trade & finance
21
752.02
632.22 541.10
214.55 695.36
However , the current regulatory attempts do not draw a hard line between those activities , but try to handle this potential conflict of interest by stricter governance requirements . The above mentioned indices which are calculated by neutral index providers however were never subject to those conflicts of interest . The further enlargement of the regulation will
There simply does not exist the same opportunity for manipulation , or incentives to manipulate on the part of the index provider which potentially exists with respect to the setting of LIBOR and EURIBOR rates
potentially burden the index industry in general , where most of the neutral index providers have already installed a wide range of safeguards in the past - in their own interest , as they are living in a fully competitive environment where clients demand transparency , clarity , unambiguity and neutrality .
“ We would caution against a one size fits all approach in the potential application of lessons learned from a review of LIBOR / EURIBOR setting .” wrote Rick Redding , executive director of the Index Industry Association , in a recent public response to the European Parliament ’ s consultation on the abuse of market benchmarks . Redding added that for index providers “ there simply does not exist the same opportunity for manipulation , or incentives to manipulate on the part of the index provider which potentially exists with respect to the setting of LIBOR and EURIBOR rates .”
Neutral index providers already publish extensive rulebooks , which detail the methodology of their indices . In addition , their indices are fully replicable . The methodology and calculation of objective indices is free from conflicts of interest as index providers , which generate their income from licensing fees , do not benefit from the performance of the indices they construct . Hence , it is in their interest to remain committed to working with the highest quality and integrity and to serve all market participants equally . At the same time , however , regulators need to be vigilant about index administrators and their relationship to issuers of financial products . For example , a conflict of interest may rise in the case of an ETF provider that acts as its own index administrator .
Safeguards are needed in the marketplace to protect investors from manipulation . However , drafting rules that place neutral index providers in the same category as the providers of panelbased indices is not ideal . Restricting neutral index providers will likely lead to
One of the biggest concerns regulators have about benchmarks is the potential conflict of interest of parties providing data used for the calculation of indices …
a decrease in innovation in the sector . Neutral index providers serve a broad investor base and are best equipped and suited to offer unbiased indices to any investor group .