The draft RTS introduce new, potentially more onerous obligations on the administrators of all categories of benchmarks.

By Nicola Higgs and Becky Critchley

On 9 March 2020, ESMA published a consultation paper (CP) on draft Regulatory Technical Standards (RTS) under the EU Benchmarks Regulation (BMR). The CP covers governance arrangements, methodologies, reporting of infringements, mandatory administration of critical benchmarks, and non-significant benchmarks, each being provisions of the BMR that were not originally subject to a mandate for ESMA to deliver RTS. ESMA initially requested comments on the CP by 9 May 2020, but in light of recent events the timeline has been extended until 8 June 2020.

Especially at a time when benchmark administrators may only just have got to grips with BMR compliance, these draft RTS might well represent another implementation uplift, in particular regarding the new obligations in relation to designation of duties of employees. Benchmark administrators may wish to revisit the transparency of their internal structures, in order to set out the employees engaged in the relevant areas of benchmark creation and administration. Similarly, the new suggested back-testing rules might also represent a further uplift, as they are designed to ensure benchmark creation methodologies are able to be calculated in the widest set of possible circumstances. Firms should carefully consider whether to respond to the CP on areas which in their view are too burdensome or go further than is necessary to achieve BMR compliance.

For more detail, please see our related Client Alert.