REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the scope of Regulation (EU) 2016/1011, in particular with respect to the continued use by supervised entities of third-country benchmarks and on potential shortcomings of the current framework
Date: 2023-07-14
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: Euribor, benchmarking, consumer protection, domestic market, financial control, financial legislation, financial market, price index, third country

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 14.7.2023  COM(2023) 455 final  REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the scope of Regulation (EU) 2016/1011, in particular with respect to the continued use by supervised entities of third-country benchmarks and on potential shortcomings of the current framework  
 
 
1. 

Introduction ..................................................................................................... 2 

2.  Political and legal context ............................................................................... 2 

3.  Appraisal ......................................................................................................... 7 

4.  Next steps ........................................................................................................ 8 

 
 
 
 
 
1. 

INTRODUCTION 

A benchmark is an index (1) that is used as a reference to determine the price of a financial 
instrument or a financial contract. A wide variety of benchmarks are currently produced, 
including interest rate benchmarks such as EURIBOR, equity benchmarks and commodity 
benchmarks, e.g. energy  benchmarks such as West  Texas  Intermediate (WTI) or Brent. 
Benchmarks  differ  in  terms  of  the  underlying  data  used,  how  the  underlying  data  is 
collected, how the benchmark is calculated and how it is disseminated to the final user.  

Financial  markets  are  global  markets,  and  benchmarks  are  produced  and  used 
internationally. European banks, investment funds and other benchmark users (2) reference 
EU  and  non-EU  benchmarks  for  a  variety  of  purposes,  from  hedging  their  own  risks, 
including interest, credit, and foreign exchange risks, and offering products to hedge the 
risk of their clients, to establishing an investment portfolio using the benchmark either as 
an  investment  template  or  performance  benchmark.  Most  benchmarks  (more  than  3.6 
million) are produced by administrators outside the EU (3). The rules in Regulation (EU) 
2016/1011 (Benchmark Regulation / BMR) on the use of non-EU benchmarks are therefore 
of great importance (4). 

This report delivers on the mandate in Article 54(6) of the BMR, which calls for a report 
on  the  scope  of  this  Regulation,  in  particular  with  respect  to  the  continued  use  by 
supervised  entities  of  third-country  benchmarks  and  on  potential  shortcomings  of  the 
current framework. This report and its conclusion also fulfil the condition for the adoption 
of  a  delegated  act  pursuant  Article  54(7)  of  the  BMR,  to  extend  the  transitional  period 
before the rules for the use of non-EU benchmarks start to apply. 

2.  POLITICAL AND LEGAL CONTEXT 

The provision and use of benchmarks have been regulated activities under the BMR since 
2016. All benchmark administrators in the EU are under national (5) or EU (6) supervision 
and must comply with organisational rules and rules on the conduct of business.  

The  BMR  essentially  implements  the  Principles  for  Financial  Benchmarks  of  the 
International Organization of Securities Commissions (the IOSCO Principles), or, where 
applicable the Principles for Oil Price Reporting Agencies (IOSCO PRA Principles). These 
two sets of principles were developed at international level in 2012-2013 in response to 
various revelations about benchmark manipulation and continue to serve as an important 
focal point for systems of benchmark regulations worldwide. The principles are adhered 
to  by  most  professional  benchmark  administrators,  albeit  mostly  on  a  self-certification 
basis. 

(1)  An  index  is  a  statistical  measure,  typically  of  a  price  or  quantity,  calculated  or  determined  from  a 

representative set of underlying data. 

(2)  Supervised entities are defined in Art. 3(1)(17) of the BMR. 

(3) According to information received from ESMA, which is based on data from Rimes Technologies - Data 

Management for Financial Services (www.rimes.com). 

(4)  Notably Art. 29(1) in fine and Artt. 30-33 of the BMR. 

(5) For all benchmarks except EU critical benchmarks. 

(6) EU critical benchmarks are supervised by ESMA. 

