This Regulation introduces a common 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 Union. This Regulation thereby contributes to the proper functioning of the internal market while achieving a high level of consumer and investor protection.
Article 2 -
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 Union.
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), 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 listed in Section C of Annex I to Directive 2014/65/EU;
(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 trading venue, as defined in point (24) of Article 4(1) of Directive 2014/65/EU, 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).
Article 3 -
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 natural or legal person that has control over the provision of a benchmark;
(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 Union;
(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 listed in Section C of Annex I to Directive 2014/65/EU for which a request for admission to trading on a trading venue, as defined in point (24) of Article 4(1) of Directive 2014/65/EU, has been made or which is traded on a trading venue as defined in point (24) of Article 4(1) of Directive 2014/65/EU or via a systematic internaliser as defined in point (20) of Article 4(1) of that Directive;
(17)
‘supervised entity’ means any of the following:
(a)
a credit institution as defined in point (1) of Article 4(1) of Regulation (EU) No 575/2013 of the European Parliament and of the Council (16);
(b)
an investment firm as defined in point (1) of Article 4(1) of Directive 2014/65/EU;
(c)
an insurance undertaking as defined in point (1) of Article 13 of Directive 2009/138/EC of the European Parliament and of the Council (17);
(d)
a reinsurance undertaking as defined in point (4) of Article 13 of Directive 2009/138/EC;
(e)
a UCITS as defined in Article 1(2) of Directive 2009/65/EC or, where applicable, a UCITS management company as defined in point (b) of Article 2(1) of that Directive;
(f)
an alternative investment fund manager (AIFM) as defined in point (b) of Article 4(1) of Directive 2011/61/EU of the European Parliament and of the Council (18);
(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 (19);
(h)
a creditor as defined in point (b) of Article 3 of Directive 2008/48/EC for the purposes of credit agreements as defined in point (c) of Article 3 of that Directive;
(i)
a non-credit institution as defined in point (10) of Article 4 of Directive 2014/17/EU for the purposes of credit agreements as defined in point (3) of Article 4 of that Directive;
(j)
a market operator as defined in point (18) of Article 4(1) of Directive 2014/65/EU;
(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 (20);
(l)
a trade repository as defined in point (2) of Article 2 of Regulation (EU) No 648/2012;
(m)
an administrator;
(18)
‘financial contract’ means:
(a)
any credit agreement as defined in point (c) of Article 3 of Directive 2008/48/EC;
(b)
any credit agreement as defined in point (3) of Article 4 of Directive 2014/17/EU;
(19)
‘investment fund’ means an AIF as defined in point (a) of Article 4(1) of Directive 2011/61/EU, or a UCITS as defined in Article 1(2) of Directive 2009/65/EC;
(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 is a commodity within the meaning of point (1) of Article 2 of Commission Regulation (EC) No 1287/2006 (21), excluding emission allowances as referred to in point (11) of Section C of Annex I to Directive 2014/65/EU;
(24)
‘regulated-data benchmark’ means a benchmark determined by the application of a formula from:
(a)
input data contributed entirely and directly from:
(i)
a trading venue as defined in point (24) of Article 4(1) of Directive 2014/65/EU or a trading venue in a third country for which the Commission has adopted an implementing decision that the legal and supervisory framework of that country is considered to have equivalent effect within the meaning of Article 28(4) of Regulation (EU) No 600/2014 of the European Parliament and of the Council (22), or a regulated market considered to be equivalent under Article 2a of Regulation (EU) No 648/2012, but in each case only with reference to transaction data concerning financial instruments;
(ii)
an approved publication arrangement as defined in point (52) of Article 4(1) of Directive 2014/65/EU or a consolidated tape provider as defined in point (53) of Article 4(1) of Directive 2014/65/EU, in accordance with mandatory post-trade transparency requirements, but only with reference to transaction data concerning financial instruments that are traded on a trading venue;
(iii)
an approved reporting mechanism as defined in point (54) of Article 4(1) of Directive 2014/65/EU, but only with reference to transaction data concerning financial instruments that are traded on a trading venue and that must be disclosed in accordance with mandatory post-trade transparency requirements;
(iv)
an electricity exchange as referred to in point (j) of Article 37(1) of Directive 2009/72/EC of the European Parliament and of the Council (23);
(v)
a natural gas exchange as referred to in point (j) of Article 41(1) of Directive 2009/73/EC of the European Parliament and of the Council (24);
(vi)
an auction platform referred to in Article 26 or 30 of Commission Regulation (EU) No 1031/2010 (25);
(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 (vi);
(b)
net asset values of investment funds;
(25)
‘critical benchmark’ means a benchmark other than a regulated-data benchmark that fulfils any of the conditions laid down in Article 20(1) and which is on the list established by the Commission pursuant to that Article;
(26)
‘significant benchmark’ means a benchmark that fulfils the conditions laid down in Article 24(1);
(27)
‘non-significant benchmark’ means a benchmark that does not fulfil the conditions laid down in Articles 20(1) and 24(1);
(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).
2. The Commission shall be empowered to adopt delegated acts in accordance with Article 49 in order to 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 Commission shall take into account the market or technological developments and the international convergence of supervisory practice in relation to benchmarks.
3. The Commission shall adopt implementing acts in order to establish and review a list of public authorities in the Union falling within the definition under point (29) of paragraph 1 of this Article. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 50(2).
Where applicable, the Commission shall take into account the market or technological developments and the international convergence of supervisory practice in relation to benchmarks.
TITLE II - BENCHMARK INTEGRITY AND RELIABILITY
CHAPTER 1 - Governance of and control by administrators
Article 4 -
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 relevant competent authority 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 relevant competent authority 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 relevant competent authority 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.
Article 5 -
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 relevant competent authorities.
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 relevant competent authorities 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. ESMA shall develop draft regulatory technical standards to specify 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. In particular, ESMA shall develop a non-exhaustive list of appropriate governance arrangements as laid down in paragraph 4.
ESMA shall distinguish between the different types of benchmarks and sectors as set out in this Regulation and 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 ESMA draft regulatory technical standards shall not cover or apply to administrators of non-significant benchmarks.
ESMA shall submit those draft regulatory technical standards to the Commission by 1 April 2017.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with the procedure laid down in Articles 10 to 14 of Regulation (EU) No 1095/2010.
6. ESMA may issue guidelines in accordance with Article 16 of Regulation (EU) No 1095/2010, addressed to administrators of non-significant benchmarks to specify the elements referred to in paragraph 5 of this Article.
Article 6 -
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 7 -
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 relevant competent authority, an administrator shall provide to the relevant competent authority the details of the reviews and reports provided for in paragraph 2. Upon the request of the relevant competent authority or any user of a benchmark, an administrator shall publish the details of the audits provided for in paragraph 3.
