Financial Services Act 2021

11 Assessment of representativeness of critical benchmarks U.K.

(1) In Article 3(1) of the Benchmarks Regulation (definitions)—

(a) after point (10) insert—

“(10A) ‘supervised third country contributor’ means a supervised third country entity that contributes input data to an administrator located in the United Kingdom;”, and

(b) after point (17) insert—

“(17A) ‘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;”.

(2) After Article 22 of the Benchmarks Regulation insert—

“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.

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).”

(3) Paragraph 2 of Article 22A of the Benchmarks Regulation (inserted by this section) applies in the case of a benchmark which became a critical benchmark before the day on which this section comes into force, but as if it only required the administrator to submit an assessment at the end of each two year period described in that paragraph which ends after that day.

Commencement Information

I1 S. 11 in force at 1.7.2021 by S.I. 2021/739, reg. 3(d)