CSA NI 25-102 Designated Benchmarks

April 30, 2019

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CSA NI 25-102 Designated Benchmarks

Letter Summary:

The proposed new rules would regulate, for the first time, the designation and regulation of benchmarks, including specific requirements for critical benchmarks, interest rate benchmarks and regulated-data benchmarks. The rules would also regulate the administrators of such benchmarks, contributors of data used to determine the benchmarks and certain users of those benchmarks, particularly those already regulated under securities legislation. It is currently proposed that only Refinitive Benchmark Services (UK) Limited (RBSL) would be designated as an administrator and only the Canadian Dollar Offered Rate (CDOR) and the Canadian Overnight Repo Rate Average (CORRA) would be designated critical and interest rate benchmarks. Currently, the EU BMR has similar regulations and RBSL is an authorized administrator under those rules. The proposed NI was developed to establish an EU BMR equivalent regime in order to allow EU institutional market participants to continue to use Canadian designated benchmarks under their equivalency provisions, as well as to protect Canadian market participants.

Overview of the Council’s Comments:

The CAC is supportive of the provisions contained in the Proposal. We supported and emphasized the importance of having a governance framework for administrators including policies designed to mitigate conflicts, which are pronounced when a benchmark contributor, administrator and user are within the same corporate family. We advocated a preference for utilizing a model used for exchanges and other marketplaces, or failing that, the passport model in a manner that mirrors the model currently successfully used by DROs and CROs. Overall, the council believes the direction of the proposal is aligned with the CFA Institute Global Investment Performance Standards (GIPS®) that aim to enable investors to compare performance with confidence.