European Benchmark Regulation
The FTSE Russell governance framework is designed to meet the requirements of the European benchmark regulation (EU BMR) that applies from 1 January 2018. The UK’s Financial Conduct Authority (FCA) has granted FTSE International Limited authorization as a benchmark administrator under the EU BMR. FTSE International Limited is listed on the FCA register and appears on the ESMA register for administrators. This authorization is comprehensive across asset classes, and covers the FTSE, Russell, FTSE Canada and FTSE MTS equity and fixed income indexes that are known to be used as benchmarks in the European Union. The fixed income indexes 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 third country transitional provisions until such time as the administration of those indexes has been assumed by FTSE International Limited. Further details are available here.
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 indexes 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 clients in undertaking a compliance review of the financial indexes that form the basis of their UCITS and UCITS ETFs products, FTSE Russell has published a statement that summarizes FTSE Russell’s position in relation to the ESMA Guidelines.
To support the statement, the following information is publicly available online:
- Index Methodologies
- Constituents and Weights
- Daily Rebalance Example
- Recalculation Guides
US ETF Listing Standards
A set of requirements similar to the ESMA guidelines will apply to US ETFs from 1 January 2018. Factsheets providing information that will allow ETF issuers to assess whether a particular FTSE Russell index will meet the standards are being prepared.