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Regulation (EU) 2016/1011 of the European Parliament and of the CouncilShow full title

Regulation (EU) 2016/1011 of the European Parliament and of the Council of 8 June 2016 on indices used as benchmarks in financial instruments and financial contracts or to measure the performance of investment funds and amending Directives 2008/48/EC and 2014/17/EU and Regulation (EU) No 596/2014 (Text with EEA relevance)

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Changes over time for: Regulation (EU) 2016/1011 of the European Parliament and of the Council (without Annexes)

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TITLE IU.K.SUBJECT MATTER, SCOPE AND DEFINITIONS

Article 1U.K.Subject-matter

This Regulation introduces a F1... framework to ensure the accuracy and integrity of indices used as benchmarks in financial instruments and financial contracts, or to measure the performance of investment funds in the [F2United Kingdom]. This Regulation thereby contributes to the proper functioning of the [F3UK financial markets] while achieving a high level of consumer and investor protection.

Textual Amendments

Article 2U.K.Scope

1.This Regulation applies to the provision of benchmarks, the contribution of input data to a benchmark and the use of a benchmark within the [F4United Kingdom].

2.This Regulation shall not apply to:

(a)a central bank;

(b)a public authority, where it contributes data to, provides, or has control over the provision of, benchmarks for public policy purposes, including measures of employment, economic activity, and inflation;

(c)a central counterparty (CCP) [F5as defined in Article 2(1) of Regulation (EU) No 648/2012 of 4 July 2012 of the European Parliament and of the Council on OTC derivatives, central counterparties and trade repositories as it forms part of retained EU law], where it provides reference prices or settlement prices used for CCP risk-management purposes and settlement;

(d)the provision of a single reference price for any financial instrument [F6specified in Part 1 of Schedule 2 to the Regulated Activities Order];

(e)the press, other media and journalists where they merely publish or refer to a benchmark as part of their journalistic activities with no control over the provision of that benchmark;

(f)a natural or legal person that grants or promises to grant credit in the course of that person's trade, business or profession, only insofar as that person publishes or makes available to the public that person's own variable or fixed borrowing rates set by internal decisions and applicable only to financial contracts entered into by that person or by a company within the same group with their respective clients;

(g)a commodity benchmark based on submissions from contributors the majority of which are non-supervised entities and in respect of which both of the following conditions apply:

(i)

the benchmark is referenced by financial instruments for which a request for admission to trading has been made on only one [F7UK trading venue] or which are traded on only one such trading venue;

(ii)

the total notional value of financial instruments referencing the benchmark does not exceed EUR 100 million;

(h)an index provider in respect of an index provided by said provider where that index provider is unaware and could not reasonably have been aware that that index is used for the purposes referred to in point (3) of Article 3(1).

[F83.Paragraphs 1 and 2 do not limit the application of Articles 23FA to 23FC.]

Textual Amendments

Article 3U.K.Definitions

1.For the purposes of this Regulation, the following definitions apply:

(1)

‘index’ means any figure:

(a)

that is published or made available to the public;

(b)

that is regularly determined:

(i)

entirely or partially by the application of a formula or any other method of calculation, or by an assessment; and

(ii)

on the basis of the value of one or more underlying assets or prices, including estimated prices, actual or estimated interest rates, quotes and committed quotes, or other values or surveys;

(2)

‘index provider’ means a natural or legal person that has control over the provision of an index;

(3)

‘benchmark’ means any index by reference to which the amount payable under a financial instrument or a financial contract, or the value of a financial instrument, is determined, or an index that is used to measure the performance of an investment fund with the purpose of tracking the return of such index or of defining the asset allocation of a portfolio or of computing the performance fees;

(4)

‘family of benchmarks’ means a group of benchmarks provided by the same administrator and determined from input data of the same nature which provides specific measures of the same or similar market or economic reality;

(5)

‘provision of a benchmark’ means:

(a)

administering the arrangements for determining a benchmark;

(b)

collecting, analysing or processing input data for the purpose of determining a benchmark; and

(c)

determining a benchmark through the application of a formula or other method of calculation or by an assessment of input data provided for that purpose;

(6)

‘administrator’ means

(a)

[F9a natural or legal person that has control over the provision of a benchmark][F10, or

(b)

in the case of an Article 23A benchmark, a natural or legal person that would have control over the provision of the benchmark but for Article 23D;]

(7)

‘use of a benchmark’ means:

(a)

issuance of a financial instrument which references an index or a combination of indices;

(b)

determination of the amount payable under a financial instrument or a financial contract by referencing an index or a combination of indices;

(c)

being a party to a financial contract which references an index or a combination of indices;

(d)

providing a borrowing rate as defined in point (j) of Article 3 of Directive 2008/48/EC calculated as a spread or mark-up over an index or a combination of indices and that is solely used as a reference in a financial contract to which the creditor is a party;

(e)

measuring the performance of an investment fund through an index or a combination of indices for the purpose of tracking the return of such index or combination of indices, of defining the asset allocation of a portfolio, or of computing the performance fees;

(8)

‘contribution of input data’ means providing any input data not readily available to an administrator, or to another person for the purposes of passing to an administrator, that is required in connection with the determination of a benchmark, and is provided for that purpose;

(9)

‘contributor’ means a natural or legal person contributing input data;

(10)

‘supervised contributor’ means a supervised entity that contributes input data to an administrator located in the [F11United Kingdom];

(10A)

[F12‘supervised third country contributor’ means a supervised third country entity that contributes input data to an administrator located in the United Kingdom;]

(11)

‘submitter’ means a natural person employed by the contributor for the purpose of contributing input data;

(12)

‘assessor’ means an employee of an administrator of a commodity benchmark, or any other natural person whose services are placed at the administrator's disposal or under the control of the administrator, and who is responsible for applying a methodology or judgement to input data and other information to reach a conclusive assessment about the price of a certain commodity;

(13)

‘expert judgement’ means the exercise of discretion by an administrator or a contributor with respect to the use of data in determining a benchmark, including 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, and weighting firm bids or offers greater than a particular concluded transaction;

(14)

‘input data’ means the data in respect of the value of one or more underlying assets, or prices, including estimated prices, quotes, committed quotes or other values, used by an administrator to determine a benchmark;

(15)

‘transaction data’ means observable prices, rates, indices or values representing transactions between unaffiliated counterparties in an active market subject to competitive supply and demand forces;

(16)

‘financial instrument’ means any of the instruments [F13specified in Part 1 of Schedule 2 to the Regulated Activities Order] for which a request for admission to trading on a [F14UK trading venue has been made, or which is traded on a UK trading venue or via a systematic internaliser as defined in Article 2(1)(12) of the Markets in Financial Instruments Regulation;]

(17)

‘supervised entity’ means any of the following:

(a)

[F15a CRR firm as defined in Article 4(1)(2A) of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012, which is a credit institution referred to in point (a)(i) of that definition;

(b)

a UK investment firm, which means an investment firm as defined in Article 2(1A) of the Markets in Financial Instruments Regulation which has its head office in the United Kingdom;]

(c)

an insurance undertaking as defined in [F16section 417(1) of FSMA];

(d)

a reinsurance undertaking as defined in [F17section 417(1) of FSMA];

(e)

a [F18UK UCITS as defined in section 237(3) of FSMA] or, where applicable, a [F19management company as defined in section 237(2) of FSMA];

(f)

an alternative investment fund manager (AIFM) as defined in [F20regulation 4 of the Alternative Investment Fund Managers Regulations 2013];

(g)

an institution for occupational retirement provision as defined in point (a) of Article 6 of Directive 2003/41/EC of the European Parliament and of the Council(1);

(ga)

[F21an occupational pension scheme as defined in section 1(1) of the Pension Schemes Act 1993;]

(h)

a creditor as defined in point (b) of Article 3 of Directive 2008/48/EC for the [F22purposes of:

(i)

a credit agreement which, immediately before IP completion day, satisfied the definition of a credit agreement in Article 3(17)(h) of the EU Benchmarks Regulation; or

(ii)

a credit agreement as defined in point (c) of Article 3 of Directive 2008/48/EC read in accordance with the modifications made to that Directive by points (18A) and (18B);]

(i)

[F23a non-credit institution, which means a mortgage creditor (as defined in s.423A of FSMA) that is not a credit institution (as defined in Article 4(1)(1) of Regulation (EU) No 575/2013), for the purposes of a mortgage agreement (as defined in section 423A of FSMA;]

(j)

a market operator as defined in [F24Article 2(1)(10) of the Markets in Financial Instruments Regulation];

(k)

a CCP as defined in point (1) of Article 2 of Regulation (EU) No 648/2012 of the European Parliament and of the Council(2);

(l)

a trade repository as defined in point (2) of Article 2 of Regulation (EU) No 648/2012;

(m)

an administrator;

(17A)

[F25‘supervised third country entity’ means an entity that would be a supervised entity by virtue of point (a) of the definition of that term (CRR firm that is a credit institution) but for the fact that it does not have its head office or registered office in the United Kingdom;]

(18)

[F26‘financial contract’ means:

(a)

a credit agreement which, immediately before IP completion day, satisfied the definition of a credit agreement in Article 3(17)(h) of the EU Benchmarks Regulation;

(aa)

a credit agreement as defined in point (c) of Article 3 of Directive 2008/48/EC read in accordance with the modifications made to that Directive by points (18A) and (18B);

(b)

a mortgage agreement as defined in section 423A of FSMA;]

(18A)

[F27 For the purposes of points (17)(h)(ii) and (18)(aa), Article 2 of Directive 2008/48/EC is to be read as if:

(a)

in paragraph 1—

(i)

for “Directive” there were substituted “ Article ”;

(ii)

after “credit agreements” there were inserted “ where the act of entering into the credit agreement or exercising the lender's rights and duties under the credit agreement is carried on in the United Kingdom ”.

(b)

in paragraph 2:

(i)

in the opening words, for “Directive” there were substituted “ Article ”;

(ii)

for points (a) and (b) there were substituted—"

(a)

an agreement to which section 423A(2) of the Financial Services and Markets Act 2000 applies;"

(iii)

in point (h)—

(aa)

for the words from “investment firms” to “financial instruments” there were substituted “ a UK investment firm (as defined in Article 3(1)(17)(b) of Regulation (EU) 2016/1011 of the European Parliament and of the Council of 8 June 2016 on indices used as benchmarks in financial instruments and financial contracts or to measure the performance of investment funds and amending Directives 2008/48/EC and 2014/17/EU and Regulation (EU) No 596/2014) ”;

(bb)

for “as defined in Article 4 of Directive 2006/48/EC” there were substituted “ (as defined in Article 4(1)(1) of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012) ”;

(cc)

for “listed in Section C of Annex 1 to Directive 2014/65/EU” there were substituted “ specified in Part 1 of Schedule 2 to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 ”;

(c)

in paragraph 2a, for “Directive” there were substituted “ Article ”;

(d)

paragraphs 3 to 6 were omitted.

(18B)

For the purposes of points (17)(h)(ii) and (18)(aa), Article 3(a) of Directive 2008/48/EC is to be read as if for “transactions covered by this Directive” there were substituted “ respect of a credit agreement to which Article 2 applies ”].

(19)

[F28‘investment fund’ means:

(a)

an AIF as defined in regulation 3 of the Alternative Investment Fund Managers Regulations 2013 ;

(b)

a UK UCITS as defined in section 237(3) of FSMA;]

(20)

‘management body’ means the body or bodies of an administrator or another supervised entity which are appointed in accordance with national law, which are empowered to set the strategy, objectives and overall direction of the administrator or other supervised entity, and which oversee and monitor management decision-making and include persons who effectively direct the business of the administrator or other supervised entity;

(21)

‘consumer’ means a natural person who, in financial contracts covered by this Regulation, is acting for purposes which are outside his or her trade, business or profession;

(22)

‘interest rate benchmark’ means a benchmark which for the purposes of point (1)(b)(ii) of this paragraph is determined on the basis of the rate at which banks may lend to, or borrow from, other banks, or agents other than banks, in the money market;

(23)

‘commodity benchmark’ means a benchmark where the underlying asset for the purposes of point (1)(b)(ii) of this paragraph [F29is:

(a)

a commodity, which means any goods of a fungible nature that are capable of being delivered, including metals and their ores and alloys, agricultural products, and energy such as electricity;

(b)

not an emission allowance referred to in paragraph 11 of Part 1 of Schedule 2 to the Regulated Activities Order;]

(23a)

[F30‘[F31UK] Climate Transition Benchmark’ means a benchmark which is labelled as an [F31UK] Climate Transition Benchmark and fulfils the following requirements:

(a)

for the purposes of point 1(b)(ii) of this paragraph and of Article 19b, its underlying assets are selected, weighted or excluded in such a manner that the resulting benchmark portfolio is on a decarbonisation trajectory; and

(b)

it is constructed in accordance with the minimum standards laid down in the delegated acts referred to in Article 19a(2);

(23b)

‘[F32UK] Paris-aligned Benchmark’ means a benchmark which is labelled as an [F32UK] Paris-aligned Benchmark and fulfils the following requirements:

(a)

for the purposes of point 1(b)(ii) of this paragraph and of the delegated act referred to in Article 19c, its underlying assets are selected, weighted or excluded in such a manner that the resulting benchmark portfolio’s carbon emissions are aligned with the objectives of the Paris Agreement adopted under the United Nations Framework Convention on Climate Change, approved by the Union on 5 October 2016(3) (the ‘Paris Agreement’);

(b)

it is constructed in accordance with the minimum standards laid down in the delegated acts referred to in Article 19a(2); and

(c)

the activities relating to its underlying assets do not significantly harm other environmental, social and governance (ESG) objectives;

(23c)

‘decarbonisation trajectory’ means a measurable, science-based and time-bound trajectory towards alignment with the objectives of the Paris Agreement by reducing Scope 1, 2 and 3 carbon emissions as referred to in point (1)(e) of Annex III;]

(24)

‘regulated-data benchmark’ means a benchmark determined by the application of a formula from:

(a)

input data contributed entirely and directly from:

(i)

[F33a UK trading venue, but only with reference to transaction data concerning financial instruments;

(ia)

a trading venue (as defined in Article 2(1)(16) of the Markets in Financial Instruments Regulation) in a third country if:

(aa)

the Treasury have made regulations determining that the legal and supervisory framework of the third country is equivalent in accordance with paragraph 4 of Article 28 of the Markets in Financial Instruments Regulation, or

(bb)

a decision has been adopted by the European Commission before IP completion day determining that the legal and supervisory framework of the third country is equivalent in accordance with paragraph 4 of Article 28 of Regulation (EU) No 600/2014 of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Regulation (EU) No 648/2012 as it had effect in the European Union immediately before IP completion day,

but only with reference to transaction data concerning financial instruments;

(ib)

a regulated market (as defined in Article 2(1)(13) of the Markets in Financial Instruments Regulation) that is considered to be equivalent in accordance with:

(aa)

regulations made by the Treasury under Article 2a of Regulation (EU) No 648/2012, or

(bb)

an implementing act adopted by the European Commission before IP completion day under Article 2a of Regulation (EU) No 648/2012 as it had effect in the European Union immediately before IP completion day,

but only with reference to transaction data concerning financial instruments;]

(ii)

an approved publication arrangement as defined in [F34Article 2(1)(34) of the Markets in Financial Instruments Regulation] or a consolidated tape provider as defined in [F35Article 2(1)(35) of the Markets in Financial Instruments Regulation], in accordance with mandatory post-trade transparency requirements, but only with reference to transaction data concerning financial instruments that are traded on a [F36UK] trading venue;

(iii)

an approved reporting mechanism as defined in [F37Article 2(1)(36) of the Markets in Financial Instruments Regulation], but only with reference to transaction data concerning financial instruments that are traded on a [F38UK] trading venue and that must be disclosed in accordance with mandatory post-trade transparency requirements;

(iv)

an electricity exchange [F39operating in an electricity market in the United Kingdom;]

(v)

a natural gas exchange [F40operating in a gas market in the United Kingdom;]

(vi)

[F41an auction platform in relation to which a recognition order is in force under the Recognised Auction Platforms Regulations 2011;]

(vii)

a service provider to which the benchmark administrator has outsourced the data collection in accordance with Article 10, provided that the service provider receives the data entirely and directly from an entity referred to in points (i) to [F42(v)];

(b)

net asset values of investment funds;

(25)

[F43‘critical benchmark’ means a benchmark listed in:

(a)

Commission Implementing Regulation (EU) 2016/1368 of 11 August 2016 establishing a list of critical benchmarks used in financial markets pursuant to Regulation (EU) 2016/1011 of the European Parliament and of the Council; or

(b)

regulations made by the Treasury under paragraph 5 or 6 of Article A20 or paragraph 5 of Article 20;]

(25A)

[F44‘Article 23A benchmark’ has the meaning given in Article 23A(14);]

(26)

‘significant benchmark’ means a benchmark that fulfils the conditions laid down in Article 24(1);

(27)

‘non-significant benchmark’ means a benchmark that [F45is not a critical benchmark or a significant benchmark];

(28)

‘located’ means, in relation to a legal person, the country where that person's registered office or other official address is situated and, in relation to a natural person, the country where that person is resident for tax purposes;

(29)

‘public authority’ means:

(a)

any government or other public administration, including the entities charged with or intervening in the management of the public debt;

(b)

any entity or person either performing public administrative functions under national law or having public responsibilities or functions or providing public services, including measures of employment, economic activities and inflation, under the control of an entity within the meaning of point (a).