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Scope of the BMR 

The BMR is binding on all EU benchmark administrators, with infringements punishable 
by  fines of up to 10 %  of the infringing  party’s annual  turnover.  In  contrast  with  legal 
regimes for benchmarks in other jurisdictions, the BMR has a broad scope, based on the 
premise  that  all  financial  benchmarks  and  all  administrators  are  potentially  subject  to 
conflicts  of  interest.  Therefore,  the  BMR  not  only  covers  benchmarks  with  systemic 
relevance and benchmarks that are especially susceptible to conflicts of interest, but also 
less-used benchmarks and benchmarks where conflicts of interest are unlikely to arise. For 
this  reason,  significant  elements  of  proportionality  were  built  into  the  BMR  based  on 
differences between benchmarks in terms of characteristics and vulnerabilities (7). Finally, 
to mitigate any risk of regulatory arbitrage, the use of non-EU benchmarks was prohibited, 
except where they are subject to equivalent local regulation and supervision, or where a 
benchmark’s administrator voluntarily complies with the BMR and seeks access to the EU 
market through recognition or endorsement.  

The BMR entered into application on 1 January 2018, with a transitional period for existing 
benchmarks and non-EU benchmarks until  31 December 2019.  That  deadline was  later 
postponed twice and is now 31 December 2023 (8). 

The proposal for what would become the 2020 BMR review examined the effects of the 
third country rules provided for in the BMR on the availability of certain foreign exchange 
(FX) benchmarks to EU market participants, as market participants have signalled that Art. 
29(1) BMR would restrict access to many of these benchmarks if the third country chapter 
entered into application. (9) A particular challenge for these benchmarks in securing access 
to  the  EU  market  lies  in  the  fact  that  they  are  generally  not  produced  for  commercial 
purposes  and  are  often  published  by  semi-public  entities  or  are  under  the  control  of 
governments that use them as a policy tool. As they are published on a non-commercial 
basis, their administrators lack an economic incentive to seek compliance with the BMR. 
Recognising  the  risk  that  EU  supervised  entities  might  be  left  without  access  to  FX 
benchmarks needed to hedge business activities in the third countries concerned, the co-
legislators granted the Commission powers to allow the use of specific FX benchmarks.  

More broadly, the co-legislators understood that the entry into application of the rules on 
third  country  benchmarks  would  potentially  affect  the  availability  of  third-country 
benchmarks for EU benchmark users beyond the very specific subset of FX benchmarks. 
It  was  also  in  the  course  of  this  negotiation  process  that  the  co-legislators  included  the 
review mandate at the origin of this report. (10) 

(7)  E.g., there is a graduation between critical, significant, and non-significant benchmarks on the basis of 
the volume of financial contracts and financial instruments referencing a benchmark, with administrators 
of the latter two categories having the option of disapplying certain requirements on a comply-or-explain 
basis (see Artt. 25 and 26 BMR). In addition, benchmarks using input data regulated at source (so-called 
regulated data benchmarks) are subject to less stringent rules on controls of input data (see Art. 17 BMR). 

(8)  By Regulation (EU) 2019/2089 and Regulation (EU) 2021/168. 

(9)  See 

the 

Impact 

Assessment 

Report 

at: 

https://eur-lex.europa.eu/legal-

content/EN/TXT/?uri=CELEX%3A52020SC0142  

(10) Articles 54(6) and 54(7) BMR. 

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Rules for the use of non-EU benchmarks (11) 

Under the current third-country rules non-EU benchmarks can be used in the EU provided 
they obtain access via one of three routes specified in the BMR. 

The first route is equivalence (Article 30 BMR), which takes the form of an implementing 
decision  stating  that  the  regulatory  framework  in  a  third  country  imposes  binding 
requirements equivalent to those of the BMR, and that those requirements are subject to 
effective supervision and enforcement. Two variants of such a decision are available, either 
covering the entire scope of a third country jurisdiction’s benchmark regulation or covering 
only  specific  administrators,  specific  benchmarks  or  families  of  benchmarks.  Once  an 
equivalence  decision  is  taken,  the  European  Securities  and  Markets  Authority  (ESMA) 
contacts the third country supervisor and draws up cooperation arrangements covering the 
exchange  of  information  and  prompt  notification  should  a  third  country  competent 
authority find an administrator in breach of its legal obligations. Benchmarks covered by 
an equivalence decision are included in ESMA’s register of third country benchmarks that 
are available for use in the EU. Only Australia and Singapore have been granted partial 
equivalence, with a handful of other jurisdictions having expressed interest. 

