UK Benchmark Regulation and European Benchmark Regulation
The FTSE Russell governance framework is designed to meet the requirements of the European regulation on indices used as benchmarks in financial instruments and financial contracts or to measure the performance of investment funds (EU BMR) that applied from 1 January 2018 and the retained EU law in the UK (UK BMR) that took effect in the United Kingdom at the end of the EU Exit Transition Period on 31 December 2020. The UK’s Financial Conduct Authority (FCA) has granted FTSE International Limited authorisation as a benchmark administrator and FTSE International Limited is listed on the FCA Benchmarks Register.
This authorisation is comprehensive across asset classes, and covers the FTSE, Russell, FTSE Canada equity and fixed income indices that are known to be used as benchmarks in the UK.
With regard to the UK’s departure from the EU, the EU third country transitional provisions currently provide for continued provision of benchmarks administered by FTSE International Limited to EU users as a non-EU based administrator up until 31 December 2025. FTSE Russell is part of an international group, and we remain fully committed to providing a seamless service to our clients given our global reach and significant infrastructure in a number of geographies across the UK, Europe, United States and Asia.
The fixed income indices acquired from Citigroup Indices LLC in August 2017 will continue to be administered by the US-based entity, FTSE Fixed Income LLC, according to the EU BMR’s and UK BMR’s third country transitional provisions.
IOSCO principles
FTSE Russell has issued a Statement of Compliance with respect to the recommendations made by the International Organization of Securities Commissions (IOSCO) in the Principles for Financial Benchmarks Final Report (the IOSCO Principles). Independent assurance of the assertions by FTSE Russell in its Statement of Compliance has been received from KPMG LLP. FTSE Russell fully embraces the IOSCO Principles and endorses IOSCO’s objective to address conflicts of interest in the benchmark-setting process, enhance the reliability of benchmark determinations and promote transparency and openness.
ESMA guidelines on ETFs and other UCITS issues
ESMA’s guidelines on ETFs and other UCITS issues, first published in December 2013 and updated in August 2014, require that the financial indices that form the basis of index-tracking UCITS should meet certain requirements with respect to, inter alia, diversification limits, the transparency of the methodology and the availability of the weights of the index constituents.
To assist our index subscribers in undertaking a compliance review of the financial indices that form the basis of their UCITS and UCITS ETFs products, FTSE Russell has published a statement that summarises FTSE Russell’s position in relation to the ESMA Guidelines.
To support the statement, the following information is publicly available online:
Qualified Indices under Section 871(m) of the US Internal Revenue Code and Treasury Regulation Section 1.871-15
Section 871(m) of the Internal Revenue Code (26 USC 871(m)) seeks to ensure that non-US persons cannot avoid withholding tax on US-sourced dividend payments through the use of financial derivatives. Save for the exemption provided by Treasury Regulation 1.871-15, such financial derivatives could include derivatives on financial indices.
To assist our index subscribers in undertaking a compliance review of the financial indices that form the basis of financial derivatives, FTSE Russell has published a statement that summarises certain information relating to FTSE Russell indices that may be relevant to a subscriber's consideration of its position in relation to Section 871(m) of the US Internal Revenue Code and Treasury Regulation Section 1.871-15.
To support the statement, the following information is publicly available online:
- 871(m) factsheets for indexes known to form the basis of financial derivatives
- FTSE Russell index-linked derivatives
Other, generic information is also available online:
Markets in Financial Instruments Regulation (“MiFIR”)
FTSE Russell licences applicable benchmarks required by relevant central counterparties (CCPs) and trading venues under Article 37 and/or Article 38 of MiFIR, pursuant to its derivatives licence agreement. CCPs and trading venues wishing to enter into such a licence should contact derivatives@ftserussell.com.
Sustainable investment metrics
The amendments to the European Regulation on indices used as benchmarks in financial instruments and financial contracts or to measure the performance of investment funds (the EU BMR) introduced in November 2019 require administrators to explain how key elements of their benchmark methodologies reflect environmental, social and governance (ESG) factors. The ESG factors to be considered are prescribed in the regulation and these data tables provide the corresponding metrics for the benchmarks administered by FTSE International Limited which pursue ESG objectives.
Japanese Financial Services Agency’s (FSA) Code of Conduct for ESG Evaluation and Data Providers
LSEG endorses the Japanese Financial Services Agency’s Code of Conduct for ESG Evaluation and Data Providers and welcomes their continued efforts in supporting enhanced environmental, social, and governance standards in its markets, in line with the IOSCO principles.
It is a positive step toward improving the reliability, comparability and interpretability of ESG ratings and data products while remaining sufficiently flexible in a rapidly developing space. LSEG’s FTSE Russell and LSEG Data & Analytics businesses will seek to comply with the Code and its six core principles.
You can find FTSE Russell and LSEG’s Data & Analytics’ specific compliance with each of the principles and guidelines of the Code of Conduct.