(30)

[F46‘EU Benchmarks Regulation’ means Regulation (EU) 2016/1011 of the European Parliament and of the Council of 8 June 2016 on indices used as benchmarks in financial instruments and financial contracts or to measure the performance of investment funds and amending Directives 2008/48/EC and 2014/17/EU and Regulation (EU) No 596/2014 as it had effect in the European Union before IP completion day;

(31)

‘FCA register’ means the register of administrators and benchmarks established and maintained by the FCA in accordance with Article 36(1);

(32)

‘FSMA’ means the Financial Services and Markets Act 2000;

(33)

‘Markets in Financial Instruments Regulation’ means Regulation (EU) No 600/2014 of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Regulation (EU) No 648/2012;

(34)

‘Regulated Activities Order’ means the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001;

(35)

‘third country’ means a country outside the United Kingdom;

(36)

‘UK trading venue’ has the meaning given in Article 2(1)(16A) of the Markets in Financial Instruments Regulation];

(37)

[F47‘working day’ means a day other than—

(a)

Saturday or Sunday,

(b)

Christmas Day or Good Friday, or

(c)

a day which is a bank holiday under the Banking and Financial Dealings Act 1971 in England and Wales.]

[F481A.References in this Regulation to the capability of a benchmark to measure the underlying market or economic reality are references to both its current capability to do so and its capability to do so in the future.]

2.The [F49Treasury may by regulations] specify further technical elements of the definitions laid down in paragraph 1 of this Article, in particular specifying what constitutes making available to the public for the purposes of the definition of an index.

Where applicable, the [F50Treasury] shall take into account the market or technological developments and the international convergence of supervisory practice in relation to benchmarks.

3.The [F51Treasury may by regulations specify] a list of public authorities in the [F52United Kingdom] falling within the definition under point (29) of paragraph 1 of this Article. F53...

Where applicable, the [F54Treasury] shall take into account the market or technological developments and the international convergence of supervisory practice in relation to benchmarks.

Textual Amendments

TITLE IIU.K.BENCHMARK INTEGRITY AND RELIABILITY

CHAPTER 1U.K.Governance of and control by administrators

Article 4U.K.Governance and conflict of interest requirements

1.An administrator shall have in place robust governance arrangements which include a clear organisational structure with well-defined, transparent and consistent roles and responsibilities for all persons involved in the provision of a benchmark.

Administrators shall take adequate steps to identify and to prevent or manage conflicts of interest between themselves, including their managers, employees or any person directly or indirectly linked to them by control, and contributors or users, and to ensure that, where any judgement or discretion in the benchmark determination process is required, it is independently and honestly exercised.

2.The provision of a benchmark shall be operationally separated from any part of an administrator's business that may create an actual or potential conflict of interest.

3.Where a conflict of interest arises within an administrator due to the latter's ownership structure, controlling interests or other activities conducted by any entity owning or controlling the administrator or by an entity that is owned or controlled by the administrator or any of the administrator's affiliates, that cannot be adequately mitigated, the [F55FCA] may require the administrator to establish an independent oversight function which shall include a balanced representation of stakeholders, including users and contributors.

4.If such a conflict of interest cannot be adequately managed, the [F56FCA] may require the administrator to either cease the activities or relationships that create the conflict of interest or cease providing the benchmark.

5.An administrator shall publish or disclose all existing or potential conflicts of interest to users of a benchmark, to the [F57FCA] and, where relevant, to contributors, including conflicts of interest arising from the ownership or control of the administrator.

6.An administrator shall establish and operate adequate policies and procedures, as well as effective organisational arrangements, for the identification, disclosure, prevention, management and mitigation of conflicts of interest in order to protect the integrity and independence of benchmark determinations. Such policies and procedures shall be regularly reviewed and updated. The policies and procedures shall take into account and address conflicts of interest, the degree of discretion exercised in the benchmark determination process and the risks that the benchmark poses, and shall:

(a)ensure the confidentiality of information contributed to or produced by the administrator, subject to the disclosure and transparency obligations under this Regulation; and

(b)specifically mitigate conflicts of interest due to the administrator's ownership or control, or due to other interests in the administrator's group or as a result of other persons that may exercise influence or control over the administrator in relation to determining the benchmark.

7.Administrators shall ensure that their employees and any other natural persons whose services are placed at their disposal or under their control and who are directly involved in the provision of a benchmark:

(a)have the necessary skills, knowledge and experience for the duties assigned to them and are subject to effective management and supervision;

(b)are not subject to undue influence or conflicts of interest and that the compensation and performance evaluation of those persons do not create conflicts of interest or otherwise impinge upon the integrity of the benchmark determination process;

(c)do not have any interests or business connections that compromise the activities of the administrator concerned;

(d)are prohibited from contributing to a benchmark determination by way of engaging in bids, offers and trades on a personal basis or on behalf of market participants, except where such way of contribution is explicitly required as part of the benchmark methodology and is subject to specific rules therein; and

(e)are subject to effective procedures to control the exchange of information with other employees involved in activities that may create a risk of conflicts of interest or with third parties, where that information may affect the benchmark.

8.An administrator shall establish specific internal control procedures to ensure the integrity and reliability of the employee or person determining the benchmark, including at least internal sign-off by management before the dissemination of the benchmark.

Textual Amendments

Article 5U.K.Oversight function requirements

1.Administrators shall establish and maintain a permanent and effective oversight function to ensure oversight of all aspects of the provision of their benchmarks.

2.Administrators shall develop and maintain robust procedures regarding their oversight function, which shall be made available to the [F58FCA].

3.The oversight function shall operate with integrity and shall have the following responsibilities, which shall be adjusted by the administrator based on the complexity, use and vulnerability of the benchmark:

(a)reviewing the benchmark's definition and methodology at least annually;

(b)overseeing any changes to the benchmark methodology and being able to request the administrator to consult on such changes;

(c)overseeing the administrator's control framework, the management and operation of the benchmark, and, where the benchmark is based on input data from contributors, the code of conduct referred to in Article 15;

(d)reviewing and approving procedures for cessation of the benchmark, including any consultation about a cessation;

(e)overseeing any third party involved in the provision of the benchmark, including calculation or dissemination agents;

(f)assessing internal and external audits or reviews, and monitoring the implementation of identified remedial actions;

(g)where the benchmark is based on input data from contributors, monitoring the input data and contributors and the actions of the administrator in challenging or validating contributions of input data;

(h)where the benchmark is based on input data from contributors, taking effective measures in respect of any breaches of the code of conduct referred to in Article 15; and

(i)reporting to the [F59FCA] any misconduct by contributors, where the benchmark is based on input data from contributors, or administrators, of which the oversight function becomes aware, and any anomalous or suspicious input data.

4.The oversight function shall be carried out by a separate committee or by means of another appropriate governance arrangement.

5.[F60The FCA may make] technical standards to specify

[F61(a)]the procedures regarding the oversight function and the characteristics of the oversight function including its composition as well as its positioning within the organisational structure of the administrator, so as to ensure the integrity of the function and the absence of conflicts of interest;

[F62(b)]F63... a non-exhaustive list of appropriate governance arrangements as laid down in paragraph 4.

[F64The technical standards] shall distinguish between the different types of benchmarks and sectors as set out in this Regulation and [F65when making the standards, the FCA] shall take into consideration the differences in the ownership and control structure of administrators, the nature, scale and complexity of the provision of the benchmark, and the risk and impact of the benchmark, also in light of international convergence of supervisory practice in relation to governance requirements of benchmarks. However, the F66... technical standards shall not cover or apply to administrators of non-significant benchmarks.

F67...

F67...

F686.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Article 6U.K.Control framework requirements

1.Administrators shall have in place a control framework that ensures that their benchmarks are provided and published or made available in accordance with this Regulation.

2.The control framework shall be proportionate to the level of conflicts of interest identified, the extent of discretion in the provision of the benchmark and the nature of the benchmark input data.

3.The control framework shall include:

(a)management of operational risk;

(b)adequate and effective business continuity and disaster recovery plans;

(c)contingency procedures that are in place in the event of a disruption to the process of the provision of the benchmark.

4.An administrator shall establish measures to:

(a)ensure that contributors adhere to the code of conduct referred to in Article 15 and comply with the applicable standards for input data;

(b)monitor input data including, where feasible, monitoring input data before publication of the benchmark and validating input data after publication to identify errors and anomalies.

5.The control framework shall be documented, reviewed and updated as appropriate and made available to the relevant competent authority and, upon request, to users.

Article 7U.K.Accountability framework requirements

1.An administrator shall have in place an accountability framework, covering record-keeping, auditing and review, and a complaints process, that provides evidence of compliance with the requirements of this Regulation.

2.An administrator shall designate an internal function with the necessary capability to review and report on the administrator's compliance with the benchmark methodology and this Regulation.

3.For critical benchmarks, an administrator shall appoint an independent external auditor to review and report on the administrator's compliance with the benchmark methodology and this Regulation, at least annually.

4.Upon the request of the [F69FCA], an administrator shall provide to the [F69FCA] the details of the reviews and reports provided for in paragraph 2. Upon the request of the [F69FCA] or any user of a benchmark, an administrator shall publish the details of the audits provided for in paragraph 3.

Textual Amendments

Article 8U.K.Record-keeping requirements

1.An administrator shall keep records of:

(a)all input data, including the use of such data;

(b)the methodology used for the determination of a benchmark;

(c)any exercise of judgement or discretion by the administrator and, where applicable, by assessors, in the determination of a benchmark, including the reasoning for said judgement or discretion;

(d)the disregard of any input data, in particular where it conformed to the requirements of the benchmark methodology, and the rationale for such disregard;

(e)other changes in or deviations from standard procedures and methodologies, including those made during periods of market stress or disruption;

(f)the identities of the submitters and of the natural persons employed by the administrator for the determination of a benchmark;

(g)all documents relating to any complaint, including those submitted by a complainant; and

(h)telephone conversations or electronic communications between any person employed by the administrator and contributors or submitters in respect of a benchmark.

2.An administrator shall keep the records set out in paragraph 1 for at least five years in such a form that it is possible to replicate and fully understand the determination of a benchmark and enable an audit or evaluation of input data, calculations, judgements and discretion. Records of telephone conversation or electronic communications recorded in accordance with point (h) of paragraph 1 shall be provided to the persons involved in the conversation or communication upon request and shall be kept for a period of three years.

Article 9U.K.Complaints-handling mechanism

1.An administrator shall have in place and publish procedures for receiving, investigating and retaining records concerning complaints made, including about the administrator's benchmark determination process.

2.Such a complaints-handling mechanism shall ensure that:

(a)the administrator makes available the complaints-handling policy through which complaints may be submitted on whether a specific benchmark determination is representative of market value, on a proposed change to the benchmark determination process, on an application of the methodology in relation to a specific benchmark determination, and on other decisions in relation to the benchmark determination process;

(b)complaints are investigated in a timely and fair manner and the outcome of the investigation is communicated to the complainant within a reasonable period of time, unless such communication would be contrary to objectives of public policy or to Regulation (EU) No 596/2014; and

(c)the inquiry is conducted independently of any personnel who may be or may have been involved in the subject-matter of the complaint.

Article 10U.K.Outsourcing

1.An administrator shall not outsource functions in the provision of a benchmark in such a way as to impair materially the administrator's control over the provision of the benchmark or the ability of the [F70FCA] to supervise the benchmark.

2.Where an administrator outsources to a service provider functions or any relevant services and activities in the provision of a benchmark, the administrator shall remain fully responsible for discharging all of the administrator's obligations under this Regulation.

3.Where outsourcing takes place, the administrator shall ensure that the following conditions are fulfilled:

(a)the service provider has the ability, capacity, and any authorisation required by law, to perform the outsourced functions, services or activities reliably and professionally;

(b)the administrator makes available to the [F71FCA] the identity and the tasks of the service provider that participates in the benchmark determination process;

(c)the administrator takes appropriate action if it appears that the service provider may not be carrying out the outsourced functions effectively and in compliance with applicable law and regulatory requirements;

(d)the administrator retains the necessary expertise to supervise the outsourced functions effectively and to manage the risks associated with the outsourcing;

(e)the service provider discloses to the administrator any development that may have a material impact on its ability to carry out the outsourced functions effectively and in compliance with applicable law and regulatory requirements;

(f)the service provider cooperates with the [F72FCA] regarding the outsourced activities, and the administrator and the [F72FCA] have effective access to data related to the outsourced activities, as well as to the business premises of the service provider, and the [F72FCA] is able to exercise those rights of access;

(g)the administrator is able to terminate the outsourcing arrangements where necessary;

(h)the administrator takes reasonable steps, including contingency plans, to avoid undue operational risk related to the participation of the service provider in the benchmark determination process.

Textual Amendments

CHAPTER 2U.K.Input data, methodology and reporting of infringements

Article 11U.K.Input data

1.The provision of a benchmark shall be governed by the following requirements in respect of its input data:

(a)the input data shall be sufficient to represent accurately and reliably the market or economic reality that the benchmark is intended to measure.

The input data shall be transaction data, if available and appropriate. If transaction data is not sufficient or is not appropriate to represent accurately and reliably the market or economic reality that the benchmark is intended to measure, input data which is not transaction data may be used, including estimated prices, quotes and committed quotes, or other values;

(b)the input data referred to in point (a) shall be verifiable;

(c)the administrator shall draw up and publish clear guidelines regarding the types of input data, the priority of use of the different types of input data and the exercise of expert judgement, to ensure compliance with point (a) and the methodology;

(d)where a benchmark is based on input data from contributors, the administrator shall obtain, where appropriate, the input data from a reliable and representative panel or sample of contributors so as to ensure that the resulting benchmark is reliable and representative of the market or economic reality that the benchmark is intended to measure;

(e)the administrator shall not use input data from a contributor if the administrator has any indication that the contributor does not adhere to the code of conduct referred to in Article 15, and in such a case shall obtain representative publicly available data.

2.Administrators shall ensure that their controls in respect of input data include:

(a)criteria that determine who may contribute input data to the administrator and a process for selecting contributors;

(b)a process for evaluating a contributor's input data and for stopping the contributor from providing further input data, or applying other penalties for non-compliance against the contributor, where appropriate; and

(c)a process for validating input data, including against other indicators or data, to ensure its integrity and accuracy.

3.Where the input data of a benchmark is contributed from a front office function, meaning any department, division, group, or personnel of contributors or any of its affiliates that performs any pricing, trading, sales, marketing, advertising, solicitation, structuring, or brokerage activities, the administrator shall:

(a)obtain data from other sources that corroborate that input data; and

(b)ensure that contributors have in place adequate internal oversight and verification procedures.

4.Where an administrator considers that the input data does not represent the market or economic reality that a benchmark is intended to measure, that administrator shall, within a reasonable time period, either change the input data, the contributors or the methodology in order to ensure that the input data does represent such market or economic reality, or else cease to provide that benchmark.

[F734A.In the case of a critical benchmark, paragraph 4 does not require the administrator to cease providing the benchmark before the end of a period during which the administrator is required to continue publishing the benchmark by Article 21(1) or (2) or by a decision of the FCA under Article 21(3).

4B.In the case of a critical benchmark in respect of which measures adopted under Article 23(6) have effect—

(a)paragraph 4 does not require the administrator to cease providing the benchmark while those measures have effect, and

(b)the administrator's duty under paragraph 4 to make changes is a duty to make changes so far as compatible with those measures.]

5.[F74The FCA may make] technical standards to specify further how to ensure that input data is appropriate and verifiable, as required under points (a) and (b) of paragraph 1, as well as the internal oversight and verification procedures of a contributor that the administrator has to ensure are in place, in compliance with point (b) of paragraph 3, in order to ensure the integrity and accuracy of input data. However, the F75... technical standards shall not cover or apply to administrators of non-significant benchmarks.

[F76The FCA] shall take into account the different types of benchmarks and sectors as set out in this Regulation, the nature of input data, the characteristics of the underlying market or economic reality and the principle of proportionality, the vulnerability of the benchmarks to manipulation as well as the international convergence of supervisory practice in relation to benchmarks.

