EUROPE: ESMA Updates Brexit Statement on Provisions of the Benchmark Regulation (BMR)

Wednesday March 24 2021

The European Securities and Markets Authority (ESMA) has updated its statement on the application of key provisions of the Benchmark Regulation (BMR).

This update concerns ESMA’s previous statements that were issued in March and October 2019 as well as in October 2020, respectively. The latest update specifies the EU’s regulatory approach towards UK-based third country benchmarks as well as UK endorsed and recognised benchmarks.

The October 2020 statement needed to be revised as the EU BMR transitional provision had been updated in the context of the recent BMR reform.

BMR: ESMA Register of Administrators and 3rd Country Benchmarks

On 31 January 2020, as the EU-UK Withdrawal Agreement entered into force, the UK withdrew from the EU and officially became a third country. The Withdrawal Agreement provided for a transition period which ensured that EU law continued to apply to the UK from 1 February 2020 to 31 December 2020. At the end of the transition period, the UK left the Single Market 2 .

Now that the Brexit transition period has ended, UK based administrators that were initially included in the “ESMA register of administrators and third-country benchmarks” (ESMA register)3 have been deleted as the BMR is no longer applicable to UK based benchmark administrators. UK based administrators that were originally included in the ESMA register as EU administrators, are now qualified as third country administrators (for which the BMR foresees different regimes to be included in the ESMA register, being equivalence, recognition or endorsement).

However, due to the fact that recently the BMR transitional period, as defined in BMR Article 51(5) 4 has been extended to 31 December 20235 , the change in the ESMA register does not yet have an effect on the ability of EU27 supervised entities to use the benchmarks provided by any third country administrators, including UK ones.

During the BMR transitional period, third country benchmarks can still be used by supervised entities in the Union if the benchmark is already used in the Union as a reference for financial instruments, financial contracts, or for measuring the performance of an investment fund.

Therefore, EU supervised entities can until 31 December 2023 use third country UK based benchmarks even if they are not included in the ESMA register. In the absence of an equivalence decision by the European Commission, UK based administrators have until the end of the extended BMR transitional period (31 December 2023) to apply for recognition or endorsement in the EU, in order for the benchmarks provided by these UK based administrators to be included in the ESMA register again

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