Article 8 -
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 9 -
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 10 -
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 relevant competent authority 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 relevant competent authorities 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 relevant competent authority regarding the outsourced activities, and the administrator and the relevant competent authority have effective access to data related to the outsourced activities, as well as to the business premises of the service provider, and the relevant competent authority 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.
CHAPTER 2 - Input data, methodology and reporting of infringements
Article 11 -
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.
5. ESMA shall develop draft regulatory 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 ESMA draft regulatory technical standards shall not cover or apply to administrators of non-significant benchmarks.
ESMA 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.
ESMA shall submit those draft regulatory technical standards to the Commission by 1 April 2017.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with the procedure laid down in Articles 10 to 14 of Regulation (EU) No 1095/2010.
6. ESMA may issue guidelines in accordance with Article 16 of Regulation (EU) No 1095/2010, addressed to administrators of non-significant benchmarks to specify the elements referred to in paragraph 5 of this Article.
Article 12 -
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 13 -
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.
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.
3. ESMA shall develop draft regulatory 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. ESMA 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 ESMA draft regulatory technical standards shall not cover or apply to administrators of non-significant benchmarks.
ESMA shall submit those draft regulatory technical standards to the Commission by 1 April 2017.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.
4. ESMA may issue guidelines in accordance with Article 16 of Regulation (EU) No 1095/2010, addressed to administrators of non-significant benchmarks to specify further the elements referred to in paragraph 3 of this Article.
Article 14 -
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 competent authority 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 competent authority 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.
The competent authority of the administrator shall, where applicable, transmit such information to the relevant authority under Regulation (EU) No 596/2014.
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.
CHAPTER 3 - Code of conduct and requirements for contributors
Article 15 -
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;
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 a relevant competent authority, 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 application of the decision to include a critical benchmark in the list referred to in Article 20(1), the administrator of that critical benchmark shall notify the code of conduct to the relevant competent authority. The relevant competent authority shall verify within 30 days whether the content of the code of conduct complies with this Regulation. In the event that the relevant competent authority finds elements which do not comply with this Regulation, paragraph 4 of this Article shall apply.
6. ESMA shall develop draft regulatory 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.
ESMA 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.
ESMA shall submit those draft regulatory technical standards to the Commission by 1 April 2017.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with the procedure laid down in Articles 10 to 14 of Regulation (EU) No 1095/2010.
Article 16 -
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 relevant competent authority 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. ESMA shall develop draft regulatory technical standards to specify further the requirements concerning governance, systems and controls, and policies set out in paragraphs 1, 2 and 3.
ESMA 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 ESMA draft regulatory technical standards shall not cover or apply to supervised contributors of non-significant benchmarks.
ESMA shall submit those draft regulatory technical standards to the Commission by 1 April 2017.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with the procedure laid down in Articles 10 to 14 of Regulation (EU) No 1095/2010.
6. ESMA may issue guidelines in accordance with Article 16 of Regulation (EU) No 1095/2010, addressed to supervised contributors to non-significant benchmarks to specify the elements referred to in paragraph 5 of this Article.
TITLE III - REQUIREMENTS FOR DIFFERENT TYPES OF BENCHMARKS
CHAPTER 1 - Regulated-data benchmarks
Article 17 -
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 2 - Interest rate benchmarks
Article 18 -
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 3 - Commodity benchmarks
Article 19 -
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.
CHAPTER 4 - Critical benchmarks
Article 20 -
Critical benchmarks
1. The Commission shall adopt implementing acts in accordance with the examination procedure referred to in Article 50(2) to establish and review at least every two years a list of benchmarks provided by administrators located within the Union which are critical benchmarks, provided that one of the following conditions is fulfilled:
(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 one Member State and is recognised as being critical in that Member State 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 one or more Member States.
If a benchmark meets the criteria set out in point (c)(ii) and (iii) but does not meet the criterion set out in point (c)(i), the competent authorities of the Member States concerned together with the competent authority of the Member State where the administrator is established may agree that such benchmark should be recognised as critical under this subparagraph. In any case, the competent authority of the administrator shall consult the competent authorities of the Member States concerned. In the event of disagreement between the competent authorities, the competent authority of the administrator shall decide whether the benchmark should be recognised as critical under this subparagraph, taking into account the reasons for the disagreement. The competent authorities or, in the event of disagreement, the competent authority of the administrator, shall transmit the assessment to the Commission. After receiving the assessment, the Commission shall adopt an implementing act in accordance with this paragraph. In addition, in the event of disagreement, the competent authority of the administrator shall transmit its assessment to ESMA, which may publish an opinion.
2. Where the competent authority of a Member State referred to in point (b) of paragraph 1 considers that an administrator under its supervision provides a benchmark that should be recognised as critical, it shall notify ESMA and transmit to ESMA a documented assessment.
3. For the purposes of paragraph 2, the competent authority 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 its Member State. The competent authority 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 Member State 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 Member State;
(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 Member State and their relevance in terms of the gross national product of the Member State;
(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 Member State.
The competent authority shall review its assessment of the criticality of the benchmark at least every two years, and shall notify and transmit the new assessment to ESMA.
4. Within six weeks of receipt of the notification referred to in paragraph 2, ESMA shall issue an opinion on whether the assessment of the competent authority complies with the requirements of paragraph 3 and shall transmit such opinion to the Commission, together with the competent authority's assessment.
5. The Commission, after receiving the opinion referred to in paragraph 4, shall adopt implementing acts in accordance with paragraph 1.
6. The Commission shall be empowered to adopt delegated acts in accordance with Article 49 in order to:
(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);
(b)
review the calculation method used to determine the thresholds referred to in paragraph 1 of this Article 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 the thresholds; such review shall take place at least every two years as from 1 January 2018;
(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 one or more Member States.
Where applicable, the Commission shall take into account relevant market or technological developments.
Article 21 -
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 its competent authority; 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, the competent authority shall:
(a)
inform ESMA and, where applicable, the college established under Article 46; and
(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 the competent authority.
3. Following completion of the assessment referred to in point (b) of paragraph 2, the competent authority 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 the competent authority may compel the administrator to continue to publish the benchmark shall not exceed 12 months.
By the end of that period, the competent authority shall review its decision to compel the administrator to continue to publish the benchmark and may, where necessary, extend the time period by an appropriate period not exceeding a further 12 months. The maximum period of mandatory administration shall not exceed 24 months in total.
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, the competent authority 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).
Article 22 -
Mitigation of market power of critical benchmark administrators
Without prejudice to the application of Union 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.
