07 October 2016

Regulation of financial benchmarks: new recommendations

This article was written by Anne-Marie Neagle and Holly Fairhurst.

On Tuesday 4 October 2016, the Treasurer released the Council of Financial Regulators’ (CFR) advice to the Government proposing strengthened regulation of financial benchmarks.

What has happened?

The Treasurer has released advice received from the CFR, which includes a number of specific recommendations for the regulation of financial benchmarks and was jointly developed by the Australian Securities and Investments Commission (ASIC), the Reserve Bank of Australia (RBA), the Australian Prudential Regulation Authority (APRA) and the Commonwealth Treasury.

The advice was provided at the request of the Treasurer and followed CFR stakeholder consultation on reform options.

The Treasurer has stated that this “package will ensure our regulatory regime is as modern and secure as any comparable regime found in equivalent foreign jurisdictions, such as the United Kingdom and the European Union.”

What are the recommendations?

Key aspects of the CFR recommendations include that:

  • (new ASIC licensing regime) administrators of “significant benchmarks” should be required to hold a new, standalone “benchmark administration licence”, unless exempted.

    The CFR has recommended that “significant benchmarks” should be identified by reference to specified criteria, which in broad terms are intended to identify systemically important benchmarks and benchmarks that will have a significant impact on investors. However, for certainty, the CFR has also recommended that the implementing legislation or regulations should include an initial list of significant benchmarks, and that ASIC should be empowered to prescribe additional (or remove) significant benchmarks from time to time.

    Based on the criteria recommended, the CFR anticipates that the Bank Bill Swap Rate (BBSW), the Standard & Poor’s (S&P)/Australian Securities Exchange (ASX) 200 index, the ASX Bond futures settlement price, the cash rate and the Consumer Price Index (CPI) are likely to be considered significant, and has noted that the WM/Reuters Australian dollar foreign exchange benchmark could also be considered significant;

  • (new ASIC rule-making power – regulated benchmarks) ASIC should be empowered to make rules imposing obligations on licensed benchmark administrators, which should align with relevant International Organisation of Securities’ Commission’s (IOSCO) principles but may also expand those obligations in some cases;

  • (new ASIC rule-making power – submitters) although benchmark administrators should retain primary responsibility for operating a benchmark, ASIC should be empowered to make rules on regulatory matters related to benchmark submission (such as record keeping, governance of the submission process and data quality). The CFR has also recommended that the regime should enable the rules to apply to a range of entities that may make a submission to a significant benchmark;

  • (power to compel submission) ASIC should be empowered to make rules that could compel submission to a significant benchmark as a last resort; and

  • (new specific criminal and civil offences) new specific criminal and civil offences of benchmark manipulation applicable to all financial benchmarks (not just significant benchmarks) should be introduced.

The recommendations propose that the new regulations should apply to significant benchmarks regardless of the domicile of the administrator, and that the new offences should extend to conduct having a relevant impact in Australia, even if that conduct occurs outside Australia.


If you would like to discuss how these developments may affect your organisation, please contact one of our key contacts.

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