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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.

[F1CHAPTER 3A U.K. [F2UK Climate Transition Benchmarks and UK Paris-aligned Benchmarks ]

Article 19aU.K. [F3UK 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, [F4UK] Climate Transition Benchmarks and [F4UK] Paris-aligned Benchmarks, in addition to the requirements of Titles II, III and IV.

2.[F5The Treasury may make regulations] to supplement this Regulation by laying down the minimum standards for [F6UK] Climate Transition Benchmarks and [F6UK] 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 [F6UK] Climate Transition Benchmarks.

3.Benchmark administrators which provide an [F7UK] Climate Transition Benchmark or an [F7UK] Paris-aligned Benchmark shall comply with this Regulation by 30 April 2020.

Textual Amendments

Article 19bU.K. Requirements for [F8UK Climate Transition Benchmarks]

Administrators of [F9UK] 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 [F10UK Paris-aligned Benchmarks]

1.[F11The Treasury may make regulations] in order to supplement this Regulation by identifying, in respect of [F12UK] 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. F13...

F142.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Article 19dU.K. Endeavour to provide [F15UK Climate Transition Benchmarks]

By 1 January 2022, administrators which are located in the [F16United 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 [F17UK] Climate Transition Benchmarks.]

Textual Amendments

Textual Amendments

CHAPTER 4U.K.Critical benchmarks

[F18Article 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:

(a)whether an administrator located in the United Kingdom provides a benchmark that either:

(i)satisfies one or more of conditions (a), (b) or (c) of paragraph 1 of Article 20; or

(ii)satisfies only points (c)(ii) and (iii) of paragraph 1 of Article 20; and

(b)where a benchmark satisfies point (a)(i) or (ii) 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 point (a)(i) or (ii) 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 determines 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

(b)the Treasury considers that the benchmark either:

(i)satisfies one or more of conditions (a), (b), or (c) in paragraph 1 of Article 20; or

(ii)satisfies only the criteria in point (c)(ii) and (iii) in 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.[F19Critical benchmarks: conditions and other matters]

[F20A1.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.[F21The 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 [F22the United Kingdom] and is recognised as being critical F23... in accordance with the procedure laid down in paragraphs 2, 3, 4 and 5 of this Article;

(c)the benchmark fulfils all of the following criteria:

(i)

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 400 billion on the basis of all the range of maturities or tenors of the benchmark, where applicable, but not exceeding the value provided for in point (a);

(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 [F24the United Kingdom].

F25...

[F262.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 [F27FCA] 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 [F28the United Kingdom]. The [F29FCA] 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 [F30United 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 [F30United 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 [F30United Kingdom] and their relevance in terms of the gross national product of the [F30United 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 [F30United Kingdom].

F31...

4.Within six weeks of receipt of the notification referred to in paragraph 2, [F32the Treasury must determine whether the FCA's assessment complies with the requirements of paragraph 3.]

[F335.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 determines that the FCA's assessment complies with the requirements of paragraph 3.]

[F345A.The FCA must:

(a)review the values in points (a) and (c)(i) of paragraph 1 (the “thresholds”) 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 to the thresholds; and

(b)provide a written report to the Treasury setting out the results of the review and making a recommendation as to whether the thresholds 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.[F35The 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 thresholds referred to in paragraph 1 of this Article and in point (a) of Article 24(1);

[F36(b)amend the thresholds in points (a) and (c)(i) 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 [F37the United Kingdom].

Where applicable, the [F38Treasury] 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 [F39the 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, [F40the FCA] shall:

F41(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 [F42the FCA].

3.Following completion of the assessment referred to in point (b) of paragraph 2, [F43the 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; or

(c)the benchmark is no longer critical.

For the purposes of the first subparagraph, the period for which [F43the FCA] may compel the administrator to continue to publish the benchmark shall not exceed 12 months.

[F44By the end of that period, [F43the FCA] shall review its decision to compel the administrator to continue to publish the benchmark. [F43The FCA] may, where necessary, extend that period by an appropriate period not exceeding 12 months. The maximum period of mandatory administration shall not exceed five years.]

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, [F45the 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

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

Without prejudice to the application of [F46United 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

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

1.This Article shall apply to critical benchmarks based on submissions by contributors the majority of which are supervised entities.