Article 23 -
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 their competent authority 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 its competent authority. Where the supervised contributor is located in another Member State, the competent authority of the administrator shall inform, without delay, the competent authority of that contributor. The benchmark administrator shall submit to its competent authority 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 competent authority of the administrator shall promptly inform ESMA and, where applicable, the college established under Article 46, and 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 competent authority of the administrator 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 competent authority, 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.
The maximum period of mandatory contribution under points (a) and (b) of the first subparagraph shall not exceed 24 months in total.
7. For the purposes of paragraph 6, supervised entities that are to be required to contribute input data shall be selected by the competent authority of the administrator, with the close cooperation of the competent authorities of the supervised entities, on the basis of the size of the supervised entity's actual and potential participation in the market that the benchmark intends to measure.
8. The competent authority of a supervised contributor that has been required to contribute to a benchmark through measures taken in accordance with point (a), (b) or (c) of paragraph 6 shall cooperate with the competent authority of the administrator in the enforcement of such measures.
9. By the end of the period referred to in point (a) of the first subparagraph of paragraph 6, the competent authority of the administrator 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 competent authority 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 competent authority 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.
10. In the event that a critical benchmark is to be ceased to be provided, each supervised contributor to that benchmark shall continue to contribute input data for a period of time determined by the competent authority, but not exceeding the maximum 24-month period laid down in the second subparagraph of paragraph 6.
11. The administrator shall notify the relevant competent authority 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 its Member State.
CHAPTER 5 - Significant benchmarks
Article 24 -
Significant benchmarks
1. A benchmark which does not fulfil any of the conditions laid down in Article 20(1) 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 one or more Member States.
2. The Commission shall be empowered to adopt delegated acts in accordance with Article 49 in order to review the calculation method used to determine the threshold referred to in point (a) of paragraph 1 of this Article 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. Such review shall take place at least every two years as from 1 January 2018.
3. An administrator shall immediately notify its competent authority when its significant benchmark falls below the threshold mentioned in point (a) of paragraph 1.
Article 25 -
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 the competent authority 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. A competent authority 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, the competent authority 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, the competent authority shall notify that administrator of its decision to apply an additional requirement pursuant to paragraph 3. In the event that the notification to the competent authority 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, a competent authority shall regularly review whether its assessment pursuant to paragraph 3 of this Article is still valid.
6. If a competent authority 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. ESMA shall develop draft implementing technical standards to develop a template for the compliance statement referred to in paragraph 7.
ESMA shall submit the draft implementing technical standards referred to in the first subparagraph to the Commission by 1 April 2017.
Power is conferred to the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1095/2010.
9. ESMA shall develop draft regulatory technical standards to specify further the criteria referred to in paragraph 3.
ESMA shall submit those draft regulatory technical standards to the Commission by 1 April 2017.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with procedure laid down in Articles 10 to 14 of Regulation (EU) No 1095/2010.
CHAPTER 6 - Non-significant benchmarks
Article 26 -
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 its competent authority 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 its competent authority.
4. The relevant competent authority shall review the compliance statement referred to in paragraph 3 of this Article. The competent authority may also request additional information from the administrator in respect of its non-significant benchmarks in accordance with Article 41 and may require changes to ensure compliance with this Regulation.
5. ESMA shall develop draft implementing technical standards to develop a template for the compliance statement referred to in paragraph 3.
ESMA shall submit the draft implementing technical standards referred to in the first subparagraph to the Commission by 1 April 2017.
Power is conferred to the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1095/2010.
TITLE IV - TRANSPARENCY AND CONSUMER PROTECTION
Article 27 -
Benchmark statement
1. Within two weeks of the inclusion of an administrator in the register referred to in Article 36, 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 Union in accordance with Article 29.
Where that administrator begins providing a new benchmark or family of benchmarks that may be used in the Union 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.
3. ESMA shall develop draft regulatory technical standards to specify further the contents of a benchmark statement and the cases in which an update of such statement is required.
ESMA 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.
ESMA shall submit those draft regulatory technical standards to the Commission by 1 April 2017.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with the procedure laid down in Articles 10 to 14 of Regulation (EU) No 1095/2010.
Article 28 -
Changes to and cessation of a benchmark
1. An administrator shall publish, together with the benchmark statement referred to in Article 27, a 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 Union in accordance with Article 29(1). The procedure may be drafted, where applicable, for families of benchmarks and shall be updated and published whenever a material change occurs.
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 relevant competent authority with those plans and any updates and shall reflect them in the contractual relationship with clients.
TITLE V - USE OF BENCHMARKS IN THE UNION
Article 29 -
Use of a benchmark
1. A supervised entity may use a benchmark or a combination of benchmarks in the Union if the benchmark is provided by an administrator located in the Union and included in the register referred to in Article 36 or is a benchmark which is included in the register referred to in Article 36.
2. Where the object of a prospectus to be published under Directive 2003/71/EC or Directive 2009/65/EC 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 register referred to in Article 36 of this Regulation.
Article 30 -
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 Union in accordance with Article 29(1), the benchmark and the administrator shall be included in the register referred to in Article 36. The following conditions shall be complied with in order to be included in the register:
(a)
an equivalence decision is adopted by the Commission in accordance with paragraph 2 or 3 of this Article;
(b)
the administrator is authorised or registered, and is subject to supervision, in the third country in question;
(c)
ESMA is notified by the administrator of its consent that its actual or prospective benchmarks may be used by supervised entities in the Union, of the list of the benchmarks for which they have given consent to be used in the Union 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 Commission may adopt an implementing decision stating 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.
Such implementing decision shall be adopted in accordance with the examination procedure referred to in Article 50(2).
3. Alternatively, the Commission may adopt an implementing decision stating 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.
Such implementing decision shall be adopted in accordance with the examination procedure referred to in Article 50(2).
4. ESMA 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. Such arrangements shall specify at least:
(a)
the mechanism for the exchange of information between ESMA 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 ESMA;
(b)
the mechanism for prompt notification to ESMA 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.
5. ESMA shall develop draft regulatory technical standards to determine the minimum content of the cooperation arrangements referred to in paragraph 4 so as to ensure that the competent authorities and ESMA are able to exercise all their supervisory powers under this Regulation.
ESMA shall submit those draft regulatory technical standards to the Commission by 1 April 2017.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with the procedure laid down in Articles 10 to 14 of Regulation (EU) No 1095/2010.
Article 31 -
Withdrawal of registration of an administrator located in a third country
1. ESMA shall withdraw the registration of an administrator located in a third country by removing that administrator from the register referred to in Article 36 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 Commission has adopted the implementing decision in accordance with Article 30(2) or (3).
