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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 benchmark2.

2[Note: article 2(2) of the Market Abuse Regulation; article 12 of the Market Abuse Regulation; article 15 of the Market Abuse Regulation, regarding the ongoing market abuse provisions applicable to firms carrying out the activities specified in MAR 8.1.2G.]

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 are not publicly available or1 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.

MAR 8.3.7A R RP

1A benchmark administrator must ensure that the specified benchmark it administers is determined using adequate benchmark submissions.

MAR 8.3.7B G RP

1To ensure it is using adequate benchmark submissions, a benchmark administrator of a specified benchmark that does not have benchmark submitters should use benchmark submissions that are:

  1. (1)

    representative of the state of the market the specified benchmark references; or

  2. (2)

    made available by reliable data sources.

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:1

1
  1. (1)

    1(where applicable) representatives of benchmark submitters;

  2. (2)

    1market infrastructure providers;

  3. (3)

    1users of the specified benchmark; and

  4. (4)

    1at least two independent non-executive directors of the benchmark administrator approved to carry out the non-executive director function.

MAR 8.3.8A R RP

1A benchmark administrator of a specified benchmark that does not have benchmark submitters must consider including in the oversight committee representatives of persons who make benchmark submissions available.

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, for the relevant specified benchmark, set out the responsibilities for: 1

    1
    1. (a)

      1benchmark submitters and (where applicable) persons who make benchmark submissions available;

    2. (b)

      1the benchmark administrator; and

    3. (c)

      1the oversight committee;

  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)

      where applicable the composition of panels of benchmark submitters or other persons who make benchmark submissions available; and1

      1
    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.

MAR 8.3.10A G RP

1For specified benchmarks that do not have benchmark submitters:

  1. (1)

    the practice standards in MAR 8.3.10R (1) should specify data standards, including data quality and the representativeness of benchmark submissions; and

  2. (2)

    the process of making relevant benchmark submissions in MAR 8.3.10R (2)(d) should include processing, considering or using the benchmark submission to determine the specified benchmark it administers.

Review of the benchmark and publication of statistics

MAR 8.3.11 R RP

The benchmark administrator must be able to 1provide to the FCA, on a daily basis, all benchmark submissions it used to determine 1the specified benchmark it administers.

1
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.

Record keeping1

MAR 8.3.12A R RP

1A benchmark administrator must keep records for at least five years of:

  1. (1)

    all benchmark submissions used to determine the specified benchmark it administers; and1

  2. (2)

    the person and, where possible, the individual who made the relevant benchmark submission.1

MAR 8.3.12B G RP

1For a specified benchmark that does not have benchmark submitters, the records in MAR 8.3.12AR (2) should include, where available, information sufficient to identify the person and the individual who made the benchmark submission available to the relevant benchmark administrator.

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 8.3.13A G RP

1A benchmark administrator that administers more than one specified benchmark may comply with its financial resources requirements under MAR 8.3.13R (2) by holding sufficient financial resources to cover the combined operating costs for all specified benchmarks it administers.

MAR 8.3.14 G RP
1
  1. (1)

    1MAR 8.3.13 R sets out the minimum amount of financial resources a benchmark administrator must hold to carry out administering a specified benchmark.

  2. (2)

    1The FCA expects benchmark administrators to:

    1. (a)

      normally hold sufficient financial resources to cover the operating costs of administering the specified benchmark for a period of nine months; and

    2. (b)

      notify the FCA where a benchmark administrator's financial resources fall below these levels (required by MAR 8.3.17 R and SUP 15.3.11 R).

MAR 8.3.15 G RP

To meet the financial resources requirement in MAR 8.3.13R (2), the FCA expects a benchmark administrator to hold both sufficient liquid financial assets and net capital to be able to cover the operating costs of administering the specified benchmark.1

1
  1. (1)

    net capital 1 can include common stock, retained earnings, disclosed reserves, other instruments generally classified as common equity tier one capital or additional tier one capital and may include interim earnings that have been independently verified by the benchmark administrator's auditor1; and

    11
  2. (2)

    should be calculated after deductions for:1

    1
    1. (a)

      1holdings of the firm's own securities or those of any undertaking in the firm'sgroup;

    2. (b)

      1any amount owed to the firm by an undertaking in its group under any loan or credit arrangement;

    3. (c)

      1any exposure arising under any guarantee, charge or contingent liability.

  3. (3)

    1liquid financial assets can include cash or liquid financial instruments held on the balance sheet of the benchmark administrator where:

    1. (a)

      the financial instruments have minimal market and credit risk, and

    2. (b)

      are capable of being liquidated with minimal adverse price effect.

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.

Notifications for breaches1

MAR 8.3.17 R RP

1A benchmark administrator must notify the FCA, as soon as practicable, where it identifies a reasonable possibility of not being able to hold sufficient financial resources to cover the operating costs of administering the specified benchmark for a period of nine months.

MAR 8.3.18 G RP

1 Benchmark administrators are reminded of their obligation under SUP 15.3.11 R to notify the FCA of any significant breaches of rules.

Fair, reasonable and non-discriminatory access to benchmarks

MAR 8.3.19 R RP
  1. (1)

    2A benchmark administrator of a specified benchmark must ensure relevant users are granted non-discriminatory access to:

    1. (a)

      relevant price and data feeds and information on the composition, methodology and pricing of that specified benchmark; and

    2. (b)

      licences or other arrangements to use that specified benchmark;

    for the purpose of clearing and trading by the relevant users.

  2. (2)

    In this section, “relevant user” means:

    1. (a)

      a CCP3;

    2. (b)

      an MTF; and

    3. (c)

      a regulated market.

MAR 8.3.20 R RP

2A benchmark administrator must grant relevant users access for the purpose of clearing and trading to the specified benchmark it administers (including access to information):

  1. (1)

    on a fair, reasonable and non-discriminatory basis; and

  2. (2)

    without undue delay, following a written request by the relevant user.

MAR 8.3.21 R RP
  1. (1)

    2Where a benchmark administrator charges a relevant user a fee for access to the specified benchmark, it must grant the relevant user access at a reasonable commercial price taking into account the price at which access is granted or the intellectual property rights are licensed to other relevant users or any related persons for the purposes of clearing and trading.

  2. (2)

    Different fees can be charged to different relevant users or related persons only where this is objectively justified having regard to reasonable commercial grounds such as the quantity, scope or field of use requested.

MAR 8.3.22 G RP

2In assessing whether the terms of access to a specified benchmark are fair, reasonable and non-discriminatory, the factors the FCA may consider include:

  1. (1)

    the degree of competition and potential competition in the market for the supply of the specified benchmark;

  2. (2)

    whether the aggregate of the fees charged to users of the specified benchmark bears a reasonable relationship to the costs and risks of producing the specified benchmark, including a reasonable return on capital;

  3. (3)

    (where “A”, the benchmark administrator or a member of its group, is active on a downstream market) whether the terms of access granted for the specified benchmark would prevent a competitor as efficient as A’s downstream business from competing effectively on that downstream market on a lasting basis; and

  4. (4)

    whether a benchmark administrator applies dissimilar conditions to equivalent transactions with relevant users or different categories of relevant users, thereby placing them at a competitive disadvantage.

MAR 8.3.23 G RP

2For the purposes of MAR 8.3.20R(2), the FCA would expect access to be provided within three months of a written request.