supervisory authority over the performance of, any pricing (excluding price 

verification for risk management purposes), trading, sales, marketing, advertising, solicitation, 

structuring, or brokerage activities on behalf of a third party or for proprietary purposes .

Interest: Refers to any physical commodity, currency or other tangible goods, intangibles (such 

as an equity security, bond, futures contract, swap or option, interest rates, another index, 

including indexes that track the performance of a rule-based trading strategy or the volatility of a 

financial instrument or another index), any financial instrument on an Interest, which is intended 

to be measured by a Benchmark. Depending on the context, it is assumed that the word “Interest” 

also includes the market for such Interest.

Market Authority: A Regulatory Authority, a Self-Regulatory Organisation, a Regulated 

Market or Exchange, or a clearing organisation (as the context requires).

Market Participants: Legal entities involved in the production, structuring, use or trading of 

financial contracts or financial instruments used to inform the Benchmark, or which reference the 

Benchmark.

Methodology: The written rules and procedures according to which information is collected and 

the Benchmark is determined.

National Authority: Refers to a relevant governmental authority such as a central bank, which 

might not be a Market or Regulatory Authority, but which has responsibility for or a 

governmental interest in Benchmark policies. 
37

Panel: Subset of Market Participants who are Benchmark Submitters.

Publish or Make Available: Refers to the expectation that a party such as an Administrator 

should provide a document or notice to Stakeholders. The means by which such notice is made 

should be proportionate to the breadth and depth of Benchmark use by Stakeholders, as 

determined by the Administrator on a “best efforts” basis. Ordinarily, posting a document or 

notice on the Administrator’s website will meet this expectation.

Regulated Market or Exchange: A market or exchange that is regulated and/or supervised by 

a Regulatory Authority.

Regulatory Authority: A governmental or statutory body (not being a Self-Regulatory 

Organisation) with responsibility for securities and/or commodities and futures regulation.

Self-Regulatory Organisation or “SRO”: An organisation that has been given the power or 

responsibility to regulate itself, whose rules are subject to meaningful sanctions regarding any 

part of the securities market or industry. This authority may be derived from a statutory 

delegation of power to a non-governmental entity or through a contract between an SRO and its 

members as is authorized or recognized by the governmental regulator. See IOSCO 

Methodology, Principle 9, p.50. http://www.iosco.org/library/pubdocs/pdf/IOSCOPD359.pdf

Stakeholder: Refers to Subscribers and other persons or entities who own contracts or financial 

instruments that reference a Benchmark. 

Submission(s): Prices, estimates, values, rates or other information that is provided by a 

Submitter to an Administrator for the purposes of determining a Benchmark. This excludes data 

sourced from Regulated Markets or Exchanges with mandatory post-trade transparency 

requirements.

Submitter: A legal person providing information to an Administrator or Calculation Agent 

required in connection with the determination of a Benchmark

Subscriber: A person or entity that purchases Benchmark determination services from an 

Administrator.
38

ANNEX B 

FEEDBACK STATEMENT

Process: IOSCO’s April Consultation Report, published on 16th April 2013, provided for a one 

month consultation period on the issues presented in the report. The consultation closed on 16th

May 2013. 

Respondents: 40 responses were received, of which 9 came from industry associations and trade 

bodies, 10 from Benchmark Administrators, 7 from exchanges and clearing houses, 5 from buy 

side firms and 2 from authorities.

Questions: The Consultation report asked the four questions below: 

1. Equity indices: Indices may be used to measure a wide range of underlying Interests, using a 

variety of calculation methodologies and inputs. In the specific case of equity indices, inputs 

are typically based on transactions concluded on Regulated Markets. In light of this: are 

there any Principles or parts of the Principles that cannot, or should not, be applied to equity 

indices? If so, please identify these Principles and explain why their application is 

inappropriate. 

2. Additional measures to address risks resulting from Submission-based Benchmarks or 

ownership or control structures: Additional measures have been specified within certain 

Principles to address specific risks arising from a reliance on Submissions (Principles 4, 10, 

13 and 17) and/or from ownership or control structures (Principles 2, 5 and 16). 

a. Should these additional requirements apply to Submitters and Administrators of all 

Submission-based Benchmarks or Benchmarks with the specified ownership/control 

structures?

b. If not, please explain why all or some Submission-based Benchmarks or Benchmarks 

with the specified ownership/control structures should be exempt. 