2. ESMA shall take a decision under paragraph 1 only if the following conditions are fulfilled:
(a)
ESMA 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 Union, or has failed to demonstrate that the administrator concerned complies with the requirements applicable to it in the third country;
(b)
ESMA 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. ESMA shall inform the other competent authorities of any measure adopted in accordance with paragraph 1 without delay and shall publish its decision on its website.
Article 32 -
Recognition of an administrator located in a third country
1. Until such time as an equivalence decision in accordance with Article 30(2) or (3) is adopted, a benchmark provided by an administrator located in a third country may be used by supervised entities in the Union provided that the administrator acquires prior recognition by the competent authority of its Member State of reference 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 competent authority of the Member State of reference 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 its Member State of reference. The legal representative shall be a natural or legal person located in the Union, 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 Union 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 competent authority of the Member State of reference.
4. The Member State of reference of an administrator located in a third country shall be determined as follows:
(a)
where an administrator is part of a group that contains one supervised entity located in the Union, the Member State of reference shall be the Member State where that supervised entity is located. Such supervised entity shall be appointed as the legal representative for the purposes of paragraph 3;
(b)
if point (a) does not apply, where an administrator is part of a group that contains more than one supervised entity located in the Union, the Member State of reference shall be the Member State where the highest number of supervised entities are located or, in the event that there is an equal number of supervised entities, the Member State of reference shall be the one where the value of financial instruments, financial contracts or investment funds that reference the benchmark is highest. One of the supervised entities located in the Member State of reference determined pursuant to this point shall be appointed as the legal representative for the purposes of paragraph 3;
(c)
if neither point (a) nor (b) of this paragraph applies, where one or more benchmarks provided by the administrator are used as a reference for financial instruments admitted to trading in a trading venue as defined in point (24) of Article 4(1) of Directive 2014/65/EU in one or more Member States, the Member State of reference shall be the Member State where the financial instrument referencing any of those benchmarks was admitted to trading or traded on a trading venue for the first time and is still traded. If the relevant financial instruments were admitted to trading or traded for the first time simultaneously on trading venues in different Member States, and are still traded, the Member State of reference shall be the one where the value of financial instruments, financial contracts or investment funds that reference the benchmark is highest;
(d)
if points (a), (b) and (c) do not apply, where one or more benchmarks provided by the administrator are used by supervised entities in more than one Member State, the Member State of reference shall be the Member State where the highest number of such supervised entities are located or, in the event that there is an equal number of supervised entities, the Member State of reference shall be the one where the value of financial instruments, financial contracts or investment funds that reference the benchmark is highest;
(e)
if points (a), (b), (c) and (d) do not apply and if the administrator enters into an agreement consenting to the use of a benchmark it provides with a supervised entity, the Member State of reference shall be the Member State where such supervised entity is located.
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 competent authority of its Member State of reference. The applicant administrator shall provide all information necessary to satisfy the competent authority 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 Union 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 competent authority shall verify that the conditions laid down in paragraphs 2, 3 and 4 are fulfilled.
If the competent authority considers that the conditions laid down in paragraphs 2, 3 and 4 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 competent authority of the Member State of reference and the competent authority of the third country where the administrator is located, in compliance with the regulatory technical standards adopted pursuant to Article 30(5), in order to ensure an efficient exchange of information that allows the competent authority to carry out its duties in accordance with this Regulation;
(b)
the effective exercise by the competent authority 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.
6. In the event that the competent authority of the Member State of reference considers that an administrator located in a third country provides a benchmark that fulfils the conditions of a significant or non-significant benchmark, as provided for in Articles 24 and 26 respectively, it shall, without undue delay, notify ESMA thereof. It shall support such assessment with the information provided by the administrator in the relevant application for recognition.
Within one month of receipt of the notification referred to in the first subparagraph, ESMA shall issue advice to the competent authority about the type of the benchmark and the requirements applicable to its provision, as provided for in Articles 24, 25 and 26. The advice may, in particular, address whether ESMA considers that the conditions for such type are fulfilled on the basis of the information provided by the administrator in the application for recognition.
The period of time referred to in paragraph 5 shall be suspended from the date on which the notification is received by ESMA, until such time as ESMA issues advice in accordance with this paragraph.
If the competent authority of the Member State of reference proposes to grant recognition contrary to ESMA's advice referred to in the second subparagraph, it shall inform ESMA thereof, stating its reasons. ESMA shall publish the fact that the competent authority does not comply or intend to comply with that advice. ESMA may also decide, on a case-by-case basis, to publish the reasons provided by the competent authority for not complying with that advice. The competent authority concerned shall receive advance notice of such publication.
7. The competent authority of the Member State of reference shall notify ESMA of any decision to recognise an administrator located in a third country within five working days, along with the list of the benchmarks provided by the administrator which may be used in the Union and, where applicable, the competent authority responsible for its supervision in the third country.
8. The competent authority of the Member State of reference 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. ESMA may develop draft regulatory technical standards to determine the form and content of the application referred to in paragraph 5 and, in particular, the presentation of the information required in paragraph 6.
In the event that such draft regulatory technical standards are developed, ESMA shall submit them to the Commission.
Power is conferred on the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with the procedure laid down in Articles 10 to 14 of Regulation (EU) No 1095/2010.
Article 33 -
Endorsement of benchmarks provided in a third country
1. An administrator located in the Union and authorised or registered in accordance with Article 34, or any other supervised entity located in the Union 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 relevant competent authority to endorse a benchmark or a family of benchmarks provided in a third country for their use in the Union, 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 its competent authority 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 Union.
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 competent authority 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 competent authority 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 relevant competent authority shall examine the application and adopt a decision either to authorise the endorsement or to refuse it. An endorsed benchmark or an endorsed family of benchmarks shall be notified by the competent authority to ESMA.
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 competent authority of the endorsing administrator or other supervised entity 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 and shall inform ESMA thereof. Article 28 shall apply in case of cessation of the endorsement.
7. The Commission shall be empowered to adopt delegated acts in accordance with Article 49 concerning measures to determine the conditions under which the relevant competent authorities 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 Union. The Commission 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.
TITLE VI - AUTHORISATION, REGISTRATION AND SUPERVISION OF ADMINISTRATORS
CHAPTER 1 - Authorisation and registration
Article 34 -
Authorisation and registration of an administrator
1. A natural or legal person located in the Union that intends to act as an administrator shall apply to the competent authority designated under Article 40 of the Member State in which that person is located 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 competent authority 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 competent authority 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 relevant competent authority 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 relevant competent authority. 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 relevant competent authority 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 competent authority shall notify it to the applicant. Where the competent authority refuses to authorise or to register the applicant, it shall give reasons for its decision.
