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MAR 8.1 Application and purpose

Application

MAR 8.1.1 R RP

1This chapter applies to every firm which is a benchmark submitter or a benchmark administrator.

Purpose

MAR 8.1.2 G RP

The purpose of this chapter is to set out the requirements

applying to firms who are benchmark submitters or benchmark administrators when carrying out the activities of providing information in relation to a specified benchmark or administering a specified benchmark

Actions for damages

MAR 8.1.3 R RP

A contravention of a rule in MAR 8 does not give rise to a right of action by a private person under section 138D(2) of the Act (and each rule in MAR 8 is specified under section 138D(3) of the Act as a provision giving rise to no such right of action).

MAR 8.2 Requirements for benchmark submitters

Organisational and governance arrangements

MAR 8.2.1 R RP

A benchmark submitter must establish and maintain adequate and effective organisational and governance arrangements for the process of making benchmark submissions.

MAR 8.2.2 G RP

These arrangements should include:

  1. (1)

    appropriate oversight of the submission process by the benchmark submitter'ssenior personnel;

  2. (2)

    appropriate oversight of the submission process by the compliance function of the firm to ensure compliance with the benchmark submitter's obligations under this section; and

  3. (3)

    periodic internal audit reviews.

MAR 8.2.3 R RP

A benchmark submitter who maintains an establishment in the United Kingdom must:

  1. (1)

    appoint a benchmark manager with responsibility for the oversight of its compliance with this chapter; and

  2. (2)

    ensure that its benchmark manager has a level of authority and access to resources and information sufficient to enable him to carry out that responsibility.

MAR 8.2.4 G RP

The requirements in MAR 8.2.3 R apply, regardless of the place from which benchmark submissions are made. The FCA expects that a benchmark manager will be based in the United Kingdom.

MAR 8.2.5 R RP

A benchmark submitter must:

  1. (1)

    ensure that its benchmark submissions are determined using an effective methodology to establish the benchmark submission on the basis of objective criteria and relevant information; and

  2. (2)

    review this methodology as and when market circumstances require, but at least every quarter, to ensure that its benchmark submissions are credible and robust.

MAR 8.2.6 G RP

An effective methodology for determining benchmark submissions in addition to quantitative criteria may include the use of qualitative criteria, such as the expert judgment of the benchmark submitter.

Conflict management

MAR 8.2.7 R RP

A benchmark submitter must maintain and operate effective organisational and administrative arrangements to enable it to identify and manage any conflicts of interest that may arise from the process of making benchmark submissions.

MAR 8.2.8 G RP

In order to identify and manage conflicts of interest as set out in MAR 8.2.7 R a benchmark submitter should:

  1. (1)

    establish, implement and maintain a conflicts of interest policy which

    1. (a)

      identifies the circumstances that constitute, or may give rise to, a conflict of interest arising from its benchmark submissions or the process of gathering information in order to make benchmark submissions; and

    2. (b)

      sets out the approach to managing such conflicts;

  2. (2)

    establish effective controls to manage conflicts of interest between the parts of the business responsible for the benchmark submission and those parts of the business who may use, or have an interest in, the benchmark rate; and

  3. (3)

    establish effective measures to prevent or limit any person from exercising inappropriate influence over the benchmark submission.

Notification of suspicions of manipulation

MAR 8.2.9 R RP

A benchmark submitter who suspects that any person

  1. (1)

    is manipulating, or has manipulated, a specified benchmark;

  2. (2)

    is attempting, or has attempted, to manipulate a specified benchmark; or

  3. (3)

    is colluding, or has colluded, in the manipulation or attempted manipulation of a specified benchmark;

must notify the FCA without delay.