Whereas equivalence depends on a third country legislator and / or supervisor taking the 
initiative to contact the European Commission, the two access routes below can be used 
on the initiative of benchmark administrators alone, or benchmark administrators active in 
a jurisdiction where they are not subject to binding regulation.  

The second access route is endorsement (Article 33 BMR), in which an EU supervised 
entity  (which  may  be  a  benchmark  administrator  or  another  type  of  entity  subject  to 
supervision by an EU national competent authority) assumes regulatory responsibility for 
a non-EU benchmark. The BMR sets out that the endorsing entity should have a ‘clear and 
well-defined  role  within  the  control  or  accountability  framework  of  a  third  country 
administrator’ and is able to ‘monitor effectively the provision of a benchmark’. Among 
other conditions, the BMR requires an objective reason why the benchmark is produced 
outside the EU. Endorsed benchmarks or families of benchmarks are included in the ESMA 
register of third country benchmarks. 

The third access route for non-EU benchmarks is recognition (Article 32 BMR). Under 
this  scheme,  a  third  country  administrator  needs  to  have  a  legal  representative,  i.e.,  a 
natural or legal person located in the EU and expressly appointed by that administrator to 
act on its behalf with regard to its obligations under the BMR. The administrator needs to 
demonstrate  compliance  with  the  main  requirements  of  the  BMR  to  ESMA,  which  can 
conclude a cooperation arrangement with the administrator’s domestic supervisor where 
applicable. 

Both recognition and endorsement can be initiated by a non-EU administrator wishing to 
market its benchmarks to EU supervised entities. However, obtaining access via either of 
these routes requires that an administrator has an economic interest in doing so. If there is 
none, a non-EU administrator will not make the effort of setting up and remunerating the 
required  presence  in  the  Union,  and  EU  users  will  be  deprived  of  the  benchmarks 
concerned. 

(11)  Notably Art. 29(1) in fine and Artt. 30-33 of the BMR. 

4 

 
 
                                                 
A picture of the EU market for benchmarks 

72  EU  benchmark  administrators  are  currently  listed  in  the  ESMA  register.  Of  the 
benchmarks  currently  in  use  in  the  EU,  one  (EURIBOR)  is  a  critical  benchmark  under 
ESMA  supervision (12).  Three  -  the  Stockholm  Interbank  Offered  Rate  (STIBOR),  the 
Norway  Interbank  Offered  Rate  (NIBOR)  and  the  Warsaw  Interbank  Offered  Rate 
(WIBOR)  are  critical  benchmarks under  national  supervision  (13).  All  these  critical 
benchmarks are interest rate benchmarks, and each of them is administered by a different 
EU administrator. An informal survey of national supervisors by ESMA revealed that in 
September 2022, six benchmark administrators under European supervision (three EU and 
three  non-EU (14))  offer  a  total  of  50  significant  benchmarks (15).  Further,  as  of  March 
2023, there is a total of 12 administrators providing EU climate benchmarks, half of which 
are subject to European supervision under BMR: five supervised by national authorities 
and one supervised by ESMA under the recognition regime. 

The ESMA register also lists 14 non-EU administrators, who choose varying access routes. 
The  equivalence  decisions  for  Australia  and  Singapore  cover  two  administrators  and  a 
total of seven benchmarks. Two benchmark administrators (S&P Dow Jones Indices LLC 
and SIX Index AG) have chosen the endorsement route for a total of 4,597 benchmarks. 
Via the recognition route, 10 administrators (16) have been included in the ESMA register, 
with a total of 15,245 benchmarks covered. 

Table 2: Overview of the number of EU and non-EU benchmark administrators  

Benchmark 
administrators 

Total 

Total number 

345 

Available 
EU (17) 

in 

the 

86 

EU 

72 

72 

Non-EU 

273 

14  

In  addition,  259  third-country  administrators  currently  not  registered  in  the  EU  benefit 
from  the  transitional  period  provided  for  in  Article  51(5)  of  the  BMR. (18)  The  top  10 
among these 259, in terms of number of benchmarks offered, are based either in the UK or 

(12)  Article  20(1)(a)  BMR,  which  requires  that  a  benchmark  is  referenced  by  a  total  amount  of  financial 

contracts and financial instruments of at least EUR 500 billion. 

(13) Article 20(1)(b) BMR. 

