The purpose of this chapter is to set out the requirements that apply to firms involved in the provision of, or contribution to, benchmarks, as follows:3

1. (1)

   MAR 8.4 (Third country benchmark contributors) sets out the requirements that apply to third country benchmark contributors that are not supervised entities, but would be if they were located in the UK4. These rules apply requirements mirroring those which apply to benchmark contributors that are in scope of the benchmarks regulation.3

2. (2)

   MAR 8.5 (Regulated benchmark administrators) sets out some Handbook requirements that apply to regulated benchmark administrators (who have been authorised under the benchmarks regulation for the activity of administering a benchmark).3

3. (3)

   MAR 8.6 (Responsibility for benchmark activities: benchmark contributors) sets out requirements in relation to responsibility for contributing input data to a BMR benchmark administrator. 3

4. (4)

   MAR 8.7 (Procedures for exercising powers in relation to critical benchmarks) sets out the procedure for imposing requirements under articles 21 and 23 of the benchmarks regulation in relation to critical benchmarks.3

[Note: articles 2(2) and 12 of the Market Abuse Regulation and3 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, and the benchmarks regulation setting out the requirements applicable to firms administering, contributing to and using a benchmark3.]

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1. (1)

   A firm may allocate the responsibility in MAR 8.5.2R to more than one person.4

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2. (2)

   If the firm does so, it should not divide the responsibility between them. Instead each person should be responsible for all aspects of the role.4

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3. (3)

   For example, the role could be allocated to more than one person:4

   1. (a)

      as part of a job share; or4

   2. (b)

      where departing and incoming senior managers work together temporarily as part of a handover.4

1. (1)

   4The FCA expects that a person who has the responsibility in MAR 8.5.2R will:

   1. (a)

      be sufficiently senior and credible; and

   2. (b)

      have sufficient resources and authority;

   to be able to exercise their management and oversight responsibilities effectively.

2. (2)

   One element of a manager’s seniority is the degree to which they can and do make decisions without prior approval and exercise judgment and discretion.

1. (1)

   1Article 19 of the benchmarks regulation states that Annex II to that regulation applies to the provision of a commodity benchmark instead of Title II to the regulation (save where Annex II is disapplied by article 19).

2. (2)

   Paragraph 14(a) of Annex II to the benchmarks regulation requires an Annex II benchmark administrator to ensure that it has in place segregated reporting lines amongst its managers, assessors and other employees and from the managers to the administrator’s most senior level management and its board to ensure:

   1. (a)

      that the administrator satisfactorily implements the requirements of the benchmarks regulation; and

   2. (b)

      that responsibilities are clearly defined and do not conflict or cause a perception of conflict.

A firm4 may comply with the requirement in MAR 8.5.2R(4) or4MAR 8.5.4R(2) to notify the FCA of the identity of the manager(s) concerned4 by including that responsibility in that person’s statement of responsibilities.

1. (1)

   1The guidance in (2) and (3) applies to regulated benchmark administrators other than Annex II benchmark administrators.

2. (2)

   Article 14(1) of the benchmarks regulation requires a regulated benchmark administrator to establish adequate systems and effective controls to ensure the integrity of input data in order to be able to identify and report to the FCA3 any conduct that may involve manipulation or attempted manipulation of a benchmark, under the Market Abuse Regulation.

3. (3)

   For the avoidance of doubt, the FCA expects a regulated benchmark administrator to notify the FCA without delay of any notification it receives from a contributor about conduct that may involve manipulation or attempted manipulation of a benchmark under the Market Abuse Regulation.

1A regulated benchmark administrator that administers more than one critical benchmark may comply with its financial resources requirements under MAR 8.5.8R(2) by holding sufficient financial resources to cover the combined operating costs for all critical benchmarks it administers.

1. (1)

   1MAR 8.5.8R sets out the minimum amount of financial resources a regulated benchmark administrator must hold to carry out administering a benchmark in relation to a critical benchmark.

2. (2)

   The FCA expects regulated benchmark administrators administering a critical benchmark to:

   1. (a)

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

   2. (b)

      notify the FCA where a regulated benchmark administrator’s financial resources fall below these levels (required by MAR 8.5.13R and SUP 15.3.11R).

1To meet the financial resources requirement in MAR 8.5.8R(2), the FCA expects a regulated benchmark administrator to hold both sufficient liquid financial assets and net capital to cover the operating costs of administering the critical benchmark(s). In particular:

1. (1)

   net capital can include common stock, retained earnings, disclosed reserves, or 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 an auditor.

2. (2)

   net capital should be calculated after deductions for:

   1. (a)

      holdings of the regulated benchmark administrator’s own securities or those of any undertakings in the regulated benchmark administrator’s group;

   2. (b)

      any amount owed to the regulated benchmark administrator by an undertaking in its group under any loan or credit arrangement; and

   3. (c)

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

3. (3)

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

   1. (a)

      have minimal market and credit risk; and

   2. (b)

      are capable of being liquidated with minimal adverse price effect.

1The FCA may use its powers under section 55L of the Act to impose on a regulated benchmark administrator subject to MAR 8.5.8R a requirement to hold additional financial resources to MAR 8.5.8R if the FCA considers that desirable to meet any of its operational objectives.