7. The competent authority shall notify ESMA of any decision to authorise or to register an applicant within five working days of the date of adoption of said decision.
8. ESMA shall develop draft regulatory 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 competent authorities.
ESMA shall submit those draft regulatory technical standards to the Commission by 1 April 2017.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with the procedure laid down in Articles 10 to 14 of Regulation (EU) No 1095/2010.
Article 35 -
Withdrawal or suspension of authorisation or registration
1. A competent authority 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. The competent authority shall notify ESMA of its decision within five working days of the adoption of said decision.
ESMA shall promptly update the register provided for in Article 36.
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 delegated act adopted pursuant to Article 51(6), the provision of the benchmark in question may be permitted by the relevant competent authority of the Member State where the administrator is located 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.
Article 36 -
Register of administrators and benchmarks
1. ESMA 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 the competent authorities 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 referred to in Article 32(7) 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.
2. The register referred to in paragraph 1 shall be publicly accessible on the website of ESMA and shall be updated promptly, as necessary.
CHAPTER 2 - Supervisory cooperation
Article 37 -
Delegation of tasks between competent authorities
1. In accordance with Article 28 of Regulation (EU) No 1095/2010, a competent authority may delegate its tasks under this Regulation to the competent authority of another Member State with its prior consent.
The competent authorities shall notify ESMA of any proposed delegation 60 days prior to such delegation taking effect.
2. A competent authority may delegate some of its tasks under this Regulation to ESMA, subject to the agreement of ESMA.
3. ESMA shall notify the Member States of a proposed delegation within seven days. ESMA shall publish details of any agreed delegation within five working days of notification.
Article 38 -
Disclosure of information from another Member State
A competent authority may disclose information received from another competent authority only if:
(a)
it has obtained the written agreement of that competent authority and the information is disclosed only for the purposes for which that competent authority gave its agreement; or
(b)
such disclosure is necessary for legal proceedings.
Article 39 -
Cooperation on on-site inspections and investigations
1. A competent authority may request the assistance of another competent authority with regard to on-site inspections or investigations. The competent authority receiving the request shall cooperate to the extent possible and appropriate.
2. A competent authority making a request referred to in paragraph 1 shall inform ESMA thereof. In the event of an investigation or inspection with cross-border effect, the competent authorities may request ESMA to coordinate the on-site inspection or investigation.
3. Where a competent authority receives a request from another competent authority to carry out an on-site inspection or an investigation, it may:
(a)
carry out the on-site inspection or investigation itself;
(b)
allow the competent authority which submitted the request to participate in the on-site inspection or investigation;
(c)
appoint auditors or experts to support or carry out the on-site inspection or investigation.
CHAPTER 3 - Role of competent authorities
Article 40 -
Competent authorities
1. For administrators and supervised entities, each Member State shall designate the relevant competent authority responsible for carrying out the duties under this Regulation and shall inform the Commission and ESMA thereof.
2. Where a Member State designates more than one competent authority, it shall clearly determine their respective roles and shall designate a single authority to be responsible for coordinating cooperation and the exchange of information with the Commission, ESMA and other Member States' competent authorities.
3. ESMA shall publish on its website a list of the competent authorities designated in accordance with paragraphs 1 and 2.
Article 41 -
Powers of competent authorities
1. In order to fulfil their duties under this Regulation, competent authorities shall have, in conformity with national law, at least the following supervisory and investigatory powers:
(a)
access to any document and other data in any form, and to receive or take a copy thereof;
(b)
require or demand information from any person involved in the provision of, and contribution to, a benchmark, including any service provider to which functions, services or activities in the provision of a benchmark have been outsourced as provided for in Article 10, as well as their principals, and if necessary, summon and question any such person with a view to obtaining information;
(c)
request, in relation to commodity benchmarks, information from contributors on related spot markets according, where applicable, to standardised formats and reports on transactions, and direct access to traders' systems;
(d)
carry out on-site inspections or investigations, at sites other than the private residences of natural persons;
(e)
enter premises of legal persons, without prejudice to Regulation (EU) No 596/2014, in order to seize documents and other data in any form, where a reasonable suspicion exists that documents and other data related to the subject-matter of the inspection or investigation may be relevant to prove a breach of this Regulation. Where prior authorisation is needed from the judicial authority of the Member State concerned, in accordance with national law, such power shall only be used after having obtained that prior authorisation;
(f)
require existing recordings of telephone conversations, electronic communications or other data traffic records held by supervised entities;
(g)
request the freezing or sequestration of assets or both;
(h)
require temporary cessation of any practice that the competent authority considers contrary to this Regulation;
(i)
impose a temporary prohibition on the exercise of professional activity;
(j)
take all necessary measures to ensure that the public is correctly informed about the provision of a benchmark, including by requiring the relevant administrator or a person that has published or disseminated the benchmark or both to publish a corrective statement about past contributions to or figures of the benchmark.
2. Competent authorities shall exercise their functions and powers referred to in paragraph 1 of this Article and the powers to impose sanctions referred to in Article 42, in accordance with their national legal frameworks, in any of the following ways:
(a)
directly;
(b)
in collaboration with other authorities or with market undertakings;
(c)
under their responsibility by delegation to such authorities or to market undertakings;
(d)
by application to the competent judicial authorities.
For the exercise of those powers, competent authorities shall have in place adequate and effective safeguards in regard to the right of defence and fundamental rights.
3. Member States shall ensure that appropriate measures are in place so that competent authorities have all the supervisory and investigatory powers that are necessary to fulfil their duties.
4. An administrator or any other supervised entity making information available to a competent authority in accordance with paragraph 1 shall not be considered to be in breach of any restriction on disclosure of information posed by any contractual, legislative, regulatory or administrative provision.
Article 42 -
Administrative sanctions and other administrative measures
1. Without prejudice to the supervisory powers of competent authorities in accordance with Article 41, and the right of Member States to provide for and impose criminal sanctions, Member States shall, in conformity with national law, provide for competent authorities to have the power to impose appropriate administrative sanctions and other administrative measures in relation to at least the following infringements:
(a)
any infringement of Articles 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 21, 23, 24, 25, 26, 27, 28, 29 and 34 where they apply; and
(b)
any failure to cooperate or comply in an investigation or with an inspection or request covered by Article 41.
Those administrative sanctions and other administrative measures shall be effective, proportionate and dissuasive.