3. Notice Concerning Use of Expert Judgment: Should Administrators be required to briefly 

describe and Publish with each Benchmark determination:

a. a concise explanation, sufficient to facilitate a User’s or Market Authority’s ability to 

understand how the Benchmark determination was developed, terms referring to the 

pricing methodology should be included (e.g., spread-based, interpolated/extrapolated 

or estimate-based); and

b. a concise explanation of the extent to which and the basis upon which judgment (i.e. 

exclusions of data which otherwise conformed to the requirements of the relevant 

methodology for that Benchmark determination, basing determinations on spreads, 

interpolation/extrapolation or estimates, or weighting bids or offers higher than 

concluded transactions etc.), if any, was used in establishing a determination. 
39

4. Revisions to the Principles: Please provide any suggested changes to specific Principles or 

definitions of key terms set out in Annex A, including drafting proposals and rationale. 

Are any other Principles needed: Should Principles to address any additional issues, risks 

or conflicts of interest be developed? Please provide a summary of the issue and drafting for 

the proposed Principle. 

Consultation Question 1:

Commenters generally supported IOSCO’s proportionate approach to the application of the 

principles and cautioned against any attempt to find a one-size-fits-all approach for the wide and 

diverse universe of indices and Benchmarks. Many commenters believed that IOSCO should 

develop principles applicable to equity indices, but most commenters noted that particular 

Principles were inapplicable or unnecessary for equity indices. 

Commenters largely agreed in their observation that certain principles should not apply to equity 

indices. There was a wide range of responses, however, as to which specific principles were 

inapplicable to equity indices. Several principles were commonly identified, while other 

principles were identified by only few commenters. Nearly all principles were mentioned at 

least once as needing to be revisited if applied to equity indices (not 10 and 15). 

Several commenters suggested that IOSCO’s question regarding equity indices should be 

expanded to include other indices based on observable transaction data, such as fixed-income 

indices. Many commenters proposed a different bifurcation to determine the proportionate 

treatment of the Principles, proposing categories such as: public data versus survey Benchmarks; 

objective versus subjective Benchmarks; commercial indices versus survey-based Benchmarks; 

Benchmarks with a certain market impact versus Benchmarks without; and Benchmarks set by a 

single estimation or survey versus indices derived in substantial part from market transaction 

data and/or multi-participant estimation.

Many commenters highlighted the fundamental differences in the production of reference rates 

and market indices, noting that market indices’ reliance on transaction data and operation in a 

competitive market demanding adequate disclosure and transparency minimized, if not 

eliminated, the risks of conflicts of interest and manipulation present with reference rates. 

Numerous commenters expressed the view that commercial indices already adhere to robust 

standards and codes of conduct, and thus should either be excluded from the principles altogether 

or permitted to proportionately implement the principles. Many of these commenters believed 

that existing regulation and voluntary codes of conduct were sufficient for transaction-based 

indices, which they suggested do not present the same weaknesses and structural concerns of 

reference rates like the IBORs.
40

Several commenters identified the diverse ways in which market indices are used by market 

participants to manage risks, to implement trading strategies, or to measure portfolio 

performance, and concluded with the view that only Benchmarks used to price financial 

instruments should be subject to the principles, due to a concern that even a minimal amount of 

added compliance burden could discourage innovation and competition for these purposes. 

Numerous commenters suggested that IOSCO revisit the definition of “Benchmark” to clarify 

the application of the principles to indices that are used for purposes other than pricing financial 

instruments or contracts. These commenters believed that strategy indices, settlement prices 

used by clearing firms for risk management purposes, indices used to evaluate returns or 

performance of portfolios, economic or market sentiment indices, and prices for single 

instruments should be excluded from the scope of the report by adoption of a narrower definition 

of “Benchmark.”