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

1. (1)

   1The FCA expects a benchmark contributor to ensure a member of its senior personnel is responsible for the process of contributing input data to a BMR benchmark administrator regardless of whether the contribution is provided from the UK or from elsewhere.

2. (2)

   1The requirement in MAR 8.6.2R applies regardless of whether the benchmark contributor contributes input data from the UK or from elsewhere.

1A UK benchmark contributor or third country benchmark contributor which is an SMCR firm2 may comply with the requirement in MAR 8.6.2R to notify the FCA of the senior personnel responsible for the process for contributing input data to a BMR benchmark administrator by including that responsibility in that person’s statement of responsibilities.

1This section applies to authorised persons and to unauthorised persons.

1. (1)

   1The purpose of this section is to set out the procedures which the FCA will follow when exercising its powers under articles 21 and 23 of the benchmarks regulation.

2. (2)

   MAR 8.7.9G contains a table of definitions for the purpose of this section. Those defined terms are not shown in italics.

1. (1)

   1The FCA has been designated as the UK competent authority for the purpose of the benchmarks regulation.

2. (2)

   The benchmarks regulation confers various directly applicable powers on the FCA2 in relation to critical benchmarks. In particular:

   1. (a)

      article 21(3) of the benchmarks regulation gives a the FCA2 the power to compel the administrator of a critical benchmark to continue publishing the critical benchmark for up to 24 months; and

   2. (b)

      article 23(6) of the benchmarks regulation gives a the FCA2 the power to take various steps where it considers that the representativeness of a critical benchmark is put at risk. That includes the power to require supervised entities to contribute input data to the administrator of a critical benchmark for up to 24 months.

3. (3)

   The two powers in (a) and (b) above are referred to in this section as the “compulsion powers”.

1. (1)

   Articles 21 and 23 of the benchmarks regulation set out the circumstances in which the FCA2 may exercise the compulsion powers.

2. (2)

   In some cases, the FCA2 may only have a short period in which to decide whether to exercise a compulsion power.

3. (3)

   Where the FCA considers it necessary to exercise a compulsion power, it will make that decision on the basis of the information available to it at that time.

4. (4)

   The benchmarks regulation does not require the FCA2 to consult on the use of compulsion powers 2.

5. (5)

   Given that the compulsion powers may need to be exercised within short timescales, the FCA does not expect to consult on the use of its compulsion powers (other than consulting other regulatory bodies where required by the Act or the benchmarks regulation).

6. (6)

   In some cases, it may be necessary to exercise compulsion powers in relation to more than one person. In those circumstances, it may be necessary to address a written notice under this section to more than one person.

7. (7)

   The FCA will review a decision to exercise a compulsion power in the circumstances described in this section.

1If the FCA decides to exercise a compulsion power in respect of a person (P) (whether a supervised entity or an administrator), the FCA will give P a written notice which:

1. (1)

   gives details of the decision (“the First Decision”);

2. (2)

   states the FCA’s reasons for the First Decision;

3. (3)

   states the date on which the First Decision takes effect; and

4. (4)

   states that P may make representations to the FCA in relation to the First Decision within a period specified in the written notice.

In some cases, the decision in MAR 8.7.5G may take effect immediately. This means that in some cases:

1. (1)

   P will be required to comply with the decision from the date of the written notice; and

2. (2)

   the decision will continue to have effect pending consideration of any representations made by P.

1. (1)

   1Where P makes written representations to the FCA in relation to the First Decision in accordance with MAR 8.7.5G(4), the FCA will review that decision and will decide whether to maintain, vary or revoke it.

2. (2)

   In conducting the review in (1), the matters which the FCA may have regard to include:

   1. (a)

      the written representations made by P in relation to the First Decision; and

   2. (b)

      any additional information relevant to the exercise of the compulsion power (whether obtained before or after the First Decision).

3. (3)

   The review in (1) will be carried out by:

   1. (a)

      a senior FCA staff member who did not participate in making the First Decision; or

   2. (b)

      two or more senior FCA staff members including at least one person who did not participate in making the First Decision.

4. (4)

   When the FCA has completed the review in (1), the FCA will give P a written notice which:

   1. (a)

      gives details of the decision in response to the review (“the Second Decision”);

   2. (b)

      states the FCA’s reasons for the Second Decision; and

   3. (c)

      states the date on which the Second Decision takes effect.

1. (1)

   The FCA may, on its own initiative, decide to vary or revoke a requirement imposed under a compulsion power (an Own Initiative Variation or Own Initiative Revocation).

2. (2)

   For instance, the FCA may decide to vary or revoke a requirement imposed under a compulsion power:

   1. (a)

      where the FCA becomes aware of new information which is material to that requirement; or

   2. (b)

      to extend the duration of the requirement in accordance with article 21(3) or article 23(6)(b) of the benchmarks regulation; or

   3. (c)

      as result of a review under article 21(3) or article 23(9) of the benchmarks regulation.

3. (3)

   The FCA will treat an Own Initiative Variation as a new First Decision and will follow the procedures in MAR 8.7.5G and MAR 8.7.7G for the purpose of that decision.