2. In the event of an infringement referred to in paragraph 1, Member States shall, in conformity with national law, confer on competent authorities the power to impose at least the following administrative sanctions and other administrative measures:
(a)
an order requiring the administrator or supervised entity responsible for the infringement to cease the conduct and to desist from repeating that conduct;
(b)
the disgorgement of the profits gained or losses avoided because of the infringement where those can be determined;
(c)
a public warning which indicates the administrator or supervised entity responsible and the nature of the infringement;
(d)
withdrawal or suspension of the authorisation or the registration of an administrator;
(e)
a temporary ban prohibiting any natural person, who is held responsible for such infringement, from exercising management functions in administrators or supervised contributors;
(f)
the imposition of maximum administrative pecuniary sanctions of at least three times the amount of the profits gained or losses avoided because of the infringement where those can be determined;
(g)
in respect of a natural person, maximum administrative pecuniary sanctions of at least:
(i)
for infringements of Articles 4, 5, 6, 7, 8, 9, 10, points (a), (b), (c) and (e) of Article 11(1), Article 11(2) and (3), and Articles 12, 13,14, 15, 16, 21, 23, 24, 25, 26, 27, 28, 29 and 34, EUR 500 000 or in the Member States whose official currency is not the euro, the corresponding value in the national currency on 30 June 2016; or
(ii)
for infringements of point (d) of Article 11(1) or of Article 11(4), EUR 100 000 or in the Member States whose official currency is not the euro, the corresponding value in the national currency on 30 June 2016;
(h)
in respect of a legal person, maximum administrative pecuniary sanctions of at least:
(i)
for infringements of Articles 4, 5, 6, 7, 8, 9, 10, points (a), (b), (c) and (e) of Article 11(1), Article 11(2) and (3), and Articles 12, 13,14, 15, 16, 21, 23, 24, 25, 26, 27, 28, 29 and 34, either EUR 1 000 000 or, in the Member States whose official currency is not the euro, the corresponding value in the national currency on 30 June 2016, or 10 % of its total annual turnover according to the last available accounts approved by the management body, whichever is the higher; or
(ii)
for infringements of point (d) of Article 11(1) or of Article 11(4), either EUR 250 000 or, in the Member States whose official currency is not the euro, the corresponding value in the national currency on 30 June 2016, or 2 % of its total annual turnover according to the last available accounts approved by the management body, whichever is the higher.
For the purposes of point (h)(i) and (ii), where the legal person is a parent undertaking or a subsidiary of a parent undertaking which has to prepare consolidated financial accounts in accordance with Directive 2013/34/EU of the European Parliament and of the Council (26), the relevant total annual turnover shall be the total annual turnover or the corresponding type of income in accordance with Council Directive 86/635/EEC (27) for banks and Council Directive 91/674/EEC (28) for insurance companies according to the last available consolidated accounts approved by the management body of the ultimate parent undertaking or if the person is an association, 10 % of the aggregate turnovers of its members.
3. By 1 January 2018, Member States shall notify the rules regarding paragraphs 1 and 2 to the Commission and ESMA.
Member States may decide not to lay down rules for administrative sanctions as provided for in paragraph 1 where the infringements referred to in that paragraph are subject to criminal sanctions under their national law. In that case, Member States shall communicate to the Commission and ESMA the relevant criminal law provisions along with the notification referred to in the first subparagraph of this paragraph.
They shall notify the Commission and ESMA without delay of any subsequent amendment thereto.
4. Member States may provide competent authorities under national law to have other powers to impose sanctions in addition to those referred to in paragraph 1 and may provide for higher levels of sanctions than those established in paragraph 2.
Article 43 -
Exercise of supervisory powers and imposition of sanctions
1. Member States shall ensure that, when determining the type and level of administrative sanctions and other administrative measures, competent authorities take into account all relevant circumstances, including where appropriate:
(a)
the gravity and duration of the infringement;
(b)
the criticality of the benchmark to financial stability and the real economy;
(c)
the degree of responsibility of the responsible person;
(d)
the financial strength of the responsible person, as indicated, in particular, by the total annual turnover of the responsible legal person or the annual income of the responsible natural person;
(e)
the level of the profits gained or losses avoided by the responsible person, insofar as they can be determined;
(f)
the level of cooperation of the responsible person with the competent authority, without prejudice to the need to ensure disgorgement of profits gained or losses avoided by that person;
(g)
previous infringements by the person concerned;
(h)
measures taken, after the infringement, by a responsible person to prevent the repetition of the infringement.
2. In the exercise of their powers to impose administrative sanctions and other administrative measures under Article 42, competent authorities shall cooperate closely to ensure that the supervisory and investigative powers and administrative sanctions and other administrative measures produce the desired results of this Regulation. They shall also coordinate their action in order to avoid possible duplication and overlap when applying supervisory and investigative powers and administrative sanctions, including pecuniary sanctions, and other administrative measures to cross-border cases.
Article 44 -
Obligation to cooperate
1. Where Member States have chosen, in accordance with Article 42, to lay down criminal sanctions for infringements of the provisions referred to in that Article, they shall ensure that appropriate measures are in place so that competent authorities have all the necessary powers to liaise with judicial authorities within their jurisdiction to receive specific information relating to criminal investigations or proceedings commenced for possible infringements of this Regulation. Those competent authorities shall provide that information to other competent authorities and ESMA, in order to fulfil their obligation to cooperate with each other and ESMA for the purposes of this Regulation.
2. Competent authorities shall provide assistance to competent authorities of other Member States. In particular, they shall exchange information and cooperate in any investigation or supervisory activities. Competent authorities may also cooperate with competent authorities of other Member States with respect to facilitating the recovery of pecuniary sanctions.
Article 45 -
Publication of decisions
1. Subject to paragraph 2, a competent authority 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 a competent authority 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 the competent authority 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 a competent authority 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, the competent authority 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 competent authority 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 competent authority for the period which is necessary in accordance with the applicable data protection rules.
5. Member States shall annually provide ESMA with aggregated information regarding all administrative sanctions and other administrative measures imposed pursuant to Article 42. That obligation does not apply to measures of an investigatory nature. ESMA shall publish that information in an annual report.
Where Member States have chosen, in accordance with Article 42, to lay down criminal sanctions for infringements of the provisions referred to in that Article, their competent authorities shall annually provide ESMA with anonymised and aggregated data regarding all criminal investigations undertaken and criminal sanctions imposed. ESMA shall publish data on criminal sanctions imposed in an annual report.
Article 46 -
Colleges
1. Within 30 working days from the inclusion of a benchmark referred to in points (a) and (c) of Article 20(1) in the list of critical benchmarks, with the exception of benchmarks where the majority of contributors are non-supervised entities, the competent authority shall establish a college.
2. The college shall comprise the competent authority of the administrator, ESMA, and the competent authorities of supervised contributors.
3. Competent authorities of other Member States shall have the right to be members of the college where, if the critical benchmark in question were to cease to be provided, it would have a significant adverse impact on the market integrity, financial stability, consumers, real economy, or financing of households and businesses of those Member States.
