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December 08, 2016

Information Governance is Key to Post-LIBOR Scandal Benchmark Reforms

Retention of records is common factor in global regulatory overhaul of benchmark submissions

London Financial regulators around the world are requiring contributors to the world’s financial benchmarks to face increased scrutiny of their record-keeping and information governance policies, reports a Thomson Reuters whitepaper.

The paper “Information Governance Reform for Benchmark Submitters” focuses on the global momentum for regulatory change following the LIBOR and foreign currency benchmark scandals and examines the challenges submitters now face.

The report findings include:

  • As most benchmarks are global and therefore cross jurisdictions, individual benchmarks may have multiple sources of regional regulations. As a result, firms are now required to ensure compliance with an expanded scope of guidelines and relevant jurisdictions.
  • Much submission activity is carried out on instant messaging systems, including consumer applications that are challenging for compliance departments to monitor and control. Large scale, real time surveillance of messaging, email and voice data will increasingly be required to safeguard against potential market abuse.
  • Stringent record retention requirements will add to benchmark submitters’ data management challenges. These requirements demand cohesive business frameworks for archiving electronic communications data and complying with legal and regulatory requests for information, as well as adequately protecting sensitive and confidential business information.
  • Technology automation has the potential to help address a number of these challenges, but must be managed properly and be coupled with the proper skilled resources and investigative expertise.

According to the report, market participants have raised initial concerns over increasing compliance burdens, but regulatory oversight is unlikely to be scaled back in the immediate term.

“Benchmarks are essential components for the functioning of global markets, so it is critical market participants have access to information that is accurate and transparent” said Lesli Fairchild, Head of Collaboration Services, Thomson Reuters.  “At the same time, the challenge of implementing the necessary control structures going forward need not overwhelm front offices and compliance functions.

“By drawing on best practices both from within the financial industry itself and further afield in the legal industry, firms can create a governance structure that helps them act with confidence.  This is necessary to ensure the continued accuracy and reliability of global benchmarks,” Fairchild added.

The full report can be downloaded here.  

Thomson Reuters

Thomson Reuters is the world’s leading source of news and information for professional markets. Our customers rely on us to deliver the intelligence, technology and expertise they need to find trusted answers. The business has operated in more than 100 countries for more than 100 years. Thomson Reuters shares are listed on the Toronto and New York Stock Exchanges. For more information, visit www.thomsonreuters.com.

Thomson Reuters administers more than 70 key rates, including the WM/Reuters FX Rates, LBMA Silver Price, Canadian Dollar Offered Rate (CDOR), Canadian Overnight Repo Rate Average (CORRA), and Islamic Interbank Benchmark Rate (IIBR). It also calculates or publishes more than 350 OTC benchmarks. In 2014, Thomson Reuters launched a suite of capabilities to help financial institutions improve transparency and reporting around financial benchmark submissions and other price sensitive data including a unique identifier in Thomson Reuters Enterprise Platform that provides detailed insight into publisher information across a firm’s entire workflow.

 

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