(14)  Having  obtained  access  to  the  EU  market  via  recognition  or  endorsement.  This  is  in  addition  to  an 
unknown  number  of  non-EU  administrators  offering  significant  benchmarks  in  the  EU  under  the 
transitional provisions. 

(15) i.e., benchmarks referenced by a total amount of financial contracts and financial instruments in excess 
of EUR 50 billion, or [which have] no or very few appropriate market-led substitutes and [could cause] 
a significant and adverse impact on market integrity, financial stability, consumers, the real economy or 
the financing of households or businesses in one or more Member States. 

(16) Hedge Fund Research, Inc. (USA),  ICAP information Services Limited (UK), Invesco Indexing LLC 
(USA), JPX Market Innovation & Research, Inc.  (Japan), Leonteq Securities AG (Switzerland), LPX 
AG (Switzerland), Nikkei Inc. (Japan), Scientific Infra Pte Ltd (Singapore), STOXX Ltd. (Switzerland), 
WisdomTree, Inc. (USA). 

(17)  Once the third country rules start to apply. 

(18)  Reported by ESMA on the basis of a commercial database. 

5 

 
                                                 
the US. Figure 1 gives an overview of the number of benchmark administrators in each 
country and presents the overall distribution of benchmark administrators worldwide. In 
addition, the top 10 third-country benchmark administrators account for 98% of the total 
third-country benchmarks provided. By comparison: the largest third country administrator 
currently registered (by endorsement or recognition) in the EU would not rank among the 
top 10 benchmark administrators globally by number of benchmarks provided.  

The  above  shows  that  only  5  percent  of  the  non-EU  benchmark  administrators  whose 
benchmarks are currently available for use on the EU market have obtained a status that 
will  ensure  their  benchmarks  remain  available  once  the  third  country  rules  become 
mandatory. 

Figure 1: Number of benchmark administrators per country worldwide (excluding those already 
registered) (19) 

Other; 71

US; 97

Canada; 4

Taiwan; 6

Hong Kong; 6

China; 6

South Korea; 9

Japan; 9

Switzerland; 15

3.  APPRAISAL 

UK; 38

BMR was designed to apply to all benchmarks, all benchmark administrators and all use 
of benchmarks by EU supervised entities. EU supervised entities are only allowed to use 
benchmarks that comply with the BMR. For benchmark administrators located in the EU, 
compliance  with  the  BMR  is  mandatory  and  results  in  the  availability  of  all  their 
benchmarks for use in the Union. For non-EU benchmarks, a number of access routes for 
non-EU  administrators  were  provided.  Still,  non-EU  benchmark  administrators  -  apart 
from those whose benchmarks are covered by an equivalence decision  – need to take a 

(19) The category “Other” includes: Chile, India, New Zealand, the Russian Federation, Singapore and South 
Africa (with three administrators each); the United Arab Emirates, Argentina, Australia, Bahrain, Brazil, 
Egypt,  Indonesia,  Israel,  Namibia,  Nigeria,  Philippines,  Thailand,  Turkiye  and  Vietnam  (with  two 
administrators each) and Colombia, Guernsey, Jamaica, Jordan, Kenya, Kuwait, Kazakhstan, Sri Lanka, 
Morocco,  Montenegro,  Mauritius,  Mexico,  Malaysia,  Oman,  Panama,  Pakistan,  Qatar,  Serbia,  Saudi 
Arabia, Tunisia, Trinidad and Tobago, Ukraine, Uganda, Zambia and Zimbabwe (with one administrator 
each). 

6 

 
 
                                                 
positive decision to seek compliance with the BMR through recognition or endorsement. 
That decision depends on the economic interest the EU market represents to them. 

It  was  assumed  that  over  time  non-EU  jurisdictions  would  develop  comparably 
comprehensive rules for financial benchmarks. This would have allowed the Commission 
to recognise those regulatory systems as equivalent or would have enabled third country 
benchmark administrators to seek access to the EU market via the routes of recognition or 
endorsement with no or lower additional compliance efforts. However, this has not been 
the  case.  Of  the  non-EU  systems  of  benchmark  regulation,  none  except  the  UK  BMR 
operate on the basis of an equally broad scope. 

