The Financial Stability Board (“FSB”) released the final version of its report on foreign exchange (“FX”) rate benchmarks. In conjunction with this report, IOSCO published a report reviewing the implementation of its Principles for Financial Benchmarks with regard to the administrator of the rate, WM/Reuters 4 p.m. Closing Spot Rate (“WMR”).
The FSB report sets out a number of recommendations to reform the FX markets and benchmark rates that have been identified as preeminent by market participants, including the WMR. The recommendations fall into the following broad categories:
- the calculation methodology of the WMR benchmark rates;
- the publication of reference rates by central banks;
- market infrastructure in relation to the execution of fix trades; and
- the behavior of market participants around the time of the major FX benchmarks (primarily the WMR 4 p.m. London fix).
The IOSCO report explains the findings of IOSCO’s review of the WMR implementation of its Principles for Financial Benchmarks, and sets out:
- the methodology used to conduct the review;
- a discussion of the implementation of each of the principles by the World Markets Company PLC, with distinctions drawn between the currency pairs where relevant; and
- where a principle has yet to be implemented fully, the reasons why, the plans for implementation and the recommended actions.