Implications for “legal representatives” of the latest update to the ESMA Q&A on the Benchmarks Regulation


ESMA has provided a new update to its “Q&A” document regarding the EU benchmarks regulation. It covers two topics: the extent to which commodity index providers can rely on a review of their compliance with the IOSCO Principles for Price Reporting Agencies, and perhaps more interestingly, on how ESMA sees the responsibilities of a legal representative to a third country index provider / administrator applying for recognition under the BMR.


ESMA emphases three things:

  1. First, that legal representatives have to be part of the oversight function of the administrator.
  2. Second, that the legal representative’s own organisational structure should be suitable for the functions BMR requires of it.
  3. Finally, and most importantly, it draws attention to the need for the oversight function to have appropriate knowledge of the underlying market or economic reality that the benchmark measures. That’s obvious, but then ESMA goes on to note that it’s necessary for the legal representative itself to have the appropriate knowledge of the underlying market or economic reality – not just the oversight function as a whole. Confirming that the legal representative has the required capability and knowledge appears to be the duty of the applicant third country administrator. The result of this is likely to be a further reduction in the number of entities that will be able to offer this service, due to a lack of the required in-depth benchmark and market knowledge.