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Setting out the UK Benchmarks Regime: The Application of the EU BMR to the FCA Handbook
Examining the Transitional Regime: Explicating the Q&As
The benchmark reforms have been underpinned by principles such as ‘professionalism’, ‘correctness’ and ‘formalisation’. Overall, the measures have strived to eliminate, or at least greatly reduce, the incentives of benchmark manipulation. However, with regards to LIBOR, the reforms were neither intended to make the underlying market more transparent, nor to make the benchmark based upon market transactions. Instead, provisions such as the use of ‘expert judgment’ were supposed to address periods of illiquidity in the underlying market. Drawing upon anecdotes and empirical research, this talk focuses on some of the challenges in obtaining correct, reliable and fair benchmark fixings for OTC markets, with emphasis on the post-reform era. It also considers the crowding out liquidity provision, traditionally upheld through mutual understanding among financial institutions – in other words, reciprocity and trust among humans.