Use of benchmarks: bilateral agreement on exchanged collateral (ESMA70-145-114_Q&A 5.11)

Question

Does the reference to an index in a bilateral agreement on the interest to be paid on exchanged collateral under various OTC derivatives amount to “use of a benchmark”?

European Securities and Markets Authority · Accepted Answer

No. According to Article 3(1)(7)(b) BMR “ use of a benchmark ” can be the determination of the amount payable under a financial instrument or a financial contract by referencing an index or a combination of indices. Counterparties often exchange collateral under a bilateral agreement for a variety of OTC derivatives (some of which may be “ financial instruments ” as specified by Article 3(1)(16) BMR). ESMA considers that the calculation of interest to be paid on these exchanged collateral is not equal to the determination of the amount payable under a financial instrument and therefore does not amount to “ use of a benchmark ”.

Use of benchmarks: bilateral agreement on exchanged collateral (ESMA70-145-114_Q&A 5.11)

Question

Answer

Similar Q&As

More Q&As on this topic