Industry mauls ESMA over benchmark proposals

LSE, UBS and ICE among those who responded to ESMA’s request for comments on upcoming benchmarking regulations.

Industry heavyweights have savaged the European Securities and Markets Authority in their responses to the recent consultation on benchmarks regulation.

Responses from trading venues, index providers, banks and trade groups lambasted ESMA for suggesting that commercial licensing agreements could be used to identify which financial instruments are referencing a benchmark.

Respondents said the proposed measures are impossible because licensing agreements between benchmark providers and their clients are too inconsistent and complicated.

They also say they that benchmark administrators do not have the regulatory or legal authority to order the product providers to give up information on how they are using the benchmark.

In its response the London Stock Exchange Group wrote that it “questions the practical arrangements”, explaining it is not always feasible to obtain the data as proposed.

The stock exchange group suggested that regulators or the domestic authorities would be better placed to carry out this task, as they have “access to the consolidated data coming from trade depositories.”

Swiss bank group UBS agreed. It said: “We reiterate … ESMA should take a coordinating role in creating and maintaining a central registry to keep information that is beyond the visibility of any particular administrator.”

ESMA declined to comment.

The Intercontinental Exchange (ICE) – which took over administration of the Libor benchmark in 2014 – raised similar issues, asking ESMA to consider varying licensing agreements and data accuracy.

It said: “…firms do not always have comprehensive information available about the value of assets priced against the benchmark.”

Financial data provider Markit, looked to ESMA for further clarity and a “unified approach” to the licensing of benchmarks.

Markit wrote: “ESMA should clarify that, given the difficulties over establishing accurate figures, the classification should be performed on a “best effort basis” to avoid exposing the administrator to liability if the figures are later found, despite their best effort, to be inaccurate.”

The exact date of when the benchmarking rules must be implemented remains to be seen, although ESMA has predicted the rules will likely be finalised during the latter half of this year.