The "Principles for Financial Benchmarks" published by the International Organization of Securities Commissions ("IOSCO") on 17 July 2013 ("Principles") represent an overarching framework of Principles for use of financial benchmarks in financial markets. IOSCO has recommended that administrators of financial benchmarks publicly disclose the extent of their compliance with the Principles on an annual basis.
This Compliance Statement is made in furtherance of the IOSCO requirement in relation to the administration of certain HSBC financial benchmarks.
As used herein the terms “Administrator” and “Benchmark” have the meaning specified in the Principles being, in summary:
“Administrator” means an entity that controls the creation and operation of the Benchmark Administration process, whether or not it owns the intellectual property relating to the Benchmark, including responsibility for, amongst others, calculation of the Benchmark, determining and applying the Benchmark Methodology, and disseminating the Benchmark.
“Benchmark” means prices, estimates, rates, indices or values that are:
- made available to users, whether free of charge or for payment;
- calculated periodically, entirely or partially by the application of a formula or another method of calculation to, or an assessment of, the value of one or more underlying interests;
- used for reference for purposes that include one or more of the following:
- determining the interest payable, or other sums due, under loan agreements or under other financial contracts or instruments;
- determining the price at which a financial instrument may be bought or sold or traded or redeemed, or the value of a financial instrument; and/or
- measuring the performance of a financial instrument.
This Compliance Statement is made in respect of the Benchmarks of the Global Markets business of HSBC Bank plc (“HSBC GM”) only.
HSBC GM designs and initiates a range of proprietary indices, which constitute Benchmarks, for use in its activities, including the issuance of financial products linked to such Benchmarks (the “HSBC Benchmarks”). It is the case, though, that HSBC GM is not the Administrator pursuant to the Principles in respect of all current HSBC Benchmarks. This is because HSBC GM has legally transferred its role as Administrator for the HSBC Benchmarks to independent, third-party Administrators, being at the date hereof, Markit Equities Limited (“Markit”) and S&P Opco, LLC (a subsidiary of S&P Dow Jones Indices LLC) (“S&P”).
As a result of their appointment, Markit and S&P have become the Administrators for the relevant HSBC Benchmarks and have assumed from HSBC GM the legal and regulatory responsibilities associated with this role, in respect of the relevant HSBC Benchmarks, as set out in the Principles. This includes the obligation on an Administrator to disclose publicly the extent of its compliance with the Principles.
It is currently envisaged that any new HSBC Benchmark created by HSBC GM will be administered by either Markit or S&P pursuant to the corresponding administration service agreement (or such other third party entity who may be appointed as Administrator from time to time) and, accordingly, Markit or S&P (or such other third party entity), respectively, will assume all legal and regulatory responsibilities associated with the administration of such HSBC Benchmark.
The HSBC Global Markets Index Oversight Committee (the “Committee”) has been set up to oversee its involvement in relation to the HSBC Benchmarks. As such, the key responsibilities of the Committee are to:
- review the continuing appropriateness of each HSBC Benchmark in relation to its use;
- oversee the appointment of any third party administrators;
- ensure each HSBC Benchmark has an appropriately authorised Administrator pursuant to an administration service agreement; and
- ensure each Administrator is undertaking its role in accordance with the applicable administration service agreement.
In undertaking its role, the Committee shall take into account all applicable law and regulation, as well as the interests of relevant stakeholders (including for these purposes clients of HSBC and other users of the HSBC Benchmarks).
In respect of each Benchmark created by HSBC GM, the index manual published by the relevant Administrator will set out which entity has the role of Administrator.
- Please see here for an overview of Markit's governance and control framework for the indices they administer: