The Securities Litigation Expert Blog

The International Organization of Securities Commissions has issued a report seeking comment regarding benchmarks.  (Press Release, Report)  The goal of the report is:

To address concerns regarding the potential inaccuracy or manipulation of Benchmarks and maintain confidence in the credibility of Benchmarks, the Task Force is seeking to articulate policy guidance and principles for Benchmark-related activities (including those related to effective self-regulation) and consider issues related to transition. To inform this work, the Task Force will:

• identify Benchmark-related issues across securities and derivatives and other financial sectors and identify the relevant policy issues including:


• the appropriate level of regulatory oversight of the process of Benchmarking;


• the standards that should apply to methodologies for Benchmark calculation, and credible governance structures to address conflict of interests in the Benchmark setting process within the reporting financial institutions as well as in the oversight bodies; and


• the appropriate level of transparency and openness in the Benchmarking process.

The Consultation Report also discusses potential provisions for replacement and issues Market Participants might confront when seeking to make a transition to a new or different Benchmark.

Obviously, what is on everyone's mind is how to insure benchmark integrity post-Libor.  My suggestion is to get away from the committee and let the market set the rate.

See our previous coverage of the IOSCO here and here.

Comments can be submitted on or before February 11th, 2013.

Joshua Gallu of Bloomberg reports here that many of the worlds benchmarks could be subject to the same type of manipulation seen with LIBOR.  How?:

Fewer than half of the benchmark interest rates surveyed in the U.S., Europe and Asia were based on actual transactions, according to a confidential International Organization of Securities Commissions discussion paper obtained by Bloomberg News. Instead, the rates were calculated by methodologies that were unclear, not transparent and only rarely subject to specific regulatory standards or obligations, the group said.

I think most people would be shocked to discover that less than half the interest rate indexes were based on transactions.  We have previously commented on this here.

The press release by the industry group IOSCO can be found here.