F77...

F77...

F786.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Article 12U.K.Methodology

1.An administrator shall use a methodology for determining a benchmark that:

(a)is robust and reliable;

(b)has clear rules identifying how and when discretion may be exercised in the determination of that benchmark;

(c)is rigorous, continuous and capable of validation including, where appropriate, back-testing against available transaction data;

(d)is resilient and ensures that the benchmark can be calculated in the widest set of possible circumstances, without compromising its integrity;

(e)is traceable and verifiable.

2.When developing a benchmark methodology, a benchmark administrator shall:

(a)take into account factors including the size and normal liquidity of the market, the transparency of trading and the positions of market participants, market concentration, market dynamics, and the adequacy of any sample to represent the market or economic reality that the benchmark is intended to measure;

(b)determine what constitutes an active market for the purposes of that benchmark; and

(c)establish the priority given to different types of input data.

3.An administrator shall have in place clear published arrangements that identify the circumstances in which the quantity or quality of input data falls below the standards necessary for the methodology to determine the benchmark accurately and reliably, and that describe whether and how the benchmark is to be calculated in such circumstances.

Article 13U.K.Transparency of methodology

1.An administrator shall develop, operate and administer the benchmark and methodology transparently. To that end, the administrator shall publish or make available the following information:

(a)the key elements of the methodology that the administrator uses for each benchmark provided and published or, when applicable, for each family of benchmarks provided and published;

(b)details of the internal review and the approval of a given methodology, as well as the frequency of such review;

(c)the procedures for consulting on any proposed material change in the administrator's methodology and the rationale for such changes, including a definition of what constitutes a material change and the circumstances in which the administrator is to notify users of any such changes[F79;]

[F30(d)an explanation of how the key elements of the methodology laid down in point (a) reflect ESG factors for each benchmark or family of benchmarks, with the exception of interest rate and foreign exchange benchmarks.]

[F30Benchmark administrators shall comply with the requirement laid down in point (d) of the first subparagraph by 30 April 2020.]

2.The procedures required under point (c) of paragraph 1 shall provide for:

(a)advance notice, with a clear time frame, that gives the opportunity to analyse and comment upon the impact of such proposed material changes; and

(b)the comments referred to in point (a) of this paragraph, and the administrator's response to those comments, to be made accessible after any consultation, except where confidentiality has been requested by the originator of the comments.

[F302a.[F80The Treasury may make regulations] to supplement this Regulation by laying down the minimum content of the explanation referred to in point (d) of the first subparagraph of paragraph 1 of this Article, as well as the standard format to be used.]

3.[F81The FCA may make] technical standards to specify further the information to be provided by an administrator in compliance with the requirements laid down in paragraphs 1 and 2, distinguishing for different types of benchmarks and sectors as set out in this Regulation. [F82The FCA] shall take into account the need to disclose those elements of the methodology that provide for sufficient detail to allow users to understand how a benchmark is provided and to assess its representativeness, its relevance to particular users and its appropriateness as a reference for financial instruments and contracts and the principle of proportionality. However, the F83... technical standards shall not cover or apply to administrators of non-significant benchmarks.

F84...

F84...

F854.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Article 14U.K.Reporting of infringements

1.An administrator shall establish adequate systems and effective controls to ensure the integrity of input data in order to be able to identify and report to the [F86FCA] any conduct that may involve manipulation or attempted manipulation of a benchmark, under Regulation (EU) No 596/2014.

2.An administrator shall monitor input data and contributors in order to be able to notify the [F87FCA] and provide all relevant information where the administrator suspects that, in relation to a benchmark, any conduct has taken place that may involve manipulation or attempted manipulation of the benchmark, under Regulation (EU) No 596/2014, including collusion to do so.

F88...

3.Administrators shall have procedures in place for their managers, employees and any other natural persons whose services are placed at their disposal or under their control to report internally infringements of this Regulation.

Textual Amendments

CHAPTER 3U.K.Code of conduct and requirements for contributors

Article 15U.K.Code of conduct

1.Where a benchmark is based on input data from contributors, its administrator shall develop a code of conduct for each benchmark clearly specifying contributors' responsibilities with respect to the contribution of input data and shall ensure that such code of conduct complies with this Regulation. The administrator shall be satisfied that contributors adhere to the code of conduct on a continuous basis and at least annually and in case of changes to it.

2.The code of conduct shall include at least the following elements:

(a)a clear description of the input data to be provided and the requirements necessary to ensure that input data is provided in accordance with Articles 11 and 14;

(b)identification of the persons that may contribute input data to the administrator and procedures to verify the identity of a contributor and any submitters, as well as authorisation of any submitters that contribute input data on behalf of a contributor;

(c)policies to ensure that a contributor provides all relevant input data;

(d)the systems and controls that a contributor is required to establish, including:

(i)

procedures for contributing input data, including requirements for the contributor to specify whether input data is transaction data and whether input data conforms to the administrator's requirements;

(ii)

policies on the use of discretion in contributing input data;

(iii)

any requirement for the validation of input data before it is provided to the administrator;

(iv)

record-keeping policies;

(v)

reporting requirements concerning suspicious input data;

(vi)

requirements concerning the management of conflicts of interest.

3.Administrators may develop a single code of conduct for each family of benchmarks they provide.

4.In the event that [F89the FCA], in the use of its powers referred to in Article 41, finds that there are elements of a code of conduct which do not comply with this Regulation, it shall notify the administrator concerned. The administrator shall adjust the code of conduct to ensure that it complies with this Regulation within 30 days of such a notification.

5.Within 15 working days from the date of [F90the Treasury making regulations under Articles A20(5) or (6), or 20(5) specifying a benchmark as critical], the administrator of that critical benchmark shall notify the code of conduct to the [F91FCA]. The [F91FCA] shall verify within 30 days whether the content of the code of conduct complies with this Regulation. In the event that the [F91FCA] finds elements which do not comply with this Regulation, paragraph 4 of this Article shall apply.

6.[F92The FCA may make] technical standards to specify further the elements of the code of conduct referred to in paragraph 2 for different types of benchmarks, and in order to take account of developments in benchmarks and financial markets.

[F93The FCA] shall take into account the different characteristics of benchmarks and contributors, in particular in terms of differences in input data and methodologies, the risks of input data of being manipulated and international convergence of supervisory practices in relation to benchmarks.

F94...

F94...

Textual Amendments

Article 16U.K.Governance and control requirements for supervised contributors

1.The following governance and control requirements shall apply to a supervised contributor:

(a)the supervised contributor shall ensure that the provision of input data is not affected by any existing or potential conflict of interest and that, where any discretion is required, it is independently and honestly exercised based on relevant information in accordance with the code of conduct referred to in Article 15;

(b)the supervised contributor shall have in place a control framework that ensures the integrity, accuracy and reliability of input data and that input data is provided in accordance with this Regulation and the code of conduct referred to in Article 15.

2.A supervised contributor shall have in place effective systems and controls to ensure the integrity and reliability of all contributions of input data to the administrator, including:

(a)controls regarding who may submit input data to an administrator including, where proportionate, a process for sign-off by a natural person holding a position senior to that of the submitter;

(b)appropriate training for submitters, covering at least this Regulation and Regulation (EU) No 596/2014;

(c)measures for the management of conflicts of interest, including organisational separation of employees where appropriate and consideration of how to remove incentives, created by remuneration polices, to manipulate a benchmark;

(d)record-keeping, for an appropriate period of time, of communications in relation to provision of input data, of all information used to enable the contributor to make each submission, and of all existing or potential conflicts of interest including, but not limited to, the contributor's exposure to financial instruments which use a benchmark as a reference;

(e)record-keeping of internal and external audits.

3.Where input data relies on expert judgement, supervised contributors shall establish, in addition to the systems and controls referred to in paragraph 2, policies guiding any use of judgement or exercise of discretion and shall retain records of the rationale for any such judgement or discretion. Where proportionate, supervised contributors shall take into account the nature of the benchmark and its input data.

4.A supervised contributor shall fully cooperate with the administrator and the [F95FCA] in the auditing and supervision of the provision of a benchmark and make available the information and records kept in accordance with paragraphs 2 and 3.

5.[F96The FCA may make] technical standards to specify further the requirements concerning governance, systems and controls, and policies set out in paragraphs 1, 2 and 3.

[F97The FCA] shall take into account the different characteristics of benchmarks and supervised contributors, in particular in terms of differences in input data provided and methodologies used, the risks of manipulation of the input data and the nature of the activities carried out by the supervised contributors, and the developments in benchmarks and financial markets in light of international convergence of supervisory practices in relation to benchmarks. However, the F98... technical standards shall not cover or apply to supervised contributors of non-significant benchmarks.

F99...

F99...

F1006.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

TITLE IIIU.K.REQUIREMENTS FOR DIFFERENT TYPES OF BENCHMARKS

CHAPTER 1U.K.Regulated-data benchmarks

Article 17U.K.Regulated-data benchmarks

1.Article 11(1)(d) and (e), Article 11(2) and (3), Article 14(1) and (2), and Articles 15 and 16 shall not apply to the provision of and the contribution to regulated-data benchmarks. Article 8(1)(a) shall not apply to the provision of regulated-data benchmarks with reference to input data that are contributed entirely and directly as specified in point (24) of Article 3(1).

2.Articles 24 and 25 or Article 26 shall, as applicable, apply to the provision of, and the contribution to, regulated-data benchmarks that are used directly or indirectly within a combination of benchmarks as a reference for financial instruments or financial contracts or for measuring the performance of investment funds, having a total value of up to EUR 500 billion, on the basis of all the range of maturities or tenors of the benchmark, where applicable.

CHAPTER 2U.K.Interest rate benchmarks

Article 18U.K.Interest rate benchmarks

The specific requirements laid down in Annex I shall apply to the provision of, and contribution to, interest rate benchmarks in addition to, or as a substitute for, the requirements of Title II.

Articles 24, 25 and 26 shall not apply to the provision of, and contribution to, interest rate benchmarks.

CHAPTER 3U.K.Commodity benchmarks

Article 19U.K.Commodity benchmarks

1.The specific requirements laid down in Annex II shall apply instead of the requirements of Title II, with the exception of Article 10, to the provision of, and contribution to, commodity benchmarks, unless the benchmark in question is a regulated-data benchmark or is based on submissions by contributors the majority of which are supervised entities.

Articles 24, 25 and 26 shall not apply to the provision of, and contribution to, commodity benchmarks.

2.Where a commodity benchmark is a critical benchmark and the underlying asset is gold, silver or platinum, the requirements of Title II shall apply instead of Annex II.

[F30CHAPTER 3A U.K. [F101UK Climate Transition Benchmarks and UK Paris-aligned Benchmarks ]

Article 19aU.K. [F102UK Climate Transition Benchmarks and UK Paris-aligned Benchmarks]

1.The requirements laid down in Annex III shall apply to the provision of, and contribution to, [F103UK] Climate Transition Benchmarks and [F103UK] Paris-aligned Benchmarks, in addition to the requirements of Titles II, III and IV.

2.[F104The Treasury may make regulations] to supplement this Regulation by laying down the minimum standards for [F105UK] Climate Transition Benchmarks and [F105UK] Paris-aligned Benchmarks to specify:

(a)the criteria for the choice of the underlying assets, including, where applicable, any criteria for excluding assets;

(b)the criteria and method for the weighting of the underlying assets in the benchmark;

(c)the determination of the decarbonisation trajectory for [F105UK] Climate Transition Benchmarks.

3.Benchmark administrators which provide an [F106UK] Climate Transition Benchmark or an [F106UK] Paris-aligned Benchmark shall comply with this Regulation by 30 April 2020.

Textual Amendments

Article 19bU.K. Requirements for [F107UK Climate Transition Benchmarks]

Administrators of [F108UK] Climate Transition Benchmarks shall select, weight, or exclude underlying assets issued by companies that follow a decarbonisation trajectory by 31 December 2022, in accordance with the following requirements:

(i)

the companies disclose measurable carbon emission reduction targets to be achieved within specific timeframes;

(ii)

the companies disclose a reduction in carbon emissions which is disaggregated down to the level of relevant operating subsidiaries;

(iii)

the companies disclose annual information on progress made towards those targets;

(iv)

the activities relating to the underlying assets do not significantly harm other ESG objectives.

Textual Amendments

Article 19cU.K. Exclusions for [F109UK Paris-aligned Benchmarks]

1.[F110The Treasury may make regulations] in order to supplement this Regulation by identifying, in respect of [F111UK] Paris-aligned Benchmarks, the sectors to be excluded because they do not have measurable carbon emission reduction targets with specific deadlines that are aligned with the objectives of the Paris Agreement. F112...

F1132.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Article 19dU.K. Endeavour to provide [F114UK Climate Transition Benchmarks]

By 1 January 2022, administrators which are located in the [F115United Kingdom] and which provide significant benchmarks determined on the basis of the value of one or more underlying assets or prices shall endeavour to provide one or more [F116UK] Climate Transition Benchmarks.]

Textual Amendments

Textual Amendments

CHAPTER 4U.K.Critical benchmarks

[F117Article A20U.K. Critical benchmarks: review of critical benchmarks

1.The FCA must conduct a proportionate review of critical benchmarks in accordance with paragraphs 2 to 4, taking into account information provided to it under paragraph A1 of Article 20.

2.The review must consider:

[F118(a)whether an administrator located in the United Kingdom provides a benchmark that satisfies one or more of conditions (a), (b), (c) or (d) of paragraph 1 of Article 20;] and

(b)where a benchmark satisfies [F119point (a)] of this paragraph, whether the FCA recommends that the benchmark is recognised as critical.

3.The FCA must provide a written report to the Treasury:

(a)setting out the result of the review; and

(b)making a recommendation as to whether any benchmark that satisfies [F120point (a)] of paragraph 2 should be recognised as critical.

4.The FCA must conduct the review and provide the report to the Treasury:

(a)within the period of two years beginning with IP completion day; and

(b)thereafter, at intervals of at least every two years, with each interval beginning with the date on which the last report was provided.

5.The Treasury must by regulations specify that a benchmark is critical if:

(a)the FCA has recommended that the benchmark is recognised as critical in accordance with the review procedure specified in paragraphs 2 and 3; and

(b)the Treasury [F121determine] that the FCA's review complies with the requirements of paragraphs 2 and 3.

6.The Treasury may by regulations specify that a benchmark is critical if:

(a)the benchmark is provided by an administrator located in the United Kingdom; and

[F122(b)the Treasury consider that the benchmark satisfies one or more of conditions (a), (b), (c) or (d) of paragraph 1 of Article 20.]

7.The Treasury may not specify a regulated-data benchmark as a critical benchmark under paragraph 5 or 6 of this Article or under paragraph 5 of Article 20.]

Textual Amendments

Article 20U.K.[F123Critical benchmarks: conditions and other matters]

[F124A1.An administrator shall immediately notify the FCA when the administrator’s benchmark:

(a)exceeds the threshold in paragraph 1(a); or

(b)fulfils the criterion in paragraph 1(c)(ii) and there is reason to believe that it also fulfils the criterion in paragraph 1(c)(iii).]

1.[F125The conditions are:]

(a)the benchmark is used directly or indirectly within a combination of benchmarks as a reference for financial instruments or financial contracts or for measuring the performance of investment funds, having a total value of at least EUR 500 billion on the basis of all the range of maturities or tenors of the benchmark, where applicable;

(b)the benchmark is based on submissions by contributors the majority of which are located in [F126the United Kingdom] and is recognised as being critical F127... in accordance with the procedure laid down in paragraphs 2, 3, 4 and 5 of this Article;

(c)the benchmark fulfils [F128both] of the following criteria:

(i)

F129...

(ii)

the benchmark has no, or very few, appropriate market-led substitutes;

(iii)

in the event that the benchmark ceases to be provided, or is provided on the basis of input data no longer fully representative of the underlying market or economic reality or on the basis of unreliable input data, there would be significant and adverse impacts on market integrity, financial stability, consumers, the real economy, or the financing of households and businesses in [F130the United Kingdom];

F131...

[F132(d)the benchmark has a sufficient number of appropriate market-led substitutes that it does not fulfil the criterion in point (c)(ii), but:

(i)it is not reasonably practicable for one or more users of the benchmark to switch to one of those substitutes, and

(ii)the benchmark fulfils the criterion in point (c)(iii).]

[F1332.Where the FCA considers that a benchmark should be recognised as critical based on an assessment under paragraph 3, and that benchmark is based on submissions by contributors the majority of which are located in the United Kingdom, the FCA shall notify the Treasury and transmit to the Treasury a documented assessment.]

