Regulation (EU) 2016/1011 on indices used as benchmarks

The CSSF would like to remind that the provisions of Regulation (EU) 2016/1011 on indices used as benchmarks (the “Regulation”) will be applicable as from 1 January 2018.

This Regulation mainly targets three types of market participants, i.e.:

• benchmark administrators;
• contributors providing input data for benchmarks and
• supervised entities that use benchmarks in financial instruments and financial contracts or to measure the performance of investment funds.

As regards the use of benchmarks by supervised entities, the CSSF wishes to draw the attention of supervised entities in particular to certain provisions that will have an impact on them if they fall within the scope of their provisions.

In accordance with the provisions of Article 29(1) of the Regulation, a supervised entity as defined in point (17) of Article 3(1) may use a benchmark or a combination of benchmarks in the Union that falls within the scope of the Regulation, if the benchmark is provided by an administrator located in the Union and included in the public register of administrators and benchmarks established and maintained by ESMA and referred to in Article 36 of the Regulation (the “Register”), or any other benchmark included in this Register.

In this respect, it should be noted that said article provides that the registration on the Register is reserved for:

(i) a natural or legal person located in the Union that intends to act as an administrator and that has received an authorisation or registration in this respect in accordance with the provisions of Article 34 of the Regulation; and

(ii) a benchmark or a combination of benchmarks provided by an administrator located in a third country as well as the administrator in question provided that:

a. the European Commission has adopted an equivalence decision for the third country in question as provided for by the provisions of Article 30 of the Regulation;

b. the administrator in question has obtained prior recognition by the competent authority of its Member State of reference in accordance with the provisions of Article 32 of the Regulation; or

c. the benchmark or the combination of benchmarks in question has been subject to endorsement as provided for in Article 33 of the Regulation

In order to avoid disruption of markets, Article 51 of the Regulation provides for, in limited circumstances, a transitional regime of two years as from its entry into application.

As regards the documentation used by the supervised entities, it should be noted that, in accordance with the provisions of Article 29(2) of the Regulation, where a prospectus to be published in accordance with Directive 2003/71/EC or Directive 2009/65/EC relates to transferable securities or any other investment product based on a benchmark, the issuer, offeror or person asking for admission to trading on a regulated market must ensure that the prospectus also includes information stating clearly and prominently whether or not the benchmark is provided by an administrator registered in the Register. In this context, it should be noted that the prospectuses for securities must include this information as from 1 January 2018. As regards prospectuses relating to UCITS approved prior to 1 January 2018 and using a benchmark, the underlying documents must be updated as soon as possible or within twelve months from this date at the latest.

In this context, reference should be made to Article 28(2) of the Regulation which provides that the supervised entities that use a benchmark must produce and maintain robust written plans setting out the actions they would take in the event of changes to or cessation of a benchmark. These entities must reflect these plans in the contractual relationship with their clients.

Any questions in relation to the application of this Regulation can be addressed by email to benchmark@cssf.lu.