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IOSCO moves to curb benchmark manipulation by stock exchanges

By  NKIRUKA NNOROM

In a bid to stop possible manipulation of its set benchmarks by member stock exchanges,the International Organization of Securities Commissions, IOSCO, has constituted a Board Level Task Force on Financial Market benchmarks.

The Commission said that the recent move became necessary following the outcome of investigations into an attempted manipulation of the benchmarks and related enforcement actions, especially the recent incidents involving the London Interbank Offer Rate, LIBOR, European Interbank Offer Rate,EURIBOR and the Japanese equivalent, TIBOR.

Accordingly, the task force is saddled with the responsibility of identifying relevant benchmark-related policy issues with a view to developing global policy guidance and principles for benchmark-related activities of particular relevance to market regulators, including those related to self regulation.

It would also ensure that it put in place robust processes and procedures for benchmark calculation, and constructing credible governance structures, to address conflict of interests in the benchmark setting process as well as ensuring transparency and openness in the benchmarking process.

The high level Task Force is composed of members of the IOSCO Board and will be chaired by Martin Wheatley, the Managing Director of the UK Financial Services Authority (UK FSA), and Gary Gensler, the Chairman of the US Commodity Futures Trading Commission (CFTC), IOSCO said in a statement on Friday.

The Commission noted in the statement that the Task Force would take into account other relevant initiatives by policymakers and stakeholders on benchmarks, and serve as the IOSCO representative, together with the Chairman of the IOSCO Board, in any other international work initiatives on benchmarking, with a view to avoiding overlap or inconsistencies.

“As the global standard setter in the securities area, IOSCO is committed to taking necessary steps to prevent the manipulation of benchmarks and restore confidence in the use of those benchmarks in global financial markets.

Benchmarks are critical to the pricing of many financial instruments. Doubts about the integrity and accuracy of benchmarks will undermine market confidence, distort the real economy, and potentially cause losses to investors and market participants,” the statement said.

Confidence
The Chairman of the IOSCO Board, Masamichi Kono, stated, “IOSCO, as the international organization of financial market regulators, is firmly committed to restoring confidence in benchmarking activities globally, and will carry forward the needed work expeditiously through this Task Force.

“Benchmarks in use across global financial markets constitute the very foundation of free, fair and transparent market transactions, and doubts over their integrity and sound operation must be removed.”

Martin Wheatley, Managing Director of the UK FSA and Chief Executive Designate of the UK Financial Conduct Authority, said, “given the global nature and extensive use of benchmarks in a wide range of financial markets and products, it is important to develop internationally consistent principles that ensure their credibility and integrity.”


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