3.For the purposes of paragraph 2, the [F134FCA] shall assess whether the cessation of the benchmark or its provision on the basis of input data or of a panel of contributors no longer representative of the underlying market or economic reality would have an adverse impact on market integrity, financial stability, consumers, the real economy, or the financing of households and businesses in [F135the United Kingdom]. The [F136FCA] shall take into consideration in its assessment:

(a)the value of financial instruments and financial contracts that reference the benchmark and the value of investment funds referencing the benchmark for measuring their performance within the [F137United Kingdom] and their relevance in terms of the total value of financial instruments and of financial contracts outstanding, and of the total value of investment funds, in the [F137United Kingdom];

(b)the value of financial instruments and financial contracts that reference the benchmark and the value of investment funds referencing the benchmark for measuring their performance within the [F137United Kingdom] and their relevance in terms of the gross national product of the [F137United Kingdom];

(c)any other figure to assess on objective grounds the potential impact of the discontinuity or unreliability of the benchmark on market integrity, financial stability, consumers, the real economy, or the financing of households and businesses in the [F137United Kingdom].

F138...

4.Within six weeks of receipt of the notification referred to in paragraph 2, [F139the Treasury must determine whether the FCA's assessment complies with the requirements of paragraph 3.]

[F1405.The Treasury must make regulations specifying that a benchmark is critical if:

(a)the FCA has recommended that the benchmark is recognised as critical in accordance with the procedure specified in paragraphs 2 and 3; and

(b)the Treasury [F141determine] that the FCA's assessment complies with the requirements of paragraph 3.]

[F1425A.The FCA must:

(a)review [F143the value in point (a) of paragraph 1 (“the paragraph 1(a) value”)] in the light of market, price and regulatory developments and the appropriateness of the classification of benchmarks with a total value of financial instruments, financial contracts, or investment funds referencing them that is close [F144to the paragraph 1(a) value]; and

(b)provide a written report to the Treasury setting out the results of the review and making a recommendation as to whether [F145the paragraph 1(a) value] should be amended.

5B.The FCA must conduct the review and provide the report to the Treasury:

(a)within the period of two years beginning with IP completion day; and

(b)thereafter, at intervals of at least every two years, with each interval beginning with the date on which the last report was provided.]

6.[F146The Treasury may by regulations]

(a)specify how the nominal amount of financial instruments other than derivatives, the notional amount of derivatives and the net asset value of investment funds are to be assessed, including in the event of an indirect reference to a benchmark within a combination of benchmarks, in order to be compared with the [F147values] referred to in paragraph 1 of this Article and in point (a) of Article 24(1);

[F148(b)amend [F149the value in point (a)] of paragraph 1 having regard to:

(i)the matters referred to in point (a) of paragraph 5A; and

(ii)any report prepared by the FCA under paragraph 5A;]

(c)specify how the criteria referred to in point (c)(iii) of paragraph 1 of this Article are to be applied, taking into consideration any data which helps assess on objective grounds the potential impact of the discontinuity or unreliability of the benchmark on market integrity, financial stability, consumers, the real economy, or the financing of households and businesses in [F150the United Kingdom].

Where applicable, the [F151Treasury] shall take into account relevant market or technological developments.

Textual Amendments

Article 21U.K.Mandatory administration of a critical benchmark

1.If an administrator of a critical benchmark intends to cease providing such benchmark, the administrator shall:

(a)immediately notify [F152the FCA]; and

(b)within four weeks of such notification submit an assessment of how the benchmark:

(i)

is to be transitioned to a new administrator; or

(ii)

is to be ceased to be provided, taking into account the procedure established in Article 28(1).

During the period referred to in point (b) of the first subparagraph, the administrator shall not cease provision of the benchmark.

2.Upon receipt of the assessment of the administrator referred to in paragraph 1, [F153the FCA] shall:

F154(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b)within four weeks, make its own assessment of how the benchmark is to be transitioned to a new administrator or be ceased to be provided, taking into account the procedure established in accordance with Article 28(1).

During the period of time referred to in point (b) of the first subparagraph of this paragraph, the administrator shall not cease the provision of the benchmark without the written consent of [F155the FCA].

3.Following completion of the assessment referred to in point (b) of paragraph 2, [F156the FCA] shall have the power to compel the administrator to continue publishing the benchmark until such time as:

(a)the provision of the benchmark has been transitioned to a new administrator;

(b)the benchmark can be ceased to be provided in an orderly fashion [F157(whether by the exercise of the FCA's powers under Article 23D or otherwise)]; or

(c)the benchmark is no longer critical.

For the purposes of the first subparagraph, the period for which [F156the FCA] may compel the administrator to continue to publish the benchmark shall not exceed 12 months.

[F79By the end of that period, [F156the FCA] shall review its decision to compel the administrator to continue to publish the benchmark. [F156The FCA] may, where necessary, extend that period by an appropriate period not exceeding 12 months. The maximum period of mandatory administration shall not exceed [F15810 years].]

[F1593A.If the FCA decides to compel the administrator to continue publishing the benchmark under paragraph 3, the FCA must assess the capability of the benchmark to measure the underlying market or economic reality, taking into account, among other things, the procedure established by the administrator in accordance with Article 28(1).

3B.After making its assessment under paragraph 3A, the FCA must give the administrator—

(a)a written notice stating that it considers that the benchmark is not representative of the market or economic reality that it is intended to measure or that the representativeness of the benchmark is at risk, or

(b)a written notice stating that it considers that the representativeness of the benchmark is not at risk.

3C.The FCA must make its assessment under paragraph 3A, and give the notice under paragraph 3B, before the end of the period of 28 days beginning with the day on which the FCA notifies the administrator of its decision to compel the administrator to continue publishing the benchmark.]

4.Without prejudice to paragraph 1, in the event that the administrator of a critical benchmark is to be wound down due to insolvency proceedings, [F160the FCA] shall make an assessment of whether and how the critical benchmark can be transitioned to a new administrator or can cease to be provided in an orderly fashion, taking into account the procedure established in accordance with Article 28(1).

Textual Amendments

[F161 Article 21A U.K. Prohibition on new use where administrator to cease providing critical benchmark

1.Where the FCA has completed an assessment of a critical benchmark under Article 21(2), the FCA may, by publishing a notice, prohibit some or all new use of the benchmark by supervised entities.

2.In paragraph 1, the reference to new use of a benchmark is to doing the following on or after the day on which the prohibition takes effect (“the prohibition day”)—

(a)issuing a financial instrument which references the benchmark, or amending the terms of a financial instrument so as to include a reference to the benchmark where the instrument did not reference the benchmark immediately before the prohibition day;

(b)determining the amount payable under a financial instrument or a financial contract by referencing the benchmark, where the instrument or contract did not reference the benchmark immediately before the prohibition day;

(c)being a party to a financial contract which references the benchmark—

(i)where the contract is formed on or after the prohibition day, or

(ii)where the contract was formed before the prohibition day but did not reference the benchmark immediately before that day;

(d)providing a borrowing rate as described in point (7)(d) of Article 3(1) calculated by reference to the benchmark for the purposes of a financial contract—

(i)where the contract is formed on or after the prohibition day, or

(ii)where the contract was formed before the prohibition day but did not use the borrowing rate immediately before that day;

(e)measuring the performance of an investment fund through the benchmark for a purpose described in point (7)(e) of Article 3(1), where the fund's constitutional documents or prospectus did not provide for its performance to be measured through the benchmark immediately before the prohibition day.

3.The FCA may only exercise the power under paragraph 1 if it considers it desirable to do so in order to advance either or both of the following—

(a)its consumer protection objective (see section 1C of FSMA);

(b)its integrity objective (see section 1D of that Act).

4.In exercising the power under paragraph 1 in relation to a benchmark that is used outside the United Kingdom, the FCA may, among other things, have regard to the likely effect outside the United Kingdom of the exercise of the power.

5.A notice under this Article may—

(a)make different provision for different purposes;

(b)make provision by reference to any aspect of the new use, including the persons involved in the use;

(c)provide that the prohibition has effect only during a period specified in the notice;

(d)make such transitional provision as the FCA considers appropriate.

6.A notice under this Article must—

(a)give reasons for the prohibition,

(b)specify when the prohibition is to take effect,

(c)explain how the FCA has taken account of the relevant policy statement (see Article 23F), and

(d)provide any further information that the FCA considers appropriate for assisting supervised entities to understand the prohibition.

7.A notice under this Article must be published in the manner that appears to the FCA to be best calculated to bring it to the attention of—

(a)supervised entities, and

(b)the public.

8.The FCA—

(a)must give a copy of a notice under this Article to the Treasury before publishing it, and

(b)may charge a reasonable fee for providing a person with a copy of a notice published under this Article.

9.In paragraph 2(a) to (e), references to referencing, or measuring performance through, the benchmark (however expressed) include referencing, or measuring performance through, a combination of indices that include the benchmark.]

Textual Amendments

Article 22U.K.Mitigation of market power of critical benchmark administrators

Without prejudice to the application of [F162United Kingdom] competition law, when providing a critical benchmark, the administrator shall take adequate steps to ensure that licences of, and information relating to, the benchmark are provided to all users on a fair, reasonable, transparent and non-discriminatory basis.

Textual Amendments

[F163 Article 22A U.K. Assessment of representativeness of critical benchmarks: administrator

1.This Article applies to a critical benchmark that—

(a)is based on submissions by contributors the majority of which are supervised entities or supervised third country entities, and

(b)is not an Article 23A benchmark.

2.An administrator of a critical benchmark must submit to the FCA an assessment of the capability of the benchmark to measure the underlying market or economic reality—

(a)at the end of the period of two years beginning with the day on which the benchmark became a critical benchmark, and

(b)at the end of each subsequent two year period.

3.The FCA may, by written notice, require an administrator of a critical benchmark to submit to the FCA an assessment of the capability of the benchmark to measure the underlying market or economic reality.

4.The FCA may only impose a requirement under paragraph 3 if it considers that—

(a)the benchmark does not, or may not, represent the underlying market or economic reality, or

(b)the representativeness of the benchmark is or may be at risk.

5.A notice under paragraph 3 may require the administrator to submit the assessment before a date specified in the notice, provided that date falls after the end of the period of two weeks beginning with the day on which the notice was given.

6.If a supervised contributor or a supervised third country contributor intends to cease contributing input data to a critical benchmark—

(a)the contributor must notify the benchmark administrator promptly in writing, and

(b)the notification must state the date on which it intends to cease contributing, which must be after the end of the period of 15 weeks beginning with the first working day after the day on which it gives the notification.

7.If an administrator of a benchmark is notified under paragraph 6, it must—

(a)inform the FCA promptly, stating the date on which the notification was given, and

(b)submit to the FCA an assessment of the implications of the contributor's withdrawal for the capability of the benchmark to measure the underlying market or economic reality.

8.An assessment under paragraph 7(b) must be submitted to the FCA before the end of the period of 14 days beginning with the first working day after the day on which the notification under paragraph 6 was given.

9.An administrator of a critical benchmark that is required to provide an assessment under this Article must not change the market or economic reality intended to be measured by the benchmark (as defined in the benchmark statement referred to in Article 27) during the assessment period, unless the FCA gives it written permission to do so.

10.For the purposes of paragraph 9, the assessment period begins—

(a)in the case of an assessment under paragraph 2, with the day falling one month before the end of the relevant two year period described in that paragraph;

(b)in the case of an assessment under paragraph 3, when the administrator receives the FCA's notice requiring the assessment;

(c)in the case of an assessment under paragraph 7(b), when the contributor notifies the administrator under paragraph 6.

11.For the purposes of paragraph 9, the assessment period ends—

(a)when the FCA notifies the administrator that it considers that the representativeness of the benchmark is not at risk, whether by giving a notice under Article 22B(3)(b) or otherwise, or

(b)when the benchmark becomes an Article 23A benchmark.]

Textual Amendments

[F163 Article 22B U.K. Assessment of representativeness of critical benchmarks: FCA

1.Where the FCA receives an assessment by a benchmark administrator under Article 22A within the period specified by or under that Article, the FCA must make its own assessment of the capability of the benchmark to measure the underlying market or economic reality, taking into account, among other things—

(a)the procedure established by the administrator in accordance with Article 28(1), and

(b)the administrator's assessment.

2.If a benchmark administrator does not submit an assessment under Article 22A within the period specified by or under that Article, the FCA may make its own assessment of the capability of the benchmark to measure the underlying market or economic reality and, if it does so—

(a)must take into account the procedure established by the administrator in accordance with Article 28(1), and

(b)may take into account, among other things, an assessment submitted by the administrator after the end of the specified period.

3.After making its assessment under this Article, the FCA must give the benchmark administrator—

(a)a written notice stating that it considers that the benchmark is not representative of the market or economic reality that it is intended to measure or that the representativeness of the benchmark is at risk, or

(b)a written notice stating that it considers that the representativeness of the benchmark is not at risk.

4.Where the administrator's assessment was made under Article 22A(7)(b) (contributor intends to cease contributing input data), the FCA must make its assessment under paragraph 1 or 2, and give the notice under paragraph 3, before the end of the period of 28 days beginning with the first working day after the day on which the administrator was notified under Article 22A(6).]

Textual Amendments

Article 23U.K.Mandatory contribution to a critical benchmark

F1641.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1642.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1643.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1644.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F1655A.If a supervised contributor or supervised third country contributor gives a notification under Article 22A(6), the contributor may not cease contributing input data before the date specified in the notification as the date on which it intends to cease contributing, unless the FCA gives it written permission to do so.

5B.Paragraph 5A does not require a contributor to trade or commit to trade.]

6.[F166If the FCA gives the administrator of a critical benchmark a notice under Article 21(3B)(a) or Article 22B(3)(a) (benchmark unrepresentative or representativeness at risk), it has the power to—]

(a)require supervised entities [F167and supervised third country entities] selected in accordance with paragraph 7 of this Article, including entities that are not yet contributors to the relevant critical benchmark, to contribute input data to the administrator in accordance with the administrator's methodology, the code of conduct referred to in Article 15 and other rules. Such requirement shall be in place for an appropriate period of time not exceeding 12 months F168...

(b)extend the period of mandatory contribution by an appropriate period of time not exceeding 12 months, following a review under paragraph 9 of any measures adopted pursuant to point (a) of this paragraph;

(c)determine the form in which, and the time by which, any input data is to be contributed without imposing an obligation on supervised entities [F169and supervised third country entities] to either trade or commit to trade;

(d)require the administrator to change the methodology, the code of conduct referred to in Article 15 or other rules of the critical benchmark.

[F79The maximum period of mandatory contribution under points (a) and (b) of the first subparagraph shall not exceed five years.]

[F1706A.The FCA may only exercise the powers under paragraph 6 so far as it considers it appropriate to do so for the purpose of maintaining, restoring or improving the representativeness of the benchmark.]

7.For the purposes of paragraph 6, supervised entities [F171and supervised third country entities] that are to be required to contribute input data shall be selected by the [F172FCA] on the basis of the size of the F173... entity's actual and potential participation in the market that the benchmark intends to measure.

F1748.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9.By the end of the period referred to in point (a) of the first subparagraph of paragraph 6, the [F175FCA] shall review the measures adopted under paragraph 6. It shall revoke any of them if it considers that:

(a)the contributors are likely to continue contributing input data for at least one year if the measure were revoked, which shall be evidenced by at least:

(i)

a written commitment by the contributors to the administrator and the [F176FCA] to continue contributing input data to the critical benchmark for at least one year if the measure were revoked;

(ii)

a written report by the administrator to the [F176FCA] providing evidence for its assessment that the critical benchmark's continued viability can be assured once mandatory contribution has been revoked;

(b)the provision of the benchmark is able to continue once the contributors mandated to contribute input data have ceased contributing;

(c)an acceptable substitute benchmark is available and users of the critical benchmark can switch to this substitute at minimal costs which shall be evidenced by at least a written report by the administrator detailing the means of transition to a substitute benchmark and the ability and costs to users of transitioning to this benchmark; or

(d)no appropriate alternative contributors can be identified and the cessation of contributions from the [F177contributors mandated to contribute input data] would weaken the benchmark to such an extent to require the cessation of the benchmark.

[F1789A.In the case of an Article 23A benchmark, any measures adopted under paragraph 6 in relation to the benchmark are to be treated as being revoked when the designation of the benchmark under Article 23A takes effect.]

[F7910.In the event that a critical benchmark is to be ceased to be provided, each supervised contributor [F179and supervised third country contributor] to that benchmark shall contribute input data for a period of time determined by the [F180FCA], but not [F181extending beyond the end of the period of five years beginning with the day on which the administrator notified the FCA of its intention to cease providing the benchmark under Article 21(1)].]

