IOSCO creates task force on financial market benchmarks

The International Organization of Securities Commissions (IOSCO) has formed a Board Level Task Force on financial market benchmarks to identify policy issues and develop global guidance and principles for benchmark-related activities of particular relevance to market regulators.

The announcement follows the “significant issues raised by investigations into attempted manipulation of benchmarks and related enforcement actions, in particular the recent incidents involving Libor, Euribor and Tibor”, the organisation said.

The Task Force is composed of members of the IOSCO board. The Task Force is composed of members of the IOSCO board. Martin Wheatley, managing director of the UK Financial Services Authority (UK FSA), and Gary Gensler, chairman of the US Commodity Futures Trading Commission (CFTC), will be co-chairmen.

It will take into account other initiatives by policymakers and stakeholders on benchmarks, and serve as the IOSCO representative, together with the Chairman of the IOSCO Board, in other international initiatives on benchmarking “with a view to avoiding overlap or inconsistencies”.

Gensler said: “When people save money in a money market fund or short-term bond fund, or take out a mortgage for a home or a small-business loan, the rate they receive or pay is often based, directly or indirectly, on Libor. Therefore it is essential that Libor and other financial benchmarks are compiled in a transparent, reliable and honest way.”   

The mandate for the Task Force is to identify benchmark-related issues across securities and derivatives, and other financial sectors and to define the types of benchmarks that are relevant to financial markets.

In addition, it will identify the relevant policy issues including

– exercising appropriate regulatory oversight of the process of benchmarking; 

– having in place robust processes and procedures for benchmark calculation

– constructing credible governance structures, to address conflict of interests in the benchmark setting process;

– ensuring transparency and openness in the benchmarking process; and

– develop global policy guidance and principles, including those related to effective self regulation.

The Task Force will also consider issues related to necessary enforcement powers, information sharing and sanctions regimes in coordination with IOSCO’s expert committees. It aims to produce a consultation report towards the end of this year or early next year, while its work is expected to require at least until the first quarter of 2013 to complete.

IOSCO is recognised as the global standard setter for securities regulation. Its membership regulates more than 95% of the world’s securities markets in 115 jurisdictions.

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