Consultation Question 2:

Commenters generally supported IOSCO’s approach that additional measures should apply to 

Submitters and Administrators of Submission-based Benchmarks or Benchmarks with specified 

ownership/control structures. However, a number of commenters did not, however, address 

question 2. Several commenters stated that the process of data Submission leads to additional 

risk, especially where the Submitters are market participants with stakes in the level of the

Benchmark. Commenters also generally supported IOSCO’s approach to proportional 

implementation of the Principles, taking into account the size and risks posed by each 

Benchmark Administrator and Benchmark-setting process.

Several commenters argued that the additional measures should not apply to products subject to 

the PRA Principles. In particular it was noted that additional controls for Submitters (Submitter

Code of Conduct) were not identical to those in the PRA Principles. They also argued that the 

Principles on Financial Benchmarks are seeking to reintroduce provisions that were considered 

and ultimately rejected in the context of the PRA Principles, in recognition of the voluntary 

nature of commodity market participants’ interactions with PRA price reporting processes.

Some commenters suggested that IOSCO include or clarify the definition of some terms, in order 

to provide certainty about the scope of the Principles on Financial Benchmarks. These terms 

included Front Office Functions, Submitters, Submissions and Submissions-based. One 

commenter argued that for the additional measures to apply, the terms Submitter and Submission 

should exclude, at a minimum, data reflecting observable transactions and other actual market 

information.

Several commenters also argued that IOSCO should further refine the definition of Benchmarks 

to ensure that certain indices are not inadvertently caught. Commenters were primarily 
41

concerned about strategy indices, reference prices produced by central counterparties to measure 

their positions and exposure, prices discovered on a Regulated Market or Exchange, settlement 

prices used for clearing, and prices for individual instruments.

Some commenters argued that IOSCO’s framework assumes that a transaction-based Benchmark

is per se more credible and reliable than an estimation-based one without providing a basis for 

this. Commenters argued that Expert Judgment is necessary and a transaction-based Benchmark

cannot replace a well-established IBOR Benchmark. Even where Benchmarks are anchored in 

observable transactions, Expert Judgment is necessary to filter out unrepresentative market 

volatility and outlier transaction data. One commenter also criticised IOSCO for not considering 

the risks associated with transactions-based Benchmarks and suggested that IOSCO should 

develop a framework for risks associated with transactions-based processes and market rates, 

whether Submission-based or not.

Consultation question 3 

Commenters generally supported IOSCO’s approach that additional transparency requirements 

should apply to Benchmark determinations based on estimates and Expert Judgment. However, 

a number of commenters did not address question 3. 

Many commenters argued that that the underlying methodologies for exercising expert 

judgement including fall-back provisions and downgrades in the data input hierarchy must be 

disclosed transparently and in detail. 

Several commenters argued that the scope of these requirements should be limited e.g., to large 

and relevant Benchmarks or Benchmarks that are prone to conflicts of interest or that rely on 

subjective Submissions. 

Several commenters argued that a notice that is Published with each Benchmark determination

could be disproportionate and burdensome for administrators and suggested that explanations 

and standards for the exercise of Expert Judgment should be addressed at the level of the 

Benchmark Methodology and the Code of Conduct. 

One commenter suggested a clarification of the term “concise explanation” which should allow 

administrators to decide how and when judgment will be used, but not so that every exercise of 

judgment must be explained and disclosed.

One commenter argued that a Benchmark Administrator would not be able to explain Expert 

Judgment exercised on the level of the Benchmark Submitter. In addition, detailed explanations 

could compromise the vital confidentiality of the Submitter inputs.
42

One commenter suggested that the content and method for the publication of an explanation 

regarding Expert Judgment should be discussed between the Administrator and the Submitters 

and should be determined based on the characteristics of each Benchmark.

Consultation Question 4

Overall there is general support for two levels of Principles and for the overarching aims of most 

of the Principles. The comments received were more technical than arguing the aims and 

objectives of the Principles.

Some respondents argued that the scope needs to be more focused to clearly define which 

Benchmarks would fall under the proposed Principles and which would not (e.g., equity indices, 

CCP reference prices, proprietary Benchmarks). Many definitional issues/revisions were 

highlighted in addition to revisions of stated Principles 

Some respondents are against the Principle which gives hierarchy to transactional data over other 

inputs (such as bid-offer quotes). These respondents stressed that not all markets are liquid or 

transparent enough to take into account non-transactional data or Expert Judgment only as a 

supplement to transactional data. 

