The Benchmark Regulation (BMR) imposes requirements on benchmark administrators, contributors and users. AFM expects you to know whether your institution is a benchmark administrator, a contributor to benchmarks or a user of benchmarks. Different requirements apply to each. Users of benchmarks do not have to apply for a registration or license at AFM unless they also administrate benchmarks.
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.
Benchmark users that fall within the scope of the BMR as mentioned above need to comply with specific requirements following from:
Article 28(2) BMR - Changes to and cessation of a benchmark
This implies that benchmark users need to have 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. Upon request, the supervised entities shall provide the relevant competent authority with those plans and any updates. The plans need to be reflected in the contractual relationship with clients and are needed for contracts that are entered into from January 2018 or later.
Article 29 BMR – use of a benchmark
A supervised entity may use a benchmark or a combination of benchmarks in the EU if the benchmark is provided by an administrator located in the EU and is included in the ESMA register. Benchmarks are included in the ESMA register if they are provided by an administrator that has a BMR registration or license. Where a prospectus is published under the Prospectus Directive (2003/71/EC) or UCITS Directive (2009/65/EC) relating to transferable securities or other investment products that reference a benchmark, is the obligation of the issuer, offeror or person asking for admission to trade on a regulated market to ensure that the prospectus includes information on whether the benchmark is provided by an administrator included in the ESMA register.
More information on the BMR can be found on the websites of AFM and ESMA. Should you have any questions after reading the BMR rules and the ESMA Q&A or if you are unsure whether you fall within the scope of the Benchmark Regulation, please contact the AFM via email@example.com.