On October 22, the UK Financial Conduct Authority (FCA) published an evaluation paper that considers the impact that bringing seven additional benchmarks into its regulatory and supervisory regime had on the market.

The paper evaluates the Benchmarks (Amendment) Instrument 2015 (Benchmarks Instrument), by which the FCA made amendments to the FCA Handbook to reflect the additional benchmarks.

The FCA highlights the following:

  1. most stakeholders believed that the FCA rules made benchmarks more robust to manipulation and more representative of the underlying market, reassuring users about the integrity of the benchmarks;
  2. the FCA’s empirical findings support such claims and find that trading costs and liquidity improved for already liquid markets (especially in swaps markets); and
  3. for less liquid markets, the fines, the methodology changes and the FCA’s regulatory intervention may have increased the perceived regulatory risk, worsening liquidity and participation.

The evaluation has informed the FCA’s current and future work, including its work to understand the trade-offs regulation of benchmarks need to solve.

The paper is available here.