11.The administrator shall notify the [F182FCA] in the event that any contributors breach the requirements set out in paragraph 6 as soon as reasonably possible.

F18312.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

[F184 Article 23A U.K. Designation of certain critical benchmarks

1.If the FCA gives the administrator of a critical benchmark a notice under Article 21(3B)(a) or Article 22B(3)(a) (benchmark unrepresentative or representativeness at risk), the FCA must, before the end of the period of 21 days beginning with the day on which it gave the notice—

(a)consider whether it is appropriate for the FCA to designate the benchmark under this Article, and

(b)if it proposes to do so, inform the benchmark administrator by written notice.

2.The FCA may not designate a benchmark under this Article if it considers that it is, and is likely to continue to be, the case that—

(a)the representativeness of the benchmark can reasonably be restored and maintained by the administrator or by the FCA exercising its powers under Article 23(6), and

(b)there are good reasons to restore and maintain its representativeness.

3.A notice under paragraph 1(b) must—

(a)explain when the FCA proposes that the designation of the benchmark should take effect,

(b)give reasons for the FCA's proposed decision, and

(c)state that the administrator may make written representations to the FCA during the period of 14 days beginning with the day on which the notice is given.

4.If, after considering any representations made in accordance with paragraph 3(c), the FCA decides to designate the benchmark under this Article, it must give the administrator a written notice of its decision.

5.A notice under paragraph 4 must—

(a)state when the designation of the benchmark takes effect,

(b)give reasons for the FCA's decision,

(c)explain how the FCA has taken account of the relevant policy statement (see Article 23F),

(d)state that the prohibition on use of the benchmark under Article 23B will take effect when the designation of the benchmark takes effect, unless the FCA exercises its powers under Article 23B(2) or 23C,

(e)inform the administrator of its right to refer the decision to the Upper Tribunal and of the procedure for doing so, and

(f)provide any further information that the FCA considers appropriate for assisting supervised entities to understand the effects of the designation of the benchmark.

6.The FCA may, before a designation under this Article takes effect, decide to change when it takes effect to a later time.

7.If it decides to make such a change—

(a)the FCA must give the benchmark administrator a written notice of its decision, and

(b)the notice must satisfy the requirements in paragraph 5(a) to (d) and (f).

8.The FCA may withdraw a designation of a benchmark under this Article if—

(a)the designation has not taken effect,

(b)paragraph 1 applies again in relation to the benchmark, and

(c)the FCA designates the benchmark again under this Article with effect from an earlier date.

9.If the FCA decides to withdraw the designation of a benchmark under paragraph 8—

(a)the FCA must include notice of the withdrawal in the notice under paragraph 4 of the further designation of the benchmark, and

(b)the notice must satisfy the requirements in paragraph 5(b), (c) and (f) in relation to the decision to withdraw.

10.A notice under paragraph 4 or 7—

(a)may identify when the designation takes effect in any manner that the FCA considers appropriate, including by specifying a day or by describing a day by reference to the process for a reference to the Upper Tribunal or another process or event, and

(b)must be published by the FCA—

(i)before the day on which the notice provides for the designation to take effect, and

(ii)in the manner that appears to the FCA to be best calculated to bring it to the attention of the public.

11.The FCA—

(a)must give a copy of a notice under this Article to the Treasury before publishing it, and

(b)may charge a reasonable fee for providing a person with a copy of a notice under this Article.

12.If the FCA decides to designate a benchmark under this Article and gives the administrator a notice under paragraph 4, the benchmark administrator may refer the matter to the Upper Tribunal.

13.Part 9 of FSMA (hearings and appeals) applies in relation to references to the Upper Tribunal made under this Article as it applies in relation to references made to that Tribunal under that Act.

14.In this Regulation, references to an “Article 23A benchmark” are to a benchmark in relation to which a designation under this Article has effect.]

Textual Amendments

[F185 Article 23B U.K. Prohibition on use of Article 23A benchmark

1.Supervised entities must not use an Article 23A benchmark, except where permitted to do so under paragraph 2 or Article 23C.

2.The FCA may, by publishing a notice before the day on which the designation of the benchmark under Article 23A takes effect, provide that the prohibition in paragraph 1 does not take effect until a date specified in the notice.

3.The date specified in a notice under paragraph 2 must fall before the end of the period of four months beginning with the day on which the designation of the benchmark under Article 23A takes effect.

4.A notice published under this Article must be published in the way appearing to the FCA to be best calculated to bring it to the attention of—

(a)supervised entities, and

(b)the public.

5.The FCA may charge a reasonable fee for providing a person with a copy of a notice published under this Article.]

Textual Amendments

[F185 Article 23C U.K. Exception from the prohibition for legacy use of Article 23A benchmark

1.This Article applies to an Article 23A benchmark.

2.The FCA may, by publishing a notice, permit some or all legacy use of the benchmark by supervised entities.

3.The FCA may, by publishing a notice, alter or withdraw a permission under paragraph 2.

4.The FCA may only exercise a power under paragraph 2 or 3 if it considers it desirable to do so in order to advance either or both of the following—

(a)its consumer protection objective (see section 1C of FSMA);

(b)its integrity objective (see section 1D of that Act).

5.In exercising a power under paragraph 2 or 3 in relation to a benchmark that is used outside the United Kingdom, the FCA may, among other things, have regard to the likely effect outside the United Kingdom of the exercise of the power.

6.A notice under this Article may—

(a)make provision by reference to any aspect of the legacy use of the benchmark, including the persons involved in the use;

(b)provide that the permission has effect only during a period specified in the notice;

(c)make different provision for different purposes;

(d)make such transitional provision as the FCA considers appropriate.

7.A notice under this Article must—

(a)give reasons for the permission, or the alteration or withdrawal of permission,

(b)specify when the permission, or the alteration or withdrawal, is to take effect,

(c)explain how the FCA has taken account of the relevant policy statement (see Article 23F), and

(d)provide any further information that the FCA considers appropriate for assisting supervised entities to understand the permission or the alteration or withdrawal of permission.

8.A notice under this Article must be published in the manner that appears to the FCA to be best calculated to bring it to the attention of—

(a)supervised entities, and

(b)the public.

9.The FCA—

(a)must give a copy of a notice under this Article to the Treasury before publishing it, and

(b)may charge a reasonable fee for providing a person with a copy of a notice published under this Article.

10.In this Article—

(a)references to legacy use of a benchmark are to use that is not new use, and

(b)“new use” has the same meaning, in connection with the prohibition under Article 23B, as it has in connection with a prohibition under Article 21A (see Article 21A(2) and (9)).]

Textual Amendments

[F186 Article 23D U.K. Orderly cessation of Article 23A benchmarks

1.This Article applies to an Article 23A benchmark.

2.The FCA may by written notice impose requirements on the benchmark administrator relating to any of the following—

(a)the way in which the benchmark is determined, including the input data,

(b)rules of the benchmark, and

(c)where the benchmark is based on submissions by contributors, the code of conduct referred to in Article 15.

3.The FCA may only exercise the powers under paragraph 2 if—

(a)it considers it appropriate to do so having regard to the desirability of securing that the cessation of the benchmark takes place in an orderly fashion, and

(b)it considers it desirable to do so in order to advance either or both of the following—

(i)its consumer protection objective (see section 1C of FSMA);

(ii)its integrity objective (see section 1D of that Act).

4.In exercising a power under paragraph 2 in relation to a benchmark that is used outside the United Kingdom, the FCA may, among other things, have regard to the likely effect outside the United Kingdom of the exercise of the power.

5.The powers under paragraph 2—

(a)may be exercised so as to confer a discretion on the administrator,

(b)include power to specify when a requirement must be satisfied, and

(c)include power to vary or withdraw a requirement from time to time.

6.The powers under paragraph 2 are not limited by the market or economic reality that was intended to be measured by the benchmark immediately before it became an Article 23A benchmark (as defined in the benchmark statement referred to in Article 27), although the FCA may have regard to that when exercising those powers.

7.A notice under paragraph 2 must—

(a)explain the exercise of the power,

(b)give reasons for the decision to exercise the power,

(c)specify when the requirement (or variation or withdrawal of a requirement) is to take effect,

(d)explain how the FCA has taken account of the relevant policy statement (see Article 23F), and

(e)provide any further information that the FCA considers appropriate for assisting supervised entities to understand the effects of the exercise of the power.

8.The benchmark administrator may not change anything described in paragraph 2 unless—

(a)the FCA requires it to do so, or gives it a discretion to do so, under paragraph 2, or

(b)the FCA has given a written notice permitting it to do so and has not given a written notice withdrawing the permission.

9.A notice under paragraph 2 or 8(b) must be published as soon as reasonably practicable in the way appearing to the FCA to be best calculated to bring it to the attention of the public.

10.The FCA—

(a)must give a copy of a notice under paragraph 2 or 8(b) to the Treasury before publishing it, and

(b)may charge a reasonable fee for providing a person with a copy of a notice under paragraph 2 or 8(b).

11.In relation to an Article 23A benchmark, this Regulation applies with the modifications specified in or under Annex 4 (and see also Articles 22A(1)(b) and 23(9A)).]

Textual Amendments

[F187 Article 23E U.K. Review of exercise of powers under Article 23D

1.Where the FCA has exercised a power under Article 23D(2) in relation to a benchmark, the FCA must, for each review period—

(a)review its exercise of its powers under Article 23D(2) in relation to that benchmark during the period, and

(b)publish a report setting out the outcome of the review.

2.For the purposes of paragraph 1, the review periods are—

(a)the period of two years beginning with the day on which the first notice under Article 23D(2) relating to the benchmark is published, and

(b)each subsequent period of two years, excluding the period in which the benchmark ceases to be provided and subsequent periods.

3.The FCA must publish a report under paragraph 1(b) as soon as reasonably practicable after the end of the review period.

4.Where the FCA, having exercised a power under Article 23D(2) in relation to a benchmark, exercises a power under Article 23D(2) again in relation to the benchmark, it must—

(a)carry out a review of the most recent previous exercise of that power in relation to that benchmark, and

(b)publish a report setting out the outcome of the review.

5.The FCA must take the action described in paragraph 4—

(a)before its subsequent exercise of a power under Article 23D(2), where that is reasonably practicable, or

(b)otherwise, as soon as reasonably practicable afterwards.

6.The FCA may fulfil the duty in paragraph 1 and satisfy paragraph 4 by means of the same review and report.

7.In a review under this Article, the FCA must—

(a)consider whether the exercise of the power has advanced, or is likely to advance, the objectives mentioned in Article 23D(3)(b), and

(b)have regard to the policy statement with respect to the exercise of its powers under Article 23D (see Article 23F).

8.A report published under this Article must be published in the way appearing to the FCA to be best calculated to bring it to the attention of the public.

9.The FCA—

(a)must give a copy of a report of a review under this Article to the Treasury before publishing it, and

(b)may charge a reasonable fee for providing a person with a copy of a report published in accordance with this Article.]

Textual Amendments

[F188 Article 23F U.K. Policy statements

1.The FCA must prepare and publish a statement of its policy with respect to—

(a)the exercise of its power under Article 21A,

(b)the designation of benchmarks under Article 23A,

(c)the exercise of its powers under Article 23C, and

(d)the exercise of its powers under Article 23D.

2.The FCA—

(a)may alter or replace a statement published under this Article, and

(b)if it does so, must publish the altered or replacement statement.

3.A statement published under this Article must be published in the way appearing to the FCA to be best calculated to bring it to the attention of the public.

4.The FCA—

(a)must give a copy of a statement under this Article to the Treasury before publishing it, and

(b)may charge a reasonable fee for providing a person with a copy of a statement published under this Article.

5.In making a decision under Article 23A, or exercising its powers under any of Article 21A, 23C or 23D, the FCA must have regard to any relevant statement of policy published under this Article and in force at the time.]

Textual Amendments

[F189 Article 23FA U.K. References to Article 23A benchmarks

1.A reference to a benchmark in a contract or other arrangement is, at any time when the benchmark is an Article 23A benchmark, to be treated for all purposes as including the benchmark as it exists—

(a)when it is an Article 23A benchmark,

(b)when the FCA has exercised a power under Article 23D(2) in respect of the benchmark, and

(c)when the benchmark administrator has exercised a discretion or permission conferred on it by the FCA under Article 23D in respect of the benchmark,

whether or not the benchmark is representative of the Article 27 market or economic reality at those times.

2.If a contract or other arrangement describes a benchmark or other figure (rather than naming a benchmark), paragraph 1 applies as if the description were a reference to—

(a)each benchmark that falls within the description, and

(b)each Article 23A benchmark that fell, or was being treated by the parties to the contract or arrangement as falling, within the description immediately before it became an Article 23A benchmark.

3.For the purposes of paragraph 2(b), where the description is of a benchmark or other figure that measures, or is intended to measure, a market or economic reality, a benchmark fell within the description immediately before it became an Article 23A benchmark if its Article 27 market or economic reality fell within the description.

4.Paragraphs 1 and 2 apply—

(a)to any contract or other arrangement, whenever it was formed, and

(b)to any reference to a benchmark or other figure, however expressed.

5.Where paragraph 1 applies in a case in which the reference formed part of the contract or other arrangement—

(a)immediately before this Article came into force, or

(b)immediately before the benchmark became an Article 23A benchmark,

the contract or arrangement is to be treated for all purposes as having always provided for the reference to have the meaning provided for by paragraph 1 (and, where relevant, paragraph 2) when the benchmark is an Article 23A benchmark.

6.Nothing in this Article is to be taken to create any right, obligation or liability of a party to a contract or other arrangement or of another person—

(a)in relation to an act or omission that is relevant to the formation or variation of the contract or arrangement (such as, among other things, an act or omission in connection with the making of a representation or the giving of advice), where the formation or variation took place before the benchmark in question became an Article 23A benchmark, or

(b)in relation to the operation of the contract or arrangement before the benchmark in question became an Article 23A benchmark.

7.Nothing in this Article is to be taken to extinguish, or otherwise affect, any cause of action that arose in relation to a contract or arrangement before the benchmark in question became an Article 23A benchmark, except that the effect of this Article is to be taken into account when determining any loss or damage incurred.

8.This Article has effect subject to Article 23FB and any regulations made under that Article.

9.For the purposes of this Article and Article 23FB, a contract or other arrangement refers to a benchmark if it refers to an index, whether or not the index is used as a benchmark for the purposes of the contract or arrangement (and references to a benchmark are to be interpreted accordingly).

10.In this Article and Article 23FB—

(a)“arrangement” means a legally binding arrangement between two or more parties;

(b)references to a contract or an arrangement—

(i)are to a contract or arrangement entered into by or on behalf of any person (including the Crown), and

(ii)include any document referred to in, or otherwise forming part of, a contract or arrangement;

(c)“Article 27 market or economic reality”, in relation to an Article 23A benchmark, means the market or economic reality that was intended to be measured by the benchmark immediately before it became an Article 23A benchmark (as defined in the benchmark statement referred to in Article 27).]

Textual Amendments

[F189 Article 23FB U.K. References to Article 23A benchmarks: further provision

1.Article 23FA(1) and (2) do not apply to the extent that the contract or arrangement provides expressly that those paragraphs do not apply.

2.Article 23FA(1) does not apply to a reference to a benchmark to which it would otherwise apply (taking account of Article 23FA(2), where relevant) to the extent that the contract or arrangement provides expressly that the reference does not include the benchmark as it exists at the times described in Article 23FA(1).

3.Article 23FA(1) to (5) do not prevent or otherwise affect the operation of fallback provision, either before or after the benchmark in question became an Article 23A benchmark, subject to paragraph 5 and any regulations made under paragraph 6.

4.“Fallback provision” means express provision for the contract or arrangement—

(a)to operate, or to be varied so as to operate, by reference to something other than the benchmark in question (temporarily or permanently), or

(b)to terminate,

either on a particular date or in particular circumstances (such as, among other things, circumstances relating to the benchmark’s representativeness, its designation under Article 23A or the way in which it is determined).

5.To the extent that fallback provision provides that it is triggered when the benchmark in question ceases to exist or to be published or otherwise made available (temporarily or permanently), Article 23FA(1) to (5) prevent it from being triggered by reason of the benchmark’s designation under Article 23A or the exercise of a power, discretion or permission under Article 23D.

6.The Treasury may by regulations provide—

(a)that Article 23FA(1) and (2) do not apply—

(i)to a specified benchmark or to benchmarks of a specified description;

(ii)to contracts or other arrangements of a specified description;

(b)that references in this Article to “fallback provision” include (in addition to the provision described in paragraph 4) express provision of a specified description;

(c)that fallback provision is not triggered in cases of a specified description relating to a benchmark’s designation under Article 23A (in addition to the cases described in paragraph 5).

In this paragraph “specified” means specified in the regulations.