Where a competent authority intends to become a member of a college, it shall submit a request to the competent authority of the administrator containing evidence that the requirements of the first subparagraph of this paragraph are fulfilled. The relevant competent authority of the administrator shall consider the request and notify the requesting authority within 20 working days of receipt of the request whether or not it considers those requirements to be fulfilled. Where it considers those requirements not to be fulfilled, the requesting authority may refer the matter to ESMA in accordance with paragraph 9.
4. ESMA shall contribute to promoting and monitoring the efficient, effective and consistent functioning of colleges referred to in this Article in accordance with Article 21 of Regulation (EU) No 1095/2010. To that end, ESMA shall participate as appropriate and shall be considered to be a competent authority for that purpose.
Where ESMA acts in accordance with Article 17(6) of Regulation (EU) No 1095/2010 regarding a critical benchmark, it shall ensure appropriate exchange of information and cooperation with the other members of the college.
5. The competent authority of an administrator shall chair the meetings of the college, coordinate the actions of the college and ensure efficient exchange of information among members of the college.
Where an administrator provides more than one critical benchmark, the competent authority of that administrator may establish a single college in respect of all the benchmarks provided by that administrator.
6. The competent authority of an administrator shall establish written arrangements within the framework of the college regarding the following matters:
(a)
the information to be exchanged between competent authorities;
(b)
the decision-making process between the competent authorities and the time frame within which each decision has to be taken;
(c)
the cases in which the competent authorities must consult each other;
(d)
the cooperation to be provided under Article 23(7) and (8).
7. The competent authority of an administrator shall give due consideration to any advice provided by ESMA concerning the written arrangements under paragraph 6 before agreeing their final text. The written arrangements shall be set out in a single document containing full reasons for any significant deviation from the advice of ESMA. The competent authority of the administrator shall transmit the written arrangements to the members of the college and to ESMA.
8. Before taking any measures referred to in Article 23(6), (7) and (9), and Articles 34, 35 and 42, the competent authority of an administrator shall consult the members of the college. The members of the college shall do everything reasonable within their power to reach an agreement within the time frame specified in the written arrangements referred to in paragraph 6 of this Article.
Any decision of the competent authority of the administrator to take such measures shall take into account the impact on the other Member States concerned, in particular the potential impact on the stability of their financial systems.
With regard to the decision to withdraw the authorisation or registration of an administrator in accordance with Article 35, whenever the cessation of a 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 Union, within the meaning specified by the Commission in any delegated act adopted pursuant to Article 51(6), the competent authorities within the college 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.
9. In the absence of agreement between the members of a college, competent authorities may refer to ESMA any of the following situations:
(a)
where a competent authority has not communicated essential information;
(b)
where, following a request made under paragraph 3, the competent authority of the administrator has notified the requesting authority that the requirements of that paragraph are not fulfilled or where it has not acted upon such request within a reasonable time;
(c)
where the competent authorities have failed to reach an agreement on the matters set out in paragraph 6;
(d)
where there is a disagreement concerning the measures to be taken in accordance with Articles 34, 35 and 42;
(e)
where there is a disagreement concerning the measures to be taken in accordance with Article 23(6);
(f)
where there is a disagreement concerning the measures to be taken in accordance with the third subparagraph of paragraph 8 of this Article.
10. In the situations referred to in points (a), (b), (c), (d) and (f) of paragraph 9, if the issue is not settled within 30 days after referral to ESMA, the competent authority of an administrator shall take the final decision and provide a detailed explanation of its decision in writing to the competent authorities referred to in that paragraph and to ESMA.
The period of time referred to in point (a) of Article 34(6) shall be suspended from the date of referral to ESMA until such time as a decision is taken in accordance with the first subparagraph of this paragraph.
Where ESMA considers that the competent authority of the administrator has taken any measures referred to in paragraph 8 of this Article which may not be in conformity with Union law it shall act in accordance with Article 17 of Regulation (EU) No 1095/2010.
11. In the situation referred to in point (e) of paragraph 9 of this Article, and without prejudice to Article 258 TFEU, ESMA may act in accordance with the powers conferred on it under Article 19 of Regulation (EU) No 1095/2010.
The power of the competent authority of an administrator under Article 23(6) may be exercised until such time as ESMA publishes its decision.
Article 47 -
Cooperation with ESMA
1. The competent authorities shall cooperate with ESMA for the purposes of this Regulation, in accordance with Regulation (EU) No 1095/2010.
2. The competent authorities shall, without delay, provide ESMA with all information necessary to carry out its duties, in accordance with Article 35 of Regulation (EU) No 1095/2010.
3. ESMA shall develop draft implementing technical standards to determine the procedures and forms for exchange of information as referred to in paragraph 2.
ESMA shall submit the draft implementing technical standards referred to in the first subparagraph to the Commission by 1 April 2017.
Power is conferred to the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1095/2010.
Article 48 -
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 competent authority or for any authority or market undertaking or natural or legal person to whom the competent authority has delegated its powers, including auditors and experts contracted by the competent authority.
3. Information covered by professional secrecy may not be disclosed to any other person or authority except by virtue of provisions laid down by Union or national law.
4. All information exchanged between the competent authorities under this Regulation 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 competent authority states at the time of communication that such information may be disclosed or where such disclosure is necessary for legal proceedings.
TITLE VII - DELEGATED AND IMPLEMENTING ACTS
Article 49 -
Exercise of the delegation
1. The power to adopt delegated acts is conferred on the Commission subject to the conditions laid down in this Article.
2. The power to adopt delegated acts referred to in Articles 3(2), 20(6), 24(2), 33(7), 51(6) and 54(3) shall be conferred on the Commission for an indeterminate period of time from 30 June 2016.
3. The delegation of power referred to in Articles 3(2), 20(6), 24(2), 33(7), 51(6) and 54(3) may be revoked at any time by the European Parliament or by the Council. A decision to revoke shall put an end to the delegation of power specified in that decision. It shall take effect on the day following the publication of the decision in the Official Journal of the European Union or on a later date specified therein. It shall not affect the validity of any delegated acts already in force.
4. Before adopting a delegated act, the Commission shall consult experts designated by each Member State in accordance with the principles laid down in the Interinstitutional Agreement on Better Law-Making of 13 April 2016.
5. As soon as it adopts a delegated act, the Commission shall notify it simultaneously to the European Parliament and to the Council.
6. A delegated act adopted pursuant to Articles 3(2), 20(6), 24(2), 33(7), 51(6) and 54(3) shall enter into force only if no objection has been expressed either by the European Parliament or by 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 of the Council.