Record keeping

MAR 8.2.10 R RP

A benchmark submitter must:

  1. (1)

    keep for at least five years:

    1. (a)

      records of its benchmark submissions, as well as all information used to enable it to make a benchmark submission; and

    2. (b)

      reports on the key sensitivities the benchmark submitter may have regarding the specified benchmark it is submitting to, including (but not limited to) the benchmark submitter's exposure to instruments which may be affected by changes in the specified benchmark;

  2. (2)

    provide to the relevant benchmark administrator all information used to enable it to make a benchmark submission on a daily basis; and

  3. (3)

    provide to the relevant benchmark administrator, on a quarterly basis, aggregate information which will allow the benchmark administrator to produce statistics relevant to the specified benchmark as required by MAR 8.3.12 R.

MAR 8.2.11 G RP

The information provided to the benchmark administrator in accordance with MAR 8.2.10R (2) should include:

  1. (1)

    a description of the methodology used to establish the benchmark submission; and

  2. (2)

    if applicable, an explanation of how any quantitative and qualitative criteria were used to establish the benchmark submission.

Auditor’s report

MAR 8.2.12 R RP

A benchmark submitter must appoint an independent auditor to report to the FCA on the benchmark submitter's compliance with the requirements of this section on a regular basis.

MAR 8.2.13 G RP
  1. (1)

    The FCA expects the report required under MAR 8.2.12 R to be issued annually, although the FCA may agree a longer period depending on the benchmark submitter's particular circumstances, including the nature and scale of its engagement in the specified benchmark and the internal framework for monitoring compliance with the requirements of this chapter.

  2. (2)

    A benchmark submitter which proposes to appoint an auditor to report to the FCA under MAR 8.2.12 R on a less frequent than annual basis should notify the FCA explaining why it believes it would be appropriate to do so.

MAR 8.3 Requirements for benchmark administrators

MAR 8.3.1 R RP

A benchmark administrator must establish and maintain effective organisational and governance arrangements to enable it to carry out the activity of administering a specified benchmark.

MAR 8.3.2 R RP

In discharging its duties, the benchmark administrator must have regard to the importance of maintaining integrity of the market and the continuity of the specified benchmark including the need for contractual certainty for contracts which reference the specified benchmark.

MAR 8.3.3 R RP

A benchmark administrator must maintain and operate effective organisational and administrative arrangements to enable it to identify and manage any conflicts of interest that may arise from the process of administering a specified benchmark.

MAR 8.3.4 G RP

The arrangements described in MAR 8.3.3 R should include measures designed to ensure the confidentiality of benchmark submissions and additional information received from benchmark submitters (to the extent that such submissions and information have not been made public by mutual agreement between the benchmark administrator and benchmark submitter), for example, through confidentiality agreements for the benchmark administrator's employees and members of the oversight committee.

MAR 8.3.5 R RP

A benchmark administrator must:

  1. (1)

    appoint a benchmark administration manager with responsibility for oversight of its compliance with this section; and

  2. (2)

    ensure that its benchmark administration manager has a level of authority and access to resources and information sufficient to enable him to carry out that responsibility.

MAR 8.3.6 R RP

A benchmark administrator must:

  1. (1)

    have effective arrangements and procedures that allow the regular monitoring and surveillance of benchmark submissions:

  2. (2)

    monitor the benchmark submissions in order to identify breaches of its practice standards (set out in MAR 8.3.10R (1)) and conduct that may involve manipulation, or attempted manipulation, of the specified benchmark it administers and provide to the oversight committee of the specified benchmark timely updates of suspected breaches of practice standards and attempted manipulation; and

  3. (3)

    notify the FCA and provide all relevant information where it suspects that, in relation to the specified benchmark it administers, there has been:

    1. (a)

      a material breach of the benchmark administrator's practice standards (set out in MAR 8.3.10R (1));

    2. (b)

      conduct that may involve manipulation or attempted manipulation of the specified benchmark it administers; or

    3. (c)

      collusion to manipulate or to attempt to manipulate the specified benchmark it administers.