7.Regulations under paragraph 6 may make provision that applies generally or only for specific purposes (for example, provision that only applies in relation to a particular benchmark, a particular description of contracts or other arrangements or a particular type of fallback provision).]

Textual Amendments

[F190 Article 23FC U.K. Liability of administrator of Article 23A benchmark

1.An administrator of an Article 23A benchmark, and its officers and employees, are not liable in damages—

(a)for action or inaction required by a notice under Article 23D(2) or by Article 23D(8), or

(b)for publishing the benchmark as it exists as a result of such action or inaction.

2.Paragraph 1 does not remove liability in respect of loss or damage arising from the exercise of a discretion conferred on the administrator under Article 23D(2) or as part of a permission given under Article 23D(8)(b).

3.Paragraph 1(b) does not remove liability in respect of loss or damage arising from the exercise of any other discretion of the administrator as to the time or manner of publication.]

Textual Amendments

[F191 Article 23G U.K. Critical benchmarks provided for different currencies etc

1.This Article makes provision about critical benchmarks provided for different currencies, maturities or tenors (“umbrella benchmarks”).

2.References in this Article to a “version” of an umbrella benchmark are to the benchmark as provided for a particular currency, maturity or tenor or, where the benchmark is provided for a combination of two or more of those factors, the benchmark as provided for each combination.

3.Articles 11(4), (4A) and (4B), 21, 21A, 22A, 22B, 23 [F192, 23A to 23E and 23FA to 23FC] and Annex 4 apply in relation to an umbrella benchmark as if each version of the umbrella benchmark were—

(a)a separate critical benchmark, and

(b)intended to measure the market or economic reality defined in the benchmark statement for the umbrella benchmark (whether defined there separately for different versions of the benchmark or for the umbrella benchmark taken as a whole),

subject to the modifications in paragraph 4.

4.The modifications are as follows—

(a)the reference in point (c) of Article 21(3) to the benchmark ceasing to be critical is a reference to the umbrella benchmark ceasing to be critical;

(b)the reference in Article 22A(1)(a) to a benchmark being based on particular submissions is a reference to the umbrella benchmark, taken as a whole but disregarding any versions that are Article 23A benchmarks, being based on such submissions;

(c)the benchmark administrator's duty under Article 22A(2) is a duty to submit an assessment dealing separately with each version of the umbrella benchmark;

(d)the FCA's duty under Article 23E(1) is a duty to carry out a review of its exercise of its powers under Article 23D(2) in relation to each version of the umbrella benchmark (and the first review period begins when the first notice under Article 23D(2) relating to any version of the benchmark is published).

5.Notices given under the provisions listed in paragraph 3 may relate to one version, several versions or all versions of the umbrella benchmark.

6.The FCA may exercise its functions under Articles 21, 21A, 22A, 22B, 23 and 23A to 23E and paragraph 3 of Annex 4 in different ways in relation to different versions of the umbrella benchmark.

7.Nothing in this Article is to be interpreted as implying anything about the operation, in relation to umbrella benchmarks, of provisions of this Regulation not mentioned in this Article.

8.The Treasury may by regulations make provision about the operation of this Regulation in relation to umbrella benchmarks, including provision amending or revoking provisions of this Article (other than this paragraph).]

Textual Amendments

CHAPTER 5U.K.Significant benchmarks

Article 24U.K.Significant benchmarks

1.A benchmark which [F193is not a critical benchmark] is significant when:

(a)it is used directly or indirectly within a combination of benchmarks as a reference for financial instruments or financial contracts or for measuring the performance of investments funds having a total average value of at least EUR 50 billion on the basis of all the range of maturities or tenors of the benchmark, where applicable, over a period of six months; or

(b)it has no or very few appropriate market-led substitutes and, in the event that the benchmark ceases to be provided or is provided on the basis of input data no longer fully representative of the underlying market or economic reality or unreliable input data, there would be a significant and adverse impact on market integrity, financial stability, consumers, the real economy or the financing of households or businesses in [F194the United Kingdom].

2.The [F195FCA must:]

[F196(a)][F197review the value in point (a) of paragraph 1 (“the threshold”)] in the light of market, price and regulatory developments as well as the appropriateness of the classification of benchmarks with a total value of financial instruments, financial contracts or investment funds referencing them that is close to that threshold F198... [F199; and

(b)provide a written report to the Treasury setting out the results of the review and making a recommendation as to whether the threshold should be amended.]

[F2002A.The FCA must conduct the review and provide the report to the Treasury:

(a)within the period of two years beginning with IP completion day; and

(b)thereafter, at intervals of at least every two years, with each interval beginning with the date on which the last report was provided.

2B.The Treasury may by regulations amend the threshold in point (a) of paragraph 1 having regard to:

(a)the matters referred to in point (a) of paragraph 2; and

(b)any report prepared by the FCA under paragraph 2.]

3.An administrator shall immediately notify [F201the FCA] when its significant benchmark falls below the threshold mentioned in point (a) of paragraph 1.

Textual Amendments

Article 25U.K.Exemptions from specific requirements for significant benchmarks

1.An administrator may choose not to apply Article 4(2), points (c), (d) and (e) of Article 4(7), point (b) of Article 11(3) or Article 15(2) with respect to its significant benchmark where that administrator considers that the application of one or more of those provisions would be disproportionate taking into account the nature or impact of the benchmark or the size of the administrator.

2.In the event that an administrator chooses not to apply one or more of the provisions referred to in paragraph 1, it shall immediately notify [F202the FCA] and provide it with all relevant information confirming the administrator's assessment that the application of one or more of those provisions would be disproportionate taking into account the nature or impact of the benchmarks or the size of the administrator.

3.[F203The FCA] may decide that the administrator of a significant benchmark is nevertheless to apply one or more of the requirements laid down in Article 4(2), points (c), (d) and (e) of Article 4(7), point (b) of Article 11(3) and Article 15(2) if it considers that it would be appropriate taking into account the nature or the impact of the benchmarks or the size of the administrator. In its assessment, [F204the FCA] shall, based on the information provided by the administrator, take into account the following criteria:

(a)the vulnerability of the benchmark to manipulation;

(b)the nature of the input data;

(c)the level of conflicts of interest;

(d)the degree of discretion of the administrator;

(e)the impact of the benchmark on markets;

(f)the nature, scale and complexity of the provision of the benchmark;

(g)the importance of the benchmark to financial stability;

(h)the value of financial instruments, financial contracts or investment funds that reference the benchmark;

(i)the administrator's size, organisational form or structure.

4.Within 30 days of receipt of a notification from an administrator under paragraph 2, [F205the FCA] shall notify that administrator of its decision to apply an additional requirement pursuant to paragraph 3. In the event that the notification to [F205the FCA] is made during the course of an authorisation or registration procedure, the deadlines set out in Article 34 shall apply.

5.When exercising its supervisory powers in accordance with Article 41, [F206the FCA] shall regularly review whether its assessment pursuant to paragraph 3 of this Article is still valid.

6.If [F207the FCA] finds, on reasonable grounds, that the information submitted to it pursuant to paragraph 2 of this Article is incomplete or that supplementary information is needed, the 30-day time limit referred to in paragraph 4 of this Article shall apply only from the date on which such complementary information is provided by the administrator, unless the deadlines of Article 34 apply pursuant to paragraph 4 of this Article.

7.Where an administrator of a significant benchmark does not comply with one or more of the requirements laid down in Article 4(2), points (c), (d) and (e) of Article 4(7), point (b) of Article 11(3) and Article 15(2), it shall publish and maintain a compliance statement that clearly states why it is appropriate for that administrator not to comply with those provisions.

8.[F208The FCA may make] technical standards to develop a template for the compliance statement referred to in paragraph 7.

F209...

F209...

9.[F210The FCA may make] technical standards to specify further the criteria referred to in paragraph 3.

F211...

F211...

Textual Amendments

CHAPTER 6U.K.Non-significant benchmarks

Article 26U.K.Non-significant benchmarks

1.An administrator may choose not to apply Articles 4(2), points (c), (d) and (e) of Article 4(7), Articles 4(8), 5(2), 5(3), 5(4), 6(1), 6(3), 6(5), 7(2), point (b) of Article 11(1), points (b) and (c) of Article 11(2), and Articles 11(3), 13(2), 14(2), 15(2), 16(2) and (3) with respect to its non-significant benchmarks.

2.An administrator shall immediately notify [F212the FCA] when the administrator's non-significant benchmark exceeds the threshold mentioned in point (a) of Article 24(1). In that case, it shall comply with the requirements applicable to significant benchmarks within three months.

3.Where an administrator of a non-significant benchmark chooses not to apply one or more of the provisions referred to in paragraph 1, it shall publish and maintain a compliance statement which shall clearly state why it is appropriate for that administrator not to comply with those provisions. The administrator shall provide the compliance statement to [F213the FCA].

4.The [F214FCA] shall review the compliance statement referred to in paragraph 3 of this Article. The [F215FCA] may also request additional information from the administrator in respect of its non-significant benchmarks in accordance with [F216any United Kingdom legislation which was relied on by the United Kingdom before IP completion day to implement Article 41 of the EU Benchmarks Regulation] and may require changes to ensure compliance with this Regulation.

5.[F217The FCA may make] technical standards to develop a template for the compliance statement referred to in paragraph 3.

F218...

F218...

Textual Amendments

[F219CHAPTER 7U.K.COMPLIANCE WITH REQUIREMENTS

Article 26A U.K. Compliance with requirements

Supervised entities and supervised third country entities must comply with prohibitions and other requirements imposed on them by the FCA under this Regulation.]

Textual Amendments

TITLE IVU.K.TRANSPARENCY AND CONSUMER PROTECTION

Article 27U.K.Benchmark statement

1.Within two weeks of the inclusion of an administrator in the [F220FCA register], the administrator shall publish, by means that ensure fair and easy access, a benchmark statement for each benchmark or, where applicable, for each family of benchmarks, that may be used in the [F221United Kingdom] in accordance with Article 29.

Where that administrator begins providing a new benchmark or family of benchmarks that may be used in the [F221United Kingdom] in accordance with Article 29, the administrator shall publish, within two weeks and by means that ensure a fair and easy access, a benchmark statement for each new benchmark or, where applicable, family of benchmarks.

The administrator shall review and, where necessary, update the benchmark statement for each benchmark or family of benchmarks in the event of any changes to the information to be provided under this Article and at least every two years.

The benchmark statement shall:

(a)clearly and unambiguously define the market or economic reality measured by the benchmark and the circumstances in which such measurement may become unreliable;

(b)lay down technical specifications that clearly and unambiguously identify the elements of the calculation of the benchmark in relation to which discretion may be exercised, the criteria applicable to the exercise of such discretion and the position of the persons that can exercise discretion, and how such discretion may be subsequently evaluated;

(c)provide notice of the possibility that factors, including external factors beyond the control of the administrator, may necessitate changes to, or the cessation of, the benchmark; and

(d)advise users that changes to, or the cessation of, the benchmark may have an impact upon the financial contracts and financial instruments that reference the benchmark or the measurement of the performance of investment funds.

2.A benchmark statement shall contain at least:

(a)the definitions for all key terms relating to the benchmark;

(b)the rationale for adopting the benchmark methodology and procedures for the review and approval of the methodology;

(c)the criteria and procedures used to determine the benchmark, including a description of the input data, the priority given to different types of input data, the minimum data needed to determine a benchmark, the use of any models or methods of extrapolation and any procedure for rebalancing the constituents of a benchmark's index;

(d)the controls and rules that govern any exercise of judgement or discretion by the administrator or any contributors, to ensure consistency in the use of such judgement or discretion;

(e)the procedures which govern the determination of the benchmark in periods of stress or periods where transaction data sources may be insufficient, inaccurate or unreliable and the potential limitations of the benchmark in such periods;

(f)the procedures for dealing with errors in input data or in the determination of the benchmark, including when a re-determination of the benchmark is required; and

(g)the identification of potential limitations of the benchmark, including its operation in illiquid or fragmented markets and the possible concentration of inputs.

[F302a.By 30 April 2020, for each of the requirements referred to in paragraph 2, the benchmark statement shall contain an explanation of how ESG factors are reflected in each benchmark or family of benchmarks provided and published. For those benchmarks or families of benchmarks that do not pursue ESG objectives, it shall be sufficient for benchmark administrators to clearly state in the benchmark statement that they do not pursue such objectives.

Where no [F222UK Climate Transition Benchmark or UK Paris-aligned Benchmark] is available in the portfolio of that individual benchmark administrator, or the individual benchmark administrator has no benchmarks that pursue ESG objectives or take into account ESG factors, this shall be stated in the benchmark statements of all benchmarks provided by that administrator. For significant equity and bond benchmarks, as well as for [F223UK Climate Transition Benchmarks and UK Paris-aligned Benchmarks], benchmark administrators shall disclose in their benchmark statements details on whether or not and to what extent a degree of overall alignment with the target of reducing carbon emissions or the attainment of the objectives of the Paris Agreement is ensured F224...

F224...

2b.[F225The Treasury may make regulations] to supplement this Regulation by further specifying the information to be provided in the benchmark statement pursuant to paragraph 2a of this Article, as well as the standard format to be used for references to ESG factors to enable market participants to make well-informed choices and to ensure the technical feasibility of compliance with that paragraph.]

3.[F226The FCA may make] technical standards to specify further the contents of a benchmark statement and the cases in which an update of such statement is required.

[F227The FCA] shall distinguish between the different types of benchmarks and sectors as set out in this Regulation and shall take into account the principle of proportionality.

F228...

F228...

Textual Amendments

Article 28U.K.Changes to and cessation of a benchmark

1.An administrator shall publishF229... [F230a robust procedure] concerning the actions to be taken by the administrator in the event of changes to or the cessation of a benchmark which may be used in the [F231United Kingdom] in accordance with Article 29(1). The procedure may be drafted, where applicable, for families of benchmarks F232....

[F2331A.The procedure described in paragraph 1—

(a)must be published with the benchmark statement for the benchmark when that statement is published in accordance with the first or second subparagraph of Article 27(1), and

(b)must be updated and published whenever a material change occurs.

1B.In the case of a critical benchmark—

(a)on the day on which a procedure described in paragraph 1 is published in accordance with paragraph 1A(a), the administrator must give the FCA an assessment of the matters described in paragraph 1C,

(b)the FCA must, before the end of the consideration period, consider whether a procedure published in accordance with paragraph 1A(a) satisfies paragraph 1,

(c)before publishing an update of a procedure described in paragraph 1 (whether in accordance with paragraph 1A(b) or otherwise), an administrator must give the update to the FCA, together with an assessment of the matters described in paragraph 1C,

(d)where the FCA is given an update of a procedure described in paragraph 1 by an administrator, it must, before the end of the consideration period, consider whether the update satisfies paragraph 1, and

(e)an administrator must not publish an update of a procedure described in paragraph 1 unless—

(i)the FCA has given a written notice to the administrator confirming that the update satisfies paragraph 1, or

(ii)the consideration period has expired without the FCA giving a written notice to the administrator stating that the update does not satisfy that paragraph.

1C.An assessment provided by an administrator for the purposes of paragraph 1B(a) or (c) must assess the following matters—

(a)the nature and extent of the current use of the benchmark,

(b)the availability of suitable alternatives to the benchmark, and

(c)how prepared users of the benchmark are for changes to, or the cessation of, the benchmark.

1D.For the purposes of paragraph 1B, “the consideration period”, in relation to a procedure or an update of a procedure, means the period of 60 days beginning with the day on which the procedure is published or the update of the procedure is given to the FCA (as appropriate) (“the relevant day”), subject to any extension under paragraph 1E.

1E.The FCA may extend the consideration period by giving a written notice to the administrator before its expiry but may not extend the period beyond the end of the period of six months beginning with the relevant day.]

2.Supervised entities other than an administrator as referred to in paragraph 1 that use a benchmark shall produce and maintain robust written plans setting out the actions that they would take in the event that a benchmark materially changes or ceases to be provided. Where feasible and appropriate, such plans shall nominate one or several alternative benchmarks that could be referenced to substitute the benchmarks no longer provided, indicating why such benchmarks would be suitable alternatives. The supervised entities shall, upon request, provide the [F234FCA] with those plans and any updates and shall reflect them in the contractual relationship with clients.

Textual Amendments

TITLE VU.K.USE OF BENCHMARKS IN THE [F235UNITED KINGDOM]

Article 29U.K.Use of a benchmark

1.A supervised entity may use a benchmark or a combination of benchmarks in the [F236United Kingdom] if the [F237benchmark:

(a)is on the FCA register; or

(b)is provided by an administrator who is on the FCA register and located in the United Kingdom.]