Generally, the commenters were in support of the Code of Conduct. However, some 

commenters argued that the Code of Conduct imposed on Submitters should be reconsidered by 

IOSCO. Given the voluntary nature of most data Submissions, some commenter said the burden 

would discourage data Submitters. Some commenters also suggested that IOSCO should state 

that the Code of Conduct applies only if a cost-benefit analysis has been undertaken.

Some respondents suggested that the restriction on Submissions from Front Office Functions (in 

the code of conduct for Submitters) should be removed since they will have the most expertise 

and proximity to the underlying interest for a Benchmark. Limiting to non-front office 

Submissions would adversely impact the quality of the Benchmark. Other controls are adequate 

to manage the relevant conflicts faced by front office staff.

Some respondents were concerned that the proposed procedures and audits may increase efforts 

and cost to Submitters of less prominent Benchmarks driving them out of the market. Similarly, 

there is concern that certain costs such as maintaining an audit trail, may exceed the benefits, and 

those costs would likely be passed on to investors. Thus, the application of Principles should 

follow a proportional approach and allow more lead time for adoption. 

Some respondents felt that the responsibility of the Benchmark was too concentrated within the 

administrator’s function and that other stakeholders that are also involved in the Benchmark

setting process should be held accountable or share the responsibility. 

Some commenters said that information about IT policies and human resource are often 

confidential, which will make it difficult to implement Principles related to disclosing 
43

information on control framework (Principle 4). Similarly, there is the risk that making the 

methodology publicly available would divulge confidential or proprietary information to 

competitors.
44

ANNEX C

Guidance on Principle 9 - Transparency of Benchmark Determinations

The following guidance is based substantially on the guidance that previously was issued in 

relation to the PRA Principles28 and also will apply to Principle 9 “Transparency of Benchmark 

Determinations” in these Principles for Financial Benchmarks. 

Question: With respect to judgment referenced throughout the Principles, how detailed 

should a description of a specific judgment be? 

Response: 

The focus of Principle 9 is on providing Stakeholders with sufficient information to allow 

Stakeholders to understand how a determination was developed. Whilst the format of disclosure 

is within the discretion of the Administrator, the minimum information called for in Principle 9

should be provided with each published Benchmark determination. 

Principle 9 contemplates that each published Benchmark determination would identify, and 

explain the rationale for, the exercise of judgment in each published Benchmark determination. 

The term judgment is illustrated in Principle 9 as being employed in the exclusion of data 

otherwise conforming to the requirements of the relevant Methodology, in basing a Benchmark 

determination on spreads, in interpolation or extrapolation, in weighting bids or offers higher 

than concluded transactions, or, in general, in a more qualitative assessment in the absence of 

hard data. 

With respect to the level of detail needed, the Principles for Financial Benchmarks report makes

clear in the introduction that “the application and implementation of the Principles should be 

proportional to the size and risks posed by each Benchmark and/or Administrator and the 

benchmarking process.” 

For example, consistent with the proportionality concept, it would be appropriate for 

Administrators to develop standard descriptions and rationales for the type of judgments that 

tend to be exercised in Benchmark determinations and publish those descriptions and rationales 

as relevant with each Benchmark determination but with a degree of aggregation where 

appropriate. 

Although Administrators may therefore develop disclosures in the most efficient manner, any 

such disclosures should provide more than the permissive procedures of the methodology. 

However, a Benchmark that is based exclusively on executable quotes as contemplated by 

 28 Frequently Asked Questions (FAQ) on IOSCO Principles for Price Reporting Agencies (Oil PRA 

FAQ)(March 2013) http://www.iosco.org/library/pubdocs/pdf/IOSCOPD406.pdf supra fn No26
45

Principle 7 would not need to explain in each determination why it has been constructed with 

executable quotes, provided there is disclosure in the Methodology. 

Benchmarks that regularly publish their Methodologies would satisfy Principle 9 when derived 

from data sourced from Regulated Markets or Exchanges with mandatory post-trade 

transparency requirements.