This situation affects EU benchmark users, as the application of the current third country 
rules under the BMR could dramatically reduce the number and variety of benchmarks that 
EU  supervised  entities  can  use.  Among  other  things,  this  would  be  problematic  for  the 
asset  management  sector,  as  it  would  restrict  the  number  and  variety  of  benchmarks 
available for investment funds to replicate the performance of a benchmark or to compare 
an investment fund’s performance to a benchmark, both of which are considered as use of 
that benchmark under the BMR. This might destabilise the EU’s asset management sector, 
and could reduce derivatives users’ ability to hedge their activities. This destabilisation of 
the  Union’s  asset  management  sector,  in  addition  to  the  reduced  ability  for  derivatives 
users to rely on a broad range of options to hedge their activities due to the reduced capacity 
of those derivatives to reference third-country benchmarks, could imply financial stability 
concerns in the Union. Lastly, a smaller market with fewer players offering benchmarks is 
likely to be less competitive.  

EU benchmark users and end-users rely significantly on benchmarks administered outside 
the EU. A targeted consultation held in the summer of 2022 (20) pointed out the following:  

-  Of the benchmark users who responded to the questionnaire, none responded that 
their activities did not rely on non-EU benchmarks at all – though there may be 
selection  bias  at  play  (16  out  of  20  users  reported  that  their  activities  were 
moderately, strongly or exclusively reliant on non-EU benchmarks) 

-  The  reasons  cited  for  using  a  non-EU  benchmark  instead  of  an  EU  alternative 

include: 

o  habit: the use of a particular benchmark is an established practice, or the 
user has a long-standing or broad business relationship with the benchmark 
administrator;  

o  unavailability of EU-based alternative, e.g., in certain niche markets that 
are  intrinsically  linked  to  a  specific  non-EU  benchmark,  such  as  the  dry 
bulk  freight  market  which  relies  on  benchmarks  produced  by  the  Baltic 
Exchange, based in London;  

o  client demand or market power of certain benchmark administrators: 
clients sometimes seek exposure to a specific (often brand name) non-EU 
benchmark,  and  certain  non-EU  benchmarks  are  also  perceived  to  be 
leaders in their specific market segment (e.g. MSCI World index family).  

-  Although several benchmark users report mainly or exclusively using benchmarks 
that currently already satisfy the criteria of the BMR third country rules, or report 

(20)  See  https://finance.ec.europa.eu/regulation-and-supervision/consultations/finance-2022-benchmarks-

third-country_en for a synopsis report of the responses to this consultation. 

7 

 
 
 
                                                 
that  they  are  confident  the  administrators  of  benchmarks  they  use  will  take  the 
required steps in time, there continues to be significant uncertainty on the future 
availability  of  many  non-EU  benchmarks.  In  many  cases  (58%;  11  out  of  19), 
administrators  whose  benchmarks  are  not  yet  BMR-compliant  have  not  yet 
systematically informed their EU users of their intentions to comply. 

Where the use of non-EU benchmarks is a response to specific demands from end-users or 
specific exposure or hedging characteristics sought by end-users that cannot be met by EU 
benchmarks, restricting their use by EU supervised entities might displace the demand for 
financial products and services referencing these benchmarks to financial service providers 
outside the EU. Indeed, where an investor’s or a business’ demand cannot be met by an 
EU  bank  or  investment  fund  (due  to  the  inability  to  reference  a  non-EU  benchmark), 
demand  might  shift  to  providers  in  jurisdictions  that  do  not  restrict  access  to  these 
benchmarks. 

4.  NEXT STEPS 

The current number of benchmarks administered in third countries that are used in the EU 
in accordance with the access routes of equivalence, recognition, and endorsement of the 
BMR is low compared to the total number of benchmarks available worldwide. Should the 
rules applicable to third country benchmarks enter into application on 31 December 2023, 
the continued use in the Union of such third-country benchmarks by supervised entities 
would be significantly impaired or would pose a risk to financial stability. Therefore, the 
Commission  has  decided  to  make  use  of  the  empowerment  in  Article  54(7)  to  adopt  a 
delegated act postponing the entry into application of the rules governing the use of non-
EU benchmarks until 31 December 2025. Noting the differences between the EU regime 
and other jurisdictions, the Commission continues monitoring the application of the BMR 
in the EU and the related financial stability risks to inform a possible review of the legal 
regime in the future.  

8