[F2381A.Paragraph 1 does not enable a supervised entity to use a benchmark in the United Kingdom in breach of a prohibition under Article 21A or 23B.

1B.The use of a benchmark by a supervised entity for a financial contract, financial instrument or investment fund in breach of a prohibition under Article 21A or 23B does not affect the validity or enforceability of a contract or other arrangement.]

2.Where the object of a prospectus to be published [F239in accordance with rules made by the FCA under section 84 or 248 of FSMA, as those rules have effect on IP completion day] is transferable securities or other investment products that reference a benchmark, the issuer, offeror, or person asking for admission to trade on a regulated market shall ensure that the prospectus also includes clear and prominent information stating whether the benchmark is provided by an administrator included in the [F240FCA register].

Textual Amendments

Article 30U.K.Equivalence

1.In order for a benchmark or a combination of benchmarks provided by an administrator located in a third country to be used in the [F241United Kingdom] in accordance with Article 29(1), the benchmark and the administrator shall be included in the [F242FCA register]. The following conditions shall be complied with in order to be included in the register:

[F243(a)either:

(i)the Treasury have made regulations in accordance with paragraph 2 or 3 of this Article; or

(ii)the European Commission has adopted a decision before IP completion day in accordance with paragraph 2 or 3 of Article 30 of the EU Benchmarks Regulation;]

(b)the administrator is authorised or registered, and is subject to supervision, in the third country in question;

(c)[F244the FCA] is notified by the administrator of its consent that its actual or prospective benchmarks may be used by supervised entities in the [F245United Kingdom], of the list of the benchmarks for which they have given consent to be used in the [F245United Kingdom] and of the competent authority responsible for its supervision in the third country; and

(d)the cooperation arrangements referred to in paragraph 4 of this Article are operational.

2.The [F246Treasury may by regulations specify] that the legal framework and supervisory practice of a third country ensures that:

(a)administrators authorised or registered in that third country comply with binding requirements which are equivalent to the requirements under this Regulation, in particular taking account of whether the legal framework and supervisory practice of a third country ensures compliance with the IOSCO principles for financial benchmarks or, where applicable, with the IOSCO principles for PRAs; and

(b)the binding requirements are subject to effective supervision and enforcement on an on-going basis in that third country.

F247...

3.Alternatively, the [F248Treasury may by regulations specify] that:

(a)binding requirements in a third country with respect to specific administrators or specific benchmarks or families of benchmarks are equivalent to the requirements under this Regulation, in particular taking account of whether the legal framework and supervisory practice of a third country ensures compliance with the IOSCO principles for financial benchmarks or, where applicable, with the IOSCO principles for PRAs; and

(b)such specific administrators or specific benchmarks or families of benchmarks are subject to effective supervision and enforcement on an on-going basis in that third country.

F249...

4.[F250The FCA] shall establish cooperation arrangements with the competent authorities of third countries whose legal framework and supervisory practices have been recognised as equivalent in accordance with paragraph 2 or 3 [F251of this Article (on or after IP completion day) or paragraph 2 or 3 of Article 30 of the EU Benchmarks Regulation (before IP completion day)]. Such arrangements shall specify at least:

(a)the mechanism for the exchange of information between [F252the FCA] and the competent authorities of third countries concerned, including access to all relevant information regarding the administrator authorised in that third country that is requested by [F252the FCA];

(b)the mechanism for prompt notification to [F253the FCA] where a third country competent authority deems that the administrator authorised in that third country that it is supervising is in breach of the conditions of its authorisation or other national legislation in the third country;

(c)the procedures concerning the coordination of supervisory activities, including on-site inspections.

[F2545.The FCA may make technical standards to determine the minimum content of the cooperation arrangements referred to in paragraph 4 so as to ensure that the FCA is able to exercise all its supervisory powers under this Regulation.]

Textual Amendments

Article 31U.K.Withdrawal of registration of an administrator located in a third country

1.[F255The FCA] shall withdraw the registration of an administrator located in a third country by removing that administrator from the [F256FCA register] where it has well-founded reasons, based on documented evidence, that the administrator:

(a)is acting in a manner which is clearly prejudicial to the interests of the users of its benchmarks or the orderly functioning of markets; or

(b)has seriously infringed the national legislation in the third country or other provisions applicable to it in the third country and on the basis of which the [F257Treasury have made regulations in accordance with Article 30(2) or (3) (on or after IP completion day) or the European Commission adopted an implementing decision in accordance with Article 30(2) or (3) of the EU Benchmarks Regulation (before IP completion day)].

2.[F258The FCA] shall take a decision under paragraph 1 only if the following conditions are fulfilled:

(a)[F259the FCA] has referred the matter to the competent authority of the third country and that competent authority has not taken the appropriate measures needed to protect investors and the orderly functioning of the markets in the [F260United Kingdom], or has failed to demonstrate that the administrator concerned complies with the requirements applicable to it in the third country;

(b)[F261the FCA] has informed the competent authority of the third country of its intention to withdraw the registration of the administrator, at least 30 days before the withdrawal.

3.[F262The FCA] shall publish its decision on its website.

Textual Amendments

Article 32U.K.Recognition of an administrator located in a third country

1.Until such time as [F263regulations are made in accordance with Article 30(2) or (3)], a benchmark provided by an administrator located in a third country may be used by supervised entities in the [F264United Kingdom] provided that the administrator acquires prior recognition by the [F265FCA] in accordance with this Article.

2.An administrator located in a third country intending to obtain prior recognition as referred to in paragraph 1 of this Article shall comply with the requirements established in this Regulation, excluding Article 11(4) and Articles 16, 20, 21 and 23. The administrator may fulfil that condition by applying the IOSCO principles for financial benchmarks or the IOSCO principles for PRAs, as applicable, provided that such application is equivalent to compliance with the requirements established in this Regulation, excluding Article 11(4), and Articles 16, 20, 21 and 23.

For the purposes of determining whether the condition referred to in the first subparagraph is fulfilled, and in order to assess compliance with the IOSCO principles for financial benchmarks or the IOSCO principles for PRAs, as applicable, the [F266FCA] may rely on an assessment by an independent external auditor or, where the administrator located in a third country is subject to supervision, on the certification provided by the competent authority of the third country where the administrator is located.

If, and to the extent that, an administrator is able to demonstrate that a benchmark it provides is a regulated-data benchmark or a commodity benchmark that is not based on submissions by contributors the majority of which are supervised entities, there shall be no obligation on the administrator to comply with requirements not applicable to the provision of regulated-data benchmarks and of commodity benchmarks as provided for in Article 17 and Article 19(1) respectively.

3.An administrator located in a third country intending to obtain prior recognition as referred to in paragraph 1 shall have a legal representative established in [F267the United Kingdom]. The legal representative shall be a natural or legal person located in the [F268United Kingdom], and which, expressly appointed by the administrator located in a third country, acts on behalf of such administrator vis-à-vis the authorities and any other person in the [F268United Kingdom] with regard to the administrator's obligations under this Regulation. The legal representative shall perform the oversight function relating to the provision of benchmarks performed by the administrator under this Regulation together with the administrator and, in that respect, shall be accountable to the [F269FCA].

F2704.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5.An administrator located in a third country intending to obtain prior recognition as referred to in paragraph 1 shall apply for recognition with the [F271FCA]. The applicant administrator shall provide all information necessary to [F272satisfy the FCA] that it has established, at the time of recognition, all the necessary arrangements to meet the requirements referred to in paragraph 2 and shall provide the list of its actual or prospective benchmarks which may be used in the [F273United Kingdom] and shall, where applicable, indicate the competent authority responsible for its supervision in the third country.

Within 90 working days of receipt of the application referred to in the first subparagraph of this paragraph, the [F274FCA] shall verify that the conditions laid down in paragraphs [F2752 and 3] are fulfilled.

If the [F276FCA] considers that the conditions laid down in paragraphs [F2772 and 3] are not fulfilled, it shall refuse the recognition request and set out the reasons for that refusal. In addition, no recognition shall be granted unless the following additional conditions are fulfilled:

(a)where an administrator located in a third country is subject to supervision, an appropriate cooperation arrangement is in place between the [F278FCA] and the competent authority of the third country where the administrator is located, in compliance with the [F279technical standards made] pursuant to Article 30(5), in order to ensure an efficient exchange of information that [F280allows the FCA] to carry out its duties in accordance with this Regulation;

(b)the effective exercise by the [F281FCA] of its supervisory functions under this Regulation is neither prevented by the laws, regulations or administrative provisions of the third country where the administrator is located, nor, where applicable, by limitations in the supervisory and investigatory powers of that third country's supervisory authority.

F2826.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F2827.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8.The [F283FCA] shall suspend or, where appropriate, withdraw the recognition granted in accordance with paragraph 5 if it has well-founded reasons, based on documented evidence, to consider that the administrator is acting in a manner which is clearly prejudicial to the interests of users of its benchmarks or the orderly functioning of markets or the administrator has seriously infringed the relevant requirements set out in this Regulation, or that the administrator made false statements or used any other irregular means to obtain the recognition.

9.[F284The FCA may make] technical standards to determine the form and content of the application referred to in paragraph 5 F285...

F286...

F286...

Textual Amendments

Article 33U.K.Endorsement of benchmarks provided in a third country

1.An administrator located in the [F287United Kingdom] and authorised or registered in accordance with Article 34, or any other supervised entity located in the [F287United Kingdom] with a clear and well-defined role within the control or accountability framework of a third country administrator, which is able to monitor effectively the provision of a benchmark, may apply to the [F288FCA] to endorse a benchmark or a family of benchmarks provided in a third country for their use in the [F287United Kingdom], provided that all of the following conditions are fulfilled:

(a)the endorsing administrator or other supervised entity has verified and is able to demonstrate on an on-going basis to [F289the FCA] that the provision of the benchmark or family of benchmarks to be endorsed fulfils, on a mandatory or on a voluntary basis, requirements which are at least as stringent as the requirements of this Regulation;

(b)the endorsing administrator or other supervised entity has the necessary expertise to monitor effectively the activity of the provision of a benchmark in a third country and to manage the associated risks;

(c)there is an objective reason to provide the benchmark or family of benchmarks in a third country and for said benchmark or family of benchmarks to be endorsed for their use in the [F290United Kingdom].

For the purpose of point (a), when assessing whether the provision of the benchmark or family of benchmarks to be endorsed fulfils requirements which are at least as stringent as the requirements of this Regulation, the [F291FCA] may take into account whether the compliance of the provision of the benchmark or family of benchmarks with the IOSCO principles for financial benchmarks or the IOSCO principles for PRAs, as applicable, would be equivalent to compliance with the requirements of this Regulation.

2.An administrator or other supervised entity that makes an application for endorsement as referred to in paragraph 1 shall provide all information necessary to satisfy the [F292FCA] that, at the time of application, all the conditions referred to in that paragraph are fulfilled.

3.Within 90 working days of receipt of the application for endorsement referred to in paragraph 1, the [F293FCA] shall examine the application and adopt a decision either to authorise the endorsement or to refuse it. F294...

4.An endorsed benchmark or an endorsed family of benchmarks shall be considered to be a benchmark or family of benchmarks provided by the endorsing administrator or other supervised entity. The endorsing administrator or other supervised entity shall not use the endorsement with the intention of avoiding the requirements of this Regulation.

5.An administrator or other supervised entity that has endorsed a benchmark or a family of benchmarks provided in a third country shall remain fully responsible for such a benchmark or family of benchmarks and for compliance with the obligations under this Regulation.

6.Where the [F295FCA] has well-founded reasons to consider that the conditions laid down under paragraph 1 of this Article are no longer fulfilled, it shall have the power to require the endorsing administrator or other supervised entity to cease the endorsement F296.... Article 28 shall apply in case of cessation of the endorsement.

7.The [F297Treasury may make regulations] to determine the conditions under which the [F298FCA] may assess whether there is an objective reason for the provision of a benchmark or family of benchmarks in a third country and their endorsement for their use in the [F299United Kingdom]. [F300When determining the conditions, the Treasury] shall take into account elements such as the specificities of the underlying market or economic reality the benchmark intends to measure, the need for proximity of the provision of the benchmark to such market or economic reality, the need for proximity of the provision of the benchmark to contributors, the material availability of input data due to different time zones, and specific skills required in the provision of the benchmark.

Textual Amendments

Textual Amendments

TITLE VIU.K.AUTHORISATION, REGISTRATION AND SUPERVISION OF ADMINISTRATORS

CHAPTER 1U.K.Authorisation and registration

Article 34U.K.Authorisation and registration of an administrator

1.A natural or legal person located in the [F301United Kingdom] that intends to act as an administrator shall apply to the [F302FCA] in order to receive:

(a)authorisation if it provides or intends to provide indices which are used or intended to be used as benchmarks within the meaning of this Regulation;

(b)registration if it is a supervised entity, other than an administrator, that provides or intends to provide indices which are used or intended to be used as benchmarks within the meaning of this Regulation, on condition that the activity of provision of a benchmark is not prevented by the sectoral discipline applying to the supervised entity and that none of the indices provided would qualify as a critical benchmark; or

(c)registration if it provides or intends to provide only indices which would qualify as non-significant benchmarks.

2.An authorised or registered administrator shall comply at all times with the conditions laid down in this Regulation and shall notify the [F303FCA] of any material changes thereof.

3.The application referred to in paragraph 1 shall be made within 30 working days of any agreement entered into by a supervised entity to use an index provided by the applicant as a reference to a financial instrument or financial contract or to measure the performance of an investment fund.

4.The applicant shall provide all information necessary to satisfy the [F304FCA] that the applicant has established, at the time of authorisation or registration, all the necessary arrangements to meet the requirements laid down in this Regulation.

5.Within 15 working days of receipt of the application, the [F305FCA] shall assess whether the application is complete and shall notify the applicant accordingly. If the application is incomplete, the applicant shall submit the additional information required by the [F305FCA]. The time limit referred to in this paragraph shall apply from the date on which such additional information is provided by the applicant.

6.The [F306FCA] shall:

(a)examine the application for authorisation and adopt a decision to authorise or refuse to authorise the applicant within four months of receipt of a complete application;

(b)examine the application for registration and adopt a decision to register or refuse to register the applicant within 45 working days of receipt of a complete application.

Within five working days of the adoption of a decision referred to in the first subparagraph, the [F307FCA] shall notify it to the applicant. Where the [F307FCA] refuses to authorise or to register the applicant, it shall give reasons for its decision.

F3087.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8.[F309The FCA may make] technical standards to specify further the information to be provided in the application for authorisation and in the application for registration, taking into account that authorisation and registration are distinct processes where authorisation requires a more extensive assessment of the administrator's application, the principle of proportionality, the nature of the supervised entities applying for registration under point (b) of paragraph 1 and the costs to the applicants and [F310the FCA].

F311...

F311...

Textual Amendments

Article 35U.K.Withdrawal or suspension of authorisation or registration

1.[F312The FCA] may withdraw or suspend the authorisation or registration of an administrator where the administrator:

(a)expressly renounces the authorisation or registration or has provided no benchmarks for the preceding 12 months;

(b)has obtained the authorisation or registration, or has endorsed a benchmark, by making false statements or by any other irregular means;

(c)no longer meets the conditions under which it was authorised or registered; or

(d)has seriously or repeatedly infringed the provisions of this Regulation.

2.F313...

[F314The FCA] shall promptly update the [F315FCA register].

3.Following the adoption of a decision to suspend the authorisation or registration of an administrator, and where cessation of the benchmark would result in a force majeure event, or frustrate or otherwise breach the terms of any financial contract or financial instrument, or the rules of any investment fund, which references that benchmark, as specified in the [F3162018 Delegated Regulation or regulations made by the Treasury] pursuant to Article 51(6), the provision of the benchmark in question may be permitted by the [F317FCA] until the decision of suspension has been withdrawn. During that period of time, the use of such benchmark by supervised entities shall be permitted only for financial contracts, financial instruments and investment funds that already reference the benchmark.

4.Following the adoption of a decision to withdraw the authorisation or registration of an administrator, Article 28(2) shall apply.

[F3185.In paragraph 3, the “2018 Delegated Regulation” means Commission Delegated Regulation (EU) 2018/67 of 3 October 2017 supplementing Regulation (EU) 2016/1011 of the European Parliament and of the Council with regard to the establishment of the conditions to assess the impact resulting from the cessation of or change to existing benchmarks.]