2.Administrators of one or more critical benchmarks shall, every two years, submit to [F47the FCA] an assessment of the capability of each critical benchmark they provide to measure the underlying market or economic reality.

3.If a supervised contributor to a critical benchmark intends to cease contributing input data, it shall promptly notify in writing the benchmark administrator, which shall inform without delay [F48the FCA]. F49... The benchmark administrator shall submit to [F50the FCA] an assessment of the implications on the capability of the benchmark to measure the underlying market or economic reality as soon as possible but no later than 14 days after the notification made by the supervised contributor.

4.Upon receipt of an assessment of the benchmark administrator referred to in paragraphs 2 and 3 of this Article and on the basis of such assessment, the [F51FCA must] make its own assessment on the capability of the benchmark to measure the underlying market and economic reality, taking into account the administrator's procedure for cessation of the benchmark established in accordance with Article 28(1).

5.From the date on which the [F52FCA] is notified of the intention of a contributor to cease contributing input data and until such time as the assessment referred to in paragraph 4 is complete, it shall have the power to require the contributors which made the notification in accordance with paragraph 3 to continue contributing input data, in any event for a period of no more than four weeks, without imposing an obligation on supervised entities to either trade or commit to trade.

6.In the event that the [F53FCA], after the period specified in paragraph 5 and on the basis of its own assessment referred to in paragraph 4, considers that the representativeness of a critical benchmark is put at risk, it shall have the power to:

(a)require supervised 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 from the date on which the initial decision requiring mandatory contribution was taken pursuant to paragraph 5 or, for those entities that are not yet contributors, from the date on which the decision requiring mandatory contribution is taken under this point;

(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 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.

[F44The maximum period of mandatory contribution under points (a) and (b) of the first subparagraph shall not exceed five years.]

7.For the purposes of paragraph 6, supervised entities that are to be required to contribute input data shall be selected by the [F54FCA] on the basis of the size of the supervised entity's actual and potential participation in the market that the benchmark intends to measure.

F558.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9.By the end of the period referred to in point (a) of the first subparagraph of paragraph 6, the [F56FCA] 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 [F57FCA] 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 [F57FCA] 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 relevant supervised entities would weaken the benchmark to such an extent to require the cessation of the benchmark.

[F4410.In the event that a critical benchmark is to be ceased to be provided, each supervised contributor to that benchmark shall contribute input data for a period of time determined by the [F58FCA], but not exceeding the maximum five year period laid down in the second subparagraph of paragraph 6.]

11.The administrator shall notify the [F59FCA] in the event that any contributors breach the requirements set out in paragraph 6 as soon as reasonably possible.

12.In the event that a benchmark is recognised as critical in accordance with the procedure laid down in Article 20(2), (3), (4) and (5), the competent authority of the administrator shall have the power to require input data in accordance with paragraph 5, and points (a), (b) and (c) of paragraph 6, of this Article only from supervised contributors located in [F60the United Kingdom].

Textual Amendments

CHAPTER 5U.K.Significant benchmarks

Article 24U.K.Significant benchmarks

1.A benchmark which [F61is 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 [F62the United Kingdom].

2.The [F63FCA must:]

[F64(a)][F65review 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 F66... [F67; 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.]

[F682A.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 [F69the 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 [F70the 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.[F71The 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, [F72the 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, [F73the FCA] shall notify that administrator of its decision to apply an additional requirement pursuant to paragraph 3. In the event that the notification to [F73the 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, [F74the FCA] shall regularly review whether its assessment pursuant to paragraph 3 of this Article is still valid.

6.If [F75the 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.[F76The FCA may make] technical standards to develop a template for the compliance statement referred to in paragraph 7.

F77...

F77...

9.[F78The FCA may make] technical standards to specify further the criteria referred to in paragraph 3.

F79...

F79...

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 [F80the 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 [F81the FCA].

4.The [F82FCA] shall review the compliance statement referred to in paragraph 3 of this Article. The [F83FCA] may also request additional information from the administrator in respect of its non-significant benchmarks in accordance with [F84any 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.[F85The FCA may make] technical standards to develop a template for the compliance statement referred to in paragraph 3.

F86...

F86...

Textual Amendments