Designated Benchmarks and Standards for Benchmark Administrators

0 Comments

On September 15, 2023, the Minister of Finance approved Order number V-1.1-2023-13 concerning the Regulation 25-102, which pertains to Designated Benchmarks and Benchmark Administrators. This order is within the context of the Securities Act (chapter V-1.1) and outlines regulatory measures that the Autorité des marchés financiers (AMF) can enact regarding benchmark standards.

The approval process for this regulation is rooted in specific provisions of the Securities Act. Sections 331.1 and 331.2 of the Act empower the AMF to create regulations concerning various benchmarks. These include benchmarks that influence financial instruments and market practices.

This regulation addresses the responsibilities and requirements for both designated benchmarks and the administrators overseeing them. The aim is to improve transparency, consistency, and reliability within the financial markets concerning benchmark methodologies.

The regulation defines what constitutes a designated benchmark, establishing standards that these benchmarks must meet. It also sets forth the responsibilities of benchmark administrators, including governance structures, data management practices, and the processes for determining and publishing benchmarks.

The regulation requires that benchmark administrators maintain robust internal controls and risk management frameworks. This is crucial for safeguarding against potential manipulation and ensuring that benchmarks accurately reflect market conditions. By establishing clear guidelines and oversight mechanisms, the regulation seeks to mitigate risks associated with benchmarks, which play a vital role in financial markets, including interest rate swaps, bonds, and other financial instruments.

With the increasing complexity of financial products and the reliance on benchmarks in pricing and valuation, a regulatory framework that governs how benchmarks are determined and administered is, in the opinion of the Quebec government, essential. Its goal is to improve market confidence and stability, and foster a more transparent and reliable financial system.

By establishing clear standards and responsibilities for designated benchmarks and their administrators, the regulation aims to strengthen market integrity, protect investors, and adapt to the rapidly changing financial landscape.

Quebec (MO 2023-13) September 27, 2023