Textual Amendments

Article 36U.K.Register of administrators and benchmarks

1.[F319The FCA] shall establish and maintain a public register that contains the following information:

(a)the identities of the administrators authorised or registered pursuant to Article 34 and [F320that the FCA is responsible for the supervision thereof];

(b)the identities of administrators that comply with the conditions laid down in Article 30(1), the list of benchmarks referred to in point (c) of Article 30(1) and the third country competent authorities responsible for the supervision thereof;

(c)the identities of the administrators that acquired recognition in accordance with Article 32, the list of benchmarks [F321provided by the administrator in accordance with Article 32(5) which may be used in the United Kingdom] and, where applicable, the third country competent authorities responsible for the supervision thereof;

(d)the benchmarks that are endorsed in accordance with the procedure laid down in Article 33, the identities of their administrators, and the identities of the endorsing administrators or endorsing supervised entities;

[F322(e)any prohibitions under Article 21A or 23B on the use of benchmarks by supervised entities that are in force;

(f)any benchmarks that are Article 23A benchmarks.]

2.The register referred to in paragraph 1 shall be publicly accessible on the website of [F323the FCA] and shall be updated promptly, as necessary.

Textual Amendments

CHAPTER 2U.K.Supervisory cooperation

F324Article 37U.K.Delegation of tasks between competent authorities

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Textual Amendments

F324Article 38U.K.Disclosure of information from another Member State

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Textual Amendments

F324Article 39U.K.Cooperation on on-site inspections and investigations

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Textual Amendments

CHAPTER 3U.K.Role of competent authorities

F324Article 40U.K.Competent authorities

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Textual Amendments

Article 41U.K.Powers of competent authorities

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4.An administrator or any other supervised entity making information available [F326at the request of the FCA or in response to a requirement imposed by the FCA in the exercise of its functions under Regulation (EU) 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC] shall not be considered to be in breach of any restriction on disclosure of information posed by any contractual, legislative, regulatory or administrative provision.

Textual Amendments

F327Article 42U.K.Administrative sanctions and other administrative measures

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Textual Amendments

F327Article 43U.K.Exercise of supervisory powers and imposition of sanctions

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Textual Amendments

F327Article 44U.K.Obligation to cooperate

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Textual Amendments

Article 45U.K.Publication of decisions

1.Subject to paragraph 2, [F328the FCA] shall publish any decision imposing an administrative sanction or other administrative measure in relation to infringements of this Regulation on its official website immediately after the person subject to that decision has been informed of that decision. Such publication shall include at least information on the type and nature of the infringement and the identity of the persons subject to the decision.

The first subparagraph does not apply to decisions imposing measures that are of an investigatory nature.

2.Where [F329the FCA] considers that the publication of the identity of the legal person or of the personal data of a natural person, would be disproportionate following a case-by-case assessment conducted on the proportionality of the publication of such data, or where such publication would jeopardise the stability of financial markets or an on-going investigation, it shall do any of the following:

(a)defer publication of the decision until such time as the reasons for that deferral cease to exist;

(b)publish the decision on an anonymous basis in accordance with national law where such anonymous publication ensures an effective protection of the personal data concerned;

(c)not publish the decision at all in the event that [F330the FCA] is of the opinion that publication in accordance with point (a) or (b) will be insufficient to ensure:

(i)that the stability of financial markets is not jeopardised; or

(ii)the proportionality of the publication of such decisions with regard to measures which are deemed to be of a minor nature.

Where [F329the FCA] decides to publish a decision on an anonymous basis as referred to in point (b) of the first subparagraph, it may postpone the publication of the relevant data for a reasonable period of time where it is foreseeable that the reasons for anonymous publication shall cease to exist during that period.

3.Where the decision is subject to an appeal before a national judicial, administrative or other authority, [F331the FCA] shall also publish, immediately, on its official website such information and any subsequent information on the outcome of such appeal. Any decision annulling a previous decision to impose a sanction or a measure shall also be published.

4.The [F332FCA] shall ensure that any decision that is published in accordance with this Article shall remain accessible on its official website for a period of at least five years after its publication. Personal data contained in the publication shall only be kept on the official website of the [F332FCA] for the period which is necessary in accordance with the applicable data protection rules.

F3335.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Article 46U.K.[F334Cessation of a critical benchmark in certain circumstances]

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F3357.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8.F336...

F336...

With regard to the decision to withdraw the authorisation or registration of an administrator in accordance with Article 35, whenever the cessation of a [F337critical] benchmark would result in a force majeure event, frustrate or otherwise breach the terms of any financial contract or financial instrument, or the rules of any investment fund, which references that benchmark in the [F338United Kingdom, within the meaning specified in Commission Delegated Regulation (EU) 2018/67 or regulations made by the Treasury under Article 51(6), the FCA] shall consider whether to adopt measures to mitigate the effects referred to in this paragraph, including:

(a)a change to the code of conduct referred to in Article 15, the methodology or other rules of the benchmark;

(b)a transitional period, during which the procedures envisaged under Article 28(2) shall apply.

F3399.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F33910.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F33911.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F340Article 47U.K.Cooperation with ESMA

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Article 48U.K.Professional secrecy

1.Any confidential information received, exchanged or transmitted pursuant to this Regulation shall be subject to the conditions of professional secrecy laid down in paragraph 2.

2.The obligation of professional secrecy applies to all persons who work or who have worked for the [F341FCA] or for any authority or market undertaking or natural or legal person to whom the [F341FCA] has delegated its powers, including auditors and experts contracted by the [F341FCA].

3.Information covered by professional secrecy may not be disclosed to any other person or authority except by virtue of provisions laid down by [F342the law of the United Kingdom or any part of the United Kingdom].

4.All information [F343exchanged between the FCA and competent authorities] that concerns business or operational conditions and other economic or personal affairs shall be considered confidential and shall be subject to the requirements of professional secrecy, except where the [F344authority from whom the information is received] states at the time of communication that such information may be disclosed or where such disclosure is necessary for legal proceedings.

Textual Amendments

[F345TITLE 6AU.K.PROVISION OF INFORMATION AND PERIODS OF TIME

Article 48A U.K. Provision of information and documents

1.The Treasury may by regulations make provision about the procedure to be followed, or rules to be applied, when a provision of or made under this Regulation—

(a)requires information or a document of any kind to be given, or

(b)authorises the imposition of a requirement.

2.The regulations may, among other things, make provision—

(a)requiring information to be given in writing;

(b)requiring, or allowing, information or a document to be sent electronically;

(c)requiring, or allowing, information or a document to be given in another manner;

(d)as to the address to which information or a document must or may be sent;

(e)requiring a person to provide an address to which information or a document must or may be sent;

(f)for treating information or a document as having been given, or as having been received, on a date or at a time determined in accordance with the regulations;

(g)as to what must, or may, be done if the person to whom information or a document is required to be given is not an individual;

(h)as to what must, or may, be done if the intended recipient of information or a document is outside the United Kingdom.

3.Paragraph 1 applies however the obligation to give information or a document is expressed (and so, among other things, includes a provision which requires a person to be notified of something and a provision which requires a document to be submitted).

4.Section 7 of the Interpretation Act 1978 (service of notice by post) has effect in relation to provisions made by or under this Regulation subject to any provision made by regulations under this Article.

Article 48B U.K. Periods of time

The following provisions of Regulation (EEC, Euratom) No. 1182/71 of the Council of 3 June 1971 determining the rules applicable to periods, dates and time limits do not apply to a reference in this Regulation to a period of time—

(a)Article 3(2)(c) (periods expressed in weeks, months or years);

(b)Article 3(4) (periods ending with a weekend or public holiday).]

Textual Amendments

TITLE VIIU.K. [F346Power to make regulations]

[F347Article 49U.K.Regulations made by the Treasury

1.Any power to make regulations conferred on the Treasury by this Regulation is exercisable by statutory instrument.

2.Such regulations may:

(a)contain incidental, supplemental, consequential and transitional provision; and

(b)make different provision for different purposes.

[F3482A.Regulations made under Article 23G may not be made unless a draft of the statutory instrument containing them has been laid before and approved by a resolution of each House of Parliament.]

3.[F349Subject to paragraph 2A,] a statutory instrument containing regulations made under this Regulation is subject to annulment in pursuance of a resolution of either House of Parliament.]

Textual Amendments

F350Article 50U.K.Committee procedure

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Textual Amendments

Textual Amendments

TITLE VIIIU.K.TRANSITIONAL AND FINAL PROVISIONS

Article 51U.K.Transitional provisions

[F3511.An index provider providing a benchmark to which paragraph 1A applies must have applied to the FCA for authorisation or registration in accordance with Article 34 of the EU Benchmarks Regulation on or before 31 December 2019, in order to provide a benchmark that may be used in the United Kingdom on or after 1 January 2020.

1A.A supervised entity may, subject to paragraphs 1B and 1C, use a benchmark in the United Kingdom that:

(a)is provided by a UK index provider who was providing a benchmark in the United Kingdom on 30 June 2016, or

(b)is a benchmark (to which paragraph (a) does not apply) that was provided by a UK index provider in the United Kingdom in the period beginning with 1 July 2016 and ending with 31 December 2017,

1B.A supervised entity may not use a benchmark under paragraph 1A if:

(a) before 1 January 2020, the index provider providing the benchmark made an application to the FCA for authorisation or registration under Article 34 of the EU Benchmarks Regulation; and

(b)the index provider is notified that the application is refused or approved.

1C.Where the UK index provider is notified that the application is refused or approved on or after IP completion day, the benchmark may not be used under paragraph 1A:

(a)where the application is refused, from the day after the date on which the index provider is notified of the refusal;

(b)where the application is approved, from the day on which the index provider is recorded on the FCA register.]

F3522.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F3533.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.Where [F354a benchmark provided by a UK index provider] does not meet the requirements of this Regulation, but ceasing or changing that benchmark to fulfil the requirements of this Regulation would result in a force majeure event, frustrate or otherwise breach the terms of any financial contract or financial instrument or the rules of any investment fund, which references that benchmark, [F355the FCA shall permit the use of the benchmark in the United Kingdom]. No financial instruments, financial contracts, or measurements of the performance of an investment fund shall add a reference to such [F356a benchmark] after 1 January 2020.

[F304a.An index provider may continue to provide an existing benchmark that has been recognised as a critical benchmark by [F357regulations made by the Treasury under Article 20(5)] until 31 December 2021 or, where the index provider submits an application for authorisation in accordance with paragraph 1, unless and until such authorisation is refused.

4b.An existing benchmark that has been recognised as a critical benchmark by [F358regulations made by the Treasury under Article 20(5)] may be used for existing and new financial instruments, financial contracts, or for measuring the performance of an investment fund until 31 December 2021 or, where the index provider submits an application for authorisation in accordance with paragraph 1, unless and until such authorisation is refused.]

[F3595.A supervised entity may use a benchmark provided by an administrator located in a third country as a reference for a financial instrument, a financial contract or for measuring the performance of an investment fund in the United Kingdom:

(a)during the period beginning with IP completion day and ending with [F36031 December 2025];

(b)on and after [F3611 January 2026], if the benchmark is used as a reference for that financial instrument, that financial contract or for measuring the performance of that investment fund on [F36231 December 2025],

(but see paragraph 5A).

5A.A benchmark may not be used under paragraph 5 if:

(a)before IP completion day:

(i)the administrator providing the benchmark makes an application for registration or authorisation under Article 34 of the EU Benchmarks Regulation; and

(ii)the administrator is notified that the application is refused;

(b)the benchmark, or the administrator providing the benchmark, is recorded on the FCA register in accordance with Article 36 of this Regulation.

5B.A benchmark that:

(a)is provided by an administrator to whom paragraph 5A(a) applies, and

(b)is used as a reference for a financial instrument, a financial contract or for measuring the performance of an investment fund in the United Kingdom before the administrator is notified the application is refused,

may continue to be used in the United Kingdom as a reference for that financial instrument, that financial contract or for measuring the performance of that investment fund.]

6.The [F363Treasury may make regulations to specify] the conditions on which the [F364FCA] may assess whether the cessation or the changing of [F365a benchmark provided by a UK index provider] to conform with the requirements of this Regulation could reasonably result in a force majeure event, frustrate or otherwise breach the terms of any financial contract or financial instrument or the rules of any investment fund which references such benchmark.

[F3667.In this Article:

  • “UK index provider” means an index provider located in the United Kingdom.]

Textual Amendments

Article 52U.K.Deadline for updating the prospectuses and key information documents

Article 29(2) is without prejudice to outstanding prospectuses approved under Directive 2003/71/EC prior to 1 January 2018. For prospectuses approved prior to 1 January 2018 under Directive 2009/65/EC, the underlying documents shall be updated at the first occasion or at the latest within 12 months after that date.

F367Article 53U.K.ESMA reviews

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Textual Amendments

F367Article 54U.K.Review

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Textual Amendments

Article 55U.K.Notification of benchmarks referenced and their administrators

When a benchmark is referenced in a financial instrument covered by Article 4(1) of Regulation (EU) No 596/2014, the notifications under Article 4(1) of that Regulation shall include the name of the benchmark referenced and its administrator.

Article 56U.K.Amendments to Regulation (EU) No 596/2014

Regulation (EU) No 596/2014 is amended as follows:

(1)

Article 19 is amended as follows:

(a)

the following paragraph is inserted:

‘1a.The notification obligation referred to in paragraph 1 shall not apply to transactions in financial instruments linked to shares or to debt instruments of the issuer referred to in that paragraph where at the time of the transaction any of the following conditions is met:

(a)the financial instrument is a unit or share in a collective investment undertaking in which the exposure to the issuer's shares or debt instruments does not exceed 20 % of the assets held by the collective investment undertaking;

(b)the financial instrument provides exposure to a portfolio of assets in which the exposure to the issuer's shares or debt instruments does not exceed 20 % of the portfolio's assets;

(c)the financial instrument is a unit or share in a collective investment undertaking or provides exposure to a portfolio of assets and the person discharging managerial responsibilities or person closely associated with such a person does not know, and could not know, the investment composition or exposure of such collective investment undertaking or portfolio of assets in relation to the issuer's shares or debt instruments, and furthermore there is no reason for that person to believe that the issuer's shares or debt instruments exceed the thresholds in point (a) or (b).

If information regarding the investment composition of the collective investment undertaking or exposure to the portfolio of assets is available, then the person discharging managerial responsibility or person closely associated with such a person shall make all reasonable efforts to avail themselves of that information.’;

(b)

in paragraph 7, the following subparagraph is inserted after the second subparagraph:

‘For the purposes of point (b), transactions executed in shares or debt instruments of an issuer or derivatives or other financial instruments linked thereto by managers of a collective investment undertaking in which the person discharging managerial responsibilities or a person closely associated with them has invested do not need to be notified where the manager of the collective investment undertaking operates with full discretion, which excludes the manager receiving any instructions or suggestions on portfolio composition directly or indirectly from investors in that collective investment undertaking.’.

(2)

Article 35 is amended as follows:

(a)

in paragraphs (2) and (3), the phrase ‘and Article 19(13) and (14)’ is replaced by ‘, Article 19(13) and (14) and Article 38’;

(b)

paragraph (5) is replaced by the following:

‘5.A delegated act adopted pursuant to Article 6(5) or (6), Article 12(5), the third subparagraph of Article 17(2), Article 17(3), Article 19(13) or (14) or Article 38, shall enter into force only if no objection has been expressed either by the European Parliament or the Council within a period of three months of notification of that act to the European Parliament and the Council or if, before the expiry of that period, the European Parliament and the Council have both informed the Commission that they will not object. That period shall be extended by three months at the initiative of the European Parliament or the Council.’.

(3)

In Article 38, the following paragraphs are added:

‘By 3 July 2019, the Commission shall, after consulting ESMA, submit a report to the European Parliament and to the Council on the level of the thresholds set out in Article 19(1a)(a) and (b) in relation to managers' transactions where the issuer's shares or debt instruments form part of a collective investment undertaking or provide exposure to a portfolio of assets, with a view to assessing whether that level is appropriate or should be adjusted.

The Commission shall be empowered to adopt delegated acts in accordance with Article 35 adjusting the thresholds in Article 19(1a)(a) and (b), if it determines in that report that those thresholds should be adjusted.’.

F368Article 57U.K.Amendments to Directive 2008/48/EC

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Textual Amendments

F369Article 58U.K.Amendments to Directive 2014/17/EU

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Textual Amendments

Article 59U.K.Entry into force

This Regulation shall enter into force on the day following that of its publication in the Official Journal of the European Union.

It shall apply from 1 January 2018.

Notwithstanding the second paragraph of this Article, Articles 3(2), 5(5), 11(5), 13(3), 15(6), 16(5), Article 20 (excluding point (b) of paragraph (6)), Articles 21 and 23, Articles 25(8), 25(9), 26(5), 27(3), 30(5), 32(9), 33(7), 34(8), Article 46, and Articles 47(3) and 51(6) shall apply from 30 June 2016.

Notwithstanding the second paragraph of this Article, Article 56 shall apply from 3 July 2016.

F370...

Textual Amendments

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