Skip to main content

Markets integrity: Benchmarks and market abuse

EU laws aimed at ensuring the integrity of securities markets, including rules on financial benchmarks and safeguards against market abuse.

What the EU is doing and why

In recent years financial markets have become increasingly global, giving rise to new trading platforms and technologies. Unfortunately, this has also led to new possibilities for manipulating these markets. Following the LIBOR (London Interbank Offered Rate) scandal, serious concerns were raised about the absence of rules governing benchmarks. A benchmark is an index or indicator used to price financial instruments and financial contracts or to measure the performance of an investment fund. Its manipulation can result in significant losses for consumers and investors.

Policy making timeline

  1. 7 December 2022
    Legislative package - Capital markets union
  2. 18 October 2022
    Legislative proposal

    As highlighted in the 2022 State of the Union address the gas market has changed dramatically: from mainly pipeline gas to increasing amounts of liquefied natural gas (LNG). But the benchmark used in the gas market – the title transfer facility (TTF) – has not been adapted to reflect this. In this context, the Commission has proposed to the Council to adopt under Article 122 of the TFEU an empowerment to ACER to publish daily an LNG price assessment and as of March 2023 an LNG benchmark.

  3. 24 July 2020
    Legislative proposal - Benchmarks
  4. 11 October 2019
    Consultation - Benchmarks
  5. June 2016
    Legislation - Benchmarks

    To complement sanctioning regime provided by the new MAD and MAR, in 2016 the EU adopted a specific Benchmarks Regulation. The regulation establishes a common set of rules governing the production and use of benchmarks across different Member States. In particular, the new rules

    • ensure that benchmark administrators are subject to prior authorisation and on-going supervision depending on the type of benchmark (e.g. commodity or interest-rate benchmarks)
    • improve their governance (e.g. management of conflicts of interest) and require greater transparency of how a benchmark is produced
    • ensuring the appropriate supervision of critical benchmarks, such as Euribor/Libor, the failure of which might create risks for many market participants and even for the functioning and integrity of financial markets
  6. April 2014
    Legislation - Market abuse

    As part of its work to make financial markets sounder and more transparent, in June 2014 the EU enacted new rules to combat market abuse. The new rules strengthened and replaced the original market abuse directive (MAD). Adopted in 2003, the MAD introduced a framework to harmonise the core concepts and rules on market abuse and strengthen cooperation between regulators. However, these rules were eventually overtaken by the growth of new trading platforms, over-the-counter trading and new technology such as high frequency trading. This is why the Commission proposed to replace the MAD with a regulation and a new directive on market abuse.

    Market Abuse Regulation

    The Market Abuse Regulation (MAR) broadens the scope of instruments covered by the market abuse framework, strengthening in particular the regime for commodity and related derivative markets. It explicitly bans the manipulation of benchmarks (such as LIBOR) and reinforces the investigative and sanctioning powers of regulators. It also ensures a single rulebook, while reducing administrative burdens on smaller and medium-sized issuers where possible.

    Market Abuse Directive

    The new Market Abuse Directive (new MAD) complements the MAR by requiring Member States to introduce common definitions of criminal offences of insider dealing and market manipulation, and to impose maximum criminal penalties for the most serious market abuse offences. Member States have to make sure that such behaviour, including the manipulation of benchmarks, is a criminal offence, punishable with effective sanctions everywhere in Europe.

Relevant legislation