Article 50 -
Committee procedure
1. The Commission shall be assisted by the European Securities Committee. That committee shall be a committee within the meaning of Regulation (EU) No 182/2011.
2. Where reference is made to this paragraph, Article 5 of Regulation (EU) No 182/2011 shall apply, having regard to the provisions of Article 8 thereof.
TITLE VIII - TRANSITIONAL AND FINAL PROVISIONS
Article 51 -
Transitional provisions
1. An index provider providing a benchmark on 30 June 2016 shall apply for authorisation or registration in accordance with Article 34 by 1 January 2020.
2. By 1 January 2020, the competent authority of the Member State where an index provider applying for authorisation in accordance with Article 34 is located shall have the power to decide to register that index provider as an administrator even if it is not a supervised entity, under the following conditions:
(a)
the index provider does not provide a critical benchmark;
(b)
the competent authority is aware, on a reasonable basis, that the index or indices provided by the index provider are not widely used, within the meaning of this Regulation, in the Member State where the index provider is located as well as in other Member States.
The competent authority shall notify ESMA of its decision adopted in accordance with the first subparagraph.
The competent authority shall keep evidence of the reasons for its decision adopted in accordance with the first subparagraph, in such a form that it is possible to fully understand the evaluations of the competent authority that the index or indices provided by the index provider are not widely used, including any market data, judgement or other information, as well as information received from the index provider.
3. An index provider may continue to provide an existing benchmark which may be used by supervised entities until 1 January 2020 or, where the index provider submits an application for authorisation or registration in accordance with paragraph 1, unless and until such authorisation or registration is refused.
4. Where an existing benchmark 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, the use of the benchmark shall be permitted by the competent authority of the Member State where the index provider is located. No financial instruments, financial contracts, or measurements of the performance of an investment fund shall add a reference to such an existing benchmark after 1 January 2020.
5. Unless the Commission has adopted an equivalence decision as referred to in Article 30(2) or (3) or unless an administrator has been recognised pursuant to Article 32, or a benchmark has been endorsed pursuant to Article 33, the use in the Union by supervised entities of a benchmark provided by an administrator located in a third country where the benchmark is already used in the Union as a reference for financial instruments, financial contracts, or for measuring the performance of an investment fund, shall be permitted only for such financial instruments, financial contracts and measurements of the performance of an investment fund that already reference the benchmark in the Union on, or which add a reference to such benchmark prior to, 1 January 2020.
6. The Commission shall be empowered to adopt delegated acts in accordance with Article 49 concerning measures to determine the conditions on which the relevant competent authority may assess whether the cessation or the changing of an existing benchmark 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.
Article 52 -
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.
Article 53 -
ESMA reviews
1. ESMA shall seek to build a common European supervisory culture and consistent supervisory practices and ensure consistent approaches among competent authorities in relation to the application of Articles 32 and 33. To that end, the recognitions granted in accordance with Article 32 and the endorsements authorised in accordance with Article 33 shall be reviewed by ESMA every two years.
ESMA shall issue an opinion to each competent authority that has recognised a third country administrator or endorsed a third country benchmark assessing how that competent authority applies the relevant requirements of Articles 32 and 33 respectively and the requirements of any relevant delegated act and regulatory or implementing technical standard based on this Regulation.
2. ESMA shall have the power to require the documented evidence from a competent authority for any of the decisions adopted in accordance with the first subparagraph of Article 51(2), Article 24(1) and Article 25(2).
Article 54 -
Review
1. By 1 January 2020, the Commission shall review and submit a report to the European Parliament and to the Council on this Regulation and in particular on:
(a)
the functioning and effectiveness of the critical benchmark, mandatory administration and mandatory contribution regime under Articles 20, 21 and 23 and the definition of a critical benchmark in point (25) of Article 3(1);
(b)
the effectiveness of the authorisation, registration and supervision regime of administrators under Title VI and the colleges under Article 46 and the appropriateness of supervision of certain benchmarks by a Union body;
(c)
the functioning and effectiveness of Article 19(2), in particular the scope of its application.
2. The Commission shall review the evolution of international principles applicable to benchmarks and of legal frameworks and supervisory practices in third countries concerning the provision of benchmarks and report to the European Parliament and to the Council every five years after 1 January 2018. That report shall assess in particular whether there is a need to amend this Regulation and shall be accompanied by a legislative proposal, if appropriate.
3. The Commission shall be empowered to adopt delegated acts in accordance with Article 49 in order to extend the 42-month period referred to in Article 51(2) by 24 months, if the report referred to in point (b) of paragraph 1 of this Article provides evidence that the transitional registration regime under Article 51(2) is not detrimental to a common European supervisory culture and consistent supervisory practices and approaches among competent authorities.
Article 55 -
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 56 -
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.’.
Article 57 -
Amendments to Directive 2008/48/EC
Directive 2008/48/EC is amended as follows:
(1)
In Article 5(1), the following subparagraph is inserted after the second subparagraph:
‘Where the credit agreement references a benchmark as defined in point 3 of Article 3(1) of Regulation (EU) 2016/1011 of the European Parliament and of the Council (*), the name of the benchmark and of its administrator and the potential implications on the consumer shall be provided by the creditor, or where applicable, by the credit intermediary, to the consumer in a separate document, which may be annexed to the Standard European Consumer Credit Information form.
(*) 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 (OJ L 171, 29.6.2016, p. 1).’."
(2)
In Article 27(1), the following subparagraph is inserted after the second subparagraph:
‘By 1 July 2018 Member States shall adopt and publish the provisions necessary to comply with the third subparagraph of Article 5(1) and shall communicate them to the Commission. They shall apply those provisions from 1 July 2018.’.
Article 58 -
Amendments to Directive 2014/17/EU
Directive 2014/17/EU is amended as follows:
(1)
In the second subparagraph of Article 13(1), the following point is inserted:
‘(ea)
where contracts that reference a benchmark as defined in point (3) of Article 3(1) of Regulation (EU) 2016/1011 of the European Parliament and of the Council (**) are available, the names of the benchmarks and of their administrators and the potential implications on the consumer;
(**) 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 (OJ L 171, 29.6.2016, p. 1).’;"
(2)
In Article 42(2), the following subparagraph is inserted after the first subparagraph:
‘By 1 July 2018, Member States shall adopt and publish the provisions necessary to comply with point (ea) of the second subparagraph of Article 13(1) and shall communicate them to the Commission. They shall apply those provisions from 1 July 2018.’;
(3)
In Article 43(1), the following subparagraph is added:
‘Point (ea) of the second subparagraph of Article 13(1) shall not apply to credit agreements existing before 1 July 2018.’.
Article 59 -
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.
This Regulation shall be binding in its entirety and directly applicable in all Member States.
