IOSCO reports progress made in implementation of Benchmark Principles

IOSCO issues statement on liquidity risk management recommendations for investment funds

The Board of the International Organization of Securities Commissions (IOSCO) today published the Second Review of the Implementation of IOSCO’s Principles for Financial Benchmarks in respect of the WM/Reuters 4 p.m. Closing Spot Rate. The report found that the administrator had made very significant progress, with most of the recommendations from an earlier review having been implemented. However, some room exists to improve and refine recently implemented policies and practices.

The report describes the findings of IOSCO´s Second Review of the implementation of the Principles for Financial Benchmarks by Thomson Reuters Benchmark Services Limited (TRBSL), the administrator of the WM/Reuters 4 p.m. London Closing Spot Rate. The Second Review was conducted by a Review Team composed of members from the IOSCO Assessment Committee and the IOSCO Task Force on Financial Benchmarks.

IOSCO released the Principles for Financial Benchmarks in July 2013 as an integral part of its efforts to enhance the integrity, the reliability and the oversight of financial benchmarks. The Principles are a set of recommended practices that should be implemented by benchmark administrators and submitters. They have been endorsed by the G20 Leaders at their Saint Petersburg Summit in September 2013 as global
standards for financial benchmarks and served as guidance to numerous jurisdictions from all around the globe, including the EU and its recent benchmarks regulation.

The first IOSCO Review, Review of the Implementation of IOSCO’s Principles for Financial Benchmarks by WM in respect of the WM/Reuters 4.p.m Closing Spot Rate, assessed policies and practices relating to the Closing Spot Rate as of 2 May 2014. It set out a series of recommendations to assist the administrator with full implementation of the 19 Principles for Financial Benchmarks regarding governance, benchmark and methodology quality, and accountability.

The purpose of the Second Review was to assess the extent to which the recommendations from the original review had been implemented as of 8 September 2016. It noted that two significant changes made after the First Review affected some policies and procedures of the closing spot rate: The UK Financial Conduct Authority (FCA) began regulating the rate in April 2015 and Thomson Reuters assumed ownership of the business from State Street in April 2016.

The Second Review describes the steps taken by the administrator to change its policies and practices to fully implement the Principles and identifies where additional actions would help maintain or improve
the effectiveness of the frameworks TRBSL has put in place to address the recommendations.

The Review Team made recommendations in relation to audit, as well as opportunities to further clarify policies, or include additional information in publicly-available documentation.

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