MAR 8.3.7 G RP

The arrangements and procedures referred to in MAR 8.3.6R (1) should include (but not be limited to):

  1. (1)

    carrying out statistical analysis of benchmark submissions, using other relevant market data in order to identify irregularities in benchmark submissions; and

  2. (2)

    an effective whistle-blowing procedure which allows any person on an anonymous basis to alert the benchmark administrator of conduct that may involve manipulation, or attempted manipulation, of the specified benchmark it administers.

Oversight committee

MAR 8.3.8 R RP

A benchmark administrator must establish an oversight committee (which must be a committee of the benchmark administrator) which includes representatives of benchmark submitters, market infrastructure providers, users of the specified benchmark and at least two independent non-executive directors of the benchmark administrator approved to carry out the non-executive director function.

MAR 8.3.9 G RP

The oversight committee should be responsible for:

  1. (1)

    considering matters of definition and scope of the specified benchmark;

  2. (2)

    exercising collective scrutiny of benchmark submissions if and when required; and

  3. (3)

    notifying the FCA of benchmark submitters that fail on a recurring basis to follow the practice standards (as set out in MAR 8.3.10R (1)) for the specified benchmark.

MAR 8.3.10 R RP

The benchmark administrator through its oversight committee must:

  1. (1)

    develop practice standards in a published code which set out the responsibilities for benchmark submitters, the benchmark administrator, and its oversight committee in relation to the relevant specified benchmark;

  2. (2)

    undertake regular periodic reviews of:

    1. (a)

      the practice standards mentioned in MAR 8.3.10R (1);

    2. (b)

      the setting and definition of the specified benchmark it administers;

    3. (c)

      the composition of benchmark submitter panels; and

    4. (d)

      the process of making relevant benchmark submissions; and

  3. (3)

    before making any changes as a result of such review:

    1. (a)

      notify the FCA;

    2. (b)

      after doing so, publish a draft of the proposed changes and a notice that representations about the proposed changes may be made to the benchmark administrator within a specified time; and

    3. (c)

      have regard to any such representations.

Review of the benchmark and publication of statistics

MAR 8.3.11 R RP

The benchmark administrator must provide to the FCA, on a daily basis, all benchmark submissions it has received relating tothe specified benchmark it administers.

MAR 8.3.12 R RP

A benchmark administrator must publish quarterly aggregate statistics outlining the activity in the underlying market relevant to the specified benchmark.

Adequate financial resources

MAR 8.3.13 R RP

Notwithstanding any other financial resource requirements that may apply, a firm whose permitted activities include administering a specified benchmark must:

  1. (1)

    be able to meet its liabilities as they fall due; and

  2. (2)

    maintain, at all times, sufficient financial resources to be able to cover the operating costs of administering the specified benchmark for a period of at least six months.

MAR 8.3.14 G RP

MAR 8.3.13 R sets out the minimum amount of financial resources a benchmark administrator must hold in order to carry out administering a specified benchmark. However, the FCA expects benchmark administrators to normally hold sufficient financial resources to cover the operating costs of administering the specified benchmark for a period of nine months.

MAR 8.3.15 G RP

The financial resources in respect of the requirement in MAR 8.3.13R (2):

  1. (1)

    can includeliquid financial assets held on the balance sheet of the benchmark administrator, for example, cash and liquid financial instruments where the financial instruments have minimal market and credit risk and are capable of being liquidated with minimal adverse price effect, common stock, retained earnings, disclosed reserves and other instruments generally classified as common equity tier one capital or additional tier one capital; and

  2. (2)

    should not include holdings of the benchmark administrator's own securities or those of any undertaking in the benchmark administrator's group; any amount owed to the benchmark administrator by an undertaking in its group under any loan or credit arrangement, and any exposure arising under any guarantee, charge or contingent liability.

MAR 8.3.16 G RP

The FCA may use its powers under section 55L of the Act to impose on a benchmark administrator a requirement to hold additional financial resources to MAR 8.3.13 R if the FCA considers it desirable to meet any of its statutory objectives.