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Benchmarks Regulation

The Benchmarks Regulation introduces a regime for benchmark administrators, contributors and users of benchmarks in order that the accuracy and integrity of benchmarks is ensured. The AFM is responsible for the authorisation, registration and ongoing supervision of compliance with the Benchmarks Regulation in the Netherlands. The Benchmarks Regulation  entered into force on 30 June 2016 and comes into effect on 1 January 2018.

What is the focus?

The Benchmarks Regulation has the following objectives:

  • improving governance and controls over the benchmark process, in particular to ensure that administrators avoid conflicts of interest, or at least manage them adequately
  • improving the quality of input data and methodologies used by benchmark administrators
  • ensuring that contributors to benchmarks and the data they provide are subject to adequate controls, in particular to avoid conflicts of interest
  • protecting consumers and investors through greater transparency and adequate rights of redress.

The Benchmarks Regulation will introduce among others requirements with respect to:

  • the governance of and control by administrators over the benchmark process
  • ensuring that administrators avoid conflicts of interest and have policies and procedures how to manage them adequately
  • the input data used for determining a benchmark
  • the methodology used for determining a benchmark
  • the code of conduct that an administrator shall have in place for its contributors.

EU entity benchmarks administrators are required to apply for authorization or registration. In order to receive an application form, please contact the AFM via benchmarks@afm.nl.

What is an index?

The Benchmarks Regulation defines an index as any figure:

  • that is that is published or made available to the public
  • that is regularly determined:
    • entirely or partially by the application of a formula or any other method of calculation, or by an assessment; and
    • 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.

What is a benchmark?

An index becomes a benchmark where the index is used:

  • to determine the amount payable under a financial instrument or financial contract, or the value of a financial instrument, or
  • to measure the performance of an investment fund for the purpose of:
    • tracking the return, or
    • defining the asset allocation or a portfolio, or
    • computing the performance fees.

Which parties are affected?

The scope of the Benchmarks Regulation covers benchmark administrators, supervised contributors and benchmark users. You may qualify as a benchmark administrator if you provide indices that are used in:

  • financial instruments traded on trading venues or via systematic internalisers in the EU
  • mortgage or consumer credit contracts, or
  • investment funds (AIF or UCITS).

You may qualify as a supervised contributor if you are an authorised person and you contribute input data:

  • that is not readily available to the administrator, and
  • that is required for the determination of a benchmark determination and is provided for that purpose.

You may qualify as a benchmark user and be subject to additional requirements if you are supervised under one of the EU regulations as specified in the Benchmark Regulation and you:

  • issue a financial instrument which references an index or a combination of indices
  • determine the amount payable under a financial instrument or a financial contract by referencing an index or a combination of indices
  • are a party to a financial contract that references an index or a combination of indices
  • provide a borrowing rate 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
  • measure the performance of an investment fund through an index or a combination of indices for the purpose of (i) tracking the return of such index or combination of indices, (ii) defining the asset allocation, or (iii) computing the performance fees.

The Benchmark Regulation imposes requirements on benchmark administrators, contributors and users. If you are unsure whether you fall within the scope of the Benchmark Regulation, please contact the AFM via benchmarks@afm.nl.

How can a benchmark provider be approved?

If you are an EU entity providing benchmarks, the entity can be approved under the Regulation in two ways: authorisation or registration.

Authorisation is required if you provide:

  • critical benchmarks, or
  • commodity benchmarks or interest rate benchmarks and you are not a supervised entity, or
  • significant benchmarks and you are not a supervised entity.

You can apply for Registration in case:

  • you are a supervised entity, and
  • you do not provide critical benchmarks.

In order to receive an application form, please contact the AFM via benchmarks@afm.nl.

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In case you have any questions or feedback or if you would like to receive an application form, please contact us via benchmarks@afm.nl.