New Governance Process Required to Audit Benchmark Usage Effective 1 January 2018
Calero, the leading provider of international Market Data Management (MDM) and Technology Expense Management (TEM) solutions, has today announced the release of the new version of Index License Manager, an automated benchmark inventory management system. Originally built to help document and manage index license expenses, Calero has since extended Index License Manager (ILM) to assist financial firms in meeting new ESMA and IOSCO benchmark management requirements. ILM as a Benchmark Manager has recently been successfully implemented for a large France-based investment bank, with various benchmark-consuming institutions currently piloting or implementing the solution this year.
“With BMR coming into force this year, we’ve seen a lot of interest from clients who want a solution for both commercial license management and a benchmark compliance inventory. ILM is the only way to provide these together,” said Sam Rushton, Senior Product Specialist at Calero.
The European Benchmark regulation came into effect on 1 January 2018, requiring financial services firms on the buy-side, sell-side and custodians to implement new governance processes to audit their benchmark usage. Utilizing benchmarks not administered by a registered and authorised EU administrator can result in a fine equivalent to the greater of €1 million or 10% of a firm’s total annual revenues.
Calero’s ILM helps firms meet these regulatory obligations by providing a management tool to track benchmark usage; serving as a repository for all license agreements, indexes and families, and catalogues from third party index aggregators. These features allow firms to map a set of indexes onto their own portfolio of benchmark consumption (e.g. funds, structured products and data licenses for users).
Incorporating BMR classifications required by ESMA, this mapping allows firms to check that benchmark usage is in accordance with the regulation, providing information on which products are using authorised benchmarks (or otherwise), what their substitutes should be, the named authorised administrators with their competent authority, status, and EU endorsing administrator. Calero’s ILM can also integrate with a variety of other financial tools, such as post-trade reporting systems, to allow them to reconcile the authorisation status of indices used in transactions.
“Our solutions are built on client feedback and we’ve been partnering with major financial institutions for more than 23 years to simplify their processes while ensuring compliance,” said Ben Mendoza, Calero Chairman. “Investment in Regtech products helps us provide solutions to ease the burden of regulation. Now is the time to implement solutions to ensure regulatory compliance and avoid reputation damaging penalties.”
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