Published On: Tue, Sep 30th, 2014

IOSCO Reviews Implementation of Significant Foreign Exchange Benchmark

Greg Medcraft IOSCO Chairman

Greg Medcraft IOSCO Chairman

IOSCO’s Review of the Implementation of IOSCO’s Principles for Financial Benchmarks by WM in respect of the WM/Reuters 4.p.m Closing Spot Rate was published 30 September, as part of the Financial Stability Board’s (FSB) report on Foreign Exchange Benchmarks.

The IOSCO report explains the findings of IOSCO´s review of the implementation of its Principles for Financial Benchmarks, in regard to the WM/Reuters 4 p.m. Closing Spot Rate by The World Markets Company PLC (WM), which is the administrator of the rate.

This report was prepared by a Review Team constituted by IOSCO’s Task Force on Financial Benchmarks and Assessment Committee members, in response to a request from the FSB for IOSCO to undertake a formal review of the closing spot rate against the Benchmark Principles. The FSB report published today sets out a number of recommendations for reform in the FX markets, and in particular the benchmark rates.

The IOSCO Benchmark Principles were published in July 2013 with the aim of creating an overarching framework for benchmarks used in financial markets. These principles address benchmark governance, benchmark and methodology quality, and accountability mechanisms, in an effort to promote the reliability of benchmark determinations.

The Review Team assessed WM’s policies and practices as of 2 May 2014, and analysed the implementation of each of the Benchmark Principles. It found that WM had implemented some principles but still needed to do substantial work to implement others. The Review Team has identified recommended actions that WM could take to improve its implementation of the Principles. It notes that many of the recommended actions are already covered by reforms that WM is in the process of implementing to improve its current policies and practices.

The Review Team also notes that the review was conducted under a tight schedule that limited the opportunity for team members and WM to exchange views on its policies and practices. IOSCO recommends a subsequent review in mid-2015 to consider the implementation of the Principles.

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