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University of New South Wales Law Journal Student Series |
A CRITICAL REVIEW OF AUSTRALIAN FINANCIAL BENCHMARK REGULATION
MICHELLE LINDENMAYER
I INTRODUCTION
Financial benchmarks are a necessity for financial markets. When managed correctly, they accurately represent the performance of financial markets.[1] Financial benchmarks are often linked to the performance of financial products and contracts and influence their value.[2]
In Australia, financial benchmarks are defined by section 908AB of the Corporations Act 2001.[3] A financial benchmark is a price, estimate, rate, index or value made available to users, calculated periodically, and used as a reference price.[4] Financial benchmarks are linked to most Australian financial markets.[5] The most prevalent financial benchmarks in Australia are the ASX/S&P 200 Index, the ASX Bond Futures Settlement Price, the Australian Interbank Overnight Cash Rate, the Australian Consumer Price Index and the Bank Bill Swap Rate (‘BBSW’).[6]
Financial benchmarks must be administered due to the complexities of managing and calculating them.[7] Financial benchmark administrators are generally financial market exchanges.[8] Financial benchmark administrators are responsible for maintaining and calculating the financial benchmark. If not administered effectively, it can be easier to manipulate a financial benchmark. Section 908DA of the Corporations Act 2001 prohibits financial benchmark manipulation in Australia.[9] Financial benchmark manipulation is a criminal and civil offence.[10]
Financial benchmarks are primarily legislated in Part 7.5B (Regulation of Financial Benchmarks) of the Corporations Act 2001.[11] Part 7.5B of the Corporations Act 2001 achieves two main objectives. It clarifies that financial benchmark manipulation is a criminal and civil offence.[12] It enforces an Australian Benchmark Administration (‘ABA’) licencing regime on significant financial benchmark administrators.[13] Administrators of significant financial benchmarks must be licenced under the Australian Benchmark Administrator (‘ABA’) licencing regime.[14] Significant financial benchmark administrators must also follow the ASIC Financial Benchmark (Administrator) Rules 2018 and ASIC Financial Benchmark (Compelled) Rules 2018. These mandated rules provide necessary detail on the responsibilities of ABA licensees.[15]
The interconnected nature of financial services legislation means other areas of the Corporations Act 2001 are relevant to financial benchmark regulation.[16] Market manipulation legislation, the Market Integrity Rules, and Australian Financial Services (‘AFS’) licence legislation also apply to regulating financial benchmarks.
Australian financial benchmark legislation must ensure that financial benchmarks are accurate. The importance of Australian financial benchmark legislation has been reinforced by misconduct to the BBSW and similar misconduct globally.[17] This includes misconduct to the London Interbank Offered Rate (‘LIBOR’).[18] The importance of financial benchmark regulatory reform was emphasised by the International Organisation of Securities Commission (‘IOSCO’) Principles for Financial Benchmarks.[19] These principles were published in 2013 to guide regulators to a minimum standard of financial benchmark regulation.[20]
Financial benchmarks are critical for financial markets and the broader economy.[21] While there have been improvements in regulating financial benchmarks in Australia, they need to be regulated further. The ABA licencing regime needs to be broadened, safe calculation methodologies mandated, and the Market Integrity Rules expanded to include financial benchmark integrity.
II FINANCIAL BENCHMARK LEGISLATION IN AUSTRALIA
Financial services legislation captures financial benchmark legislation, primarily in the Corporations Act 2001.[22] Before 2018, financial benchmark manipulation was mainly legislated by the market manipulation and AFS licence sections of the Corporations Act 2001. The Market Integrity Rules were added to the Corporations Act 2001 in 2017.[23] Following misconduct regarding the BBSW, part 7.5B (Regulation of Financial Benchmarks) was added to the Corporations Act 2001 in 2018.[24]
This section will explain Australian financial benchmark legislation. It will evaluate how market manipulation, market integrity and AFS licensee legislation apply to financial benchmark manipulation. It will also review part 7.5B (Regulation of Financial Benchmarks) of the Corporations Act 2001 and how it regulates financial benchmark manipulation and administration.
A Market Manipulation and Integrity Legislation
Financial benchmarks are regulated by the Corporations Act 2001.[25] Financial benchmarks were not explicitly referred to in legislation before part 7.5B (Regulation of Financial Benchmarks) of the Corporations Act 2001 in 2018.[26] Manipulating a financial benchmark was prohibited because of the relevant market manipulation offences.[27] Financial benchmarks are manipulated using the markets that they are linked to.[28] This means that market manipulation legislation prohibits the actions that can be used to manipulate a financial benchmark.
Market manipulation is prohibited by section 1041A of the Corporations Act 2001.[29] Section 1041A of the Corporations Act 2001 prohibits individuals from conducting one or more transactions that create an artificial price or level for a financial product in a financial market.[30] Market manipulation can occur in many forms, not limited to related provisions in the Corporations Act 2001. This includes false trading and market rigging, false or misleading statements, or misleading or deceptive conduct.[31] These are captured by sections 1041B to H of the Corporations Act 2001.[32]
Each market manipulation offence explicitly prohibited in the Corporations Act 2001 can be used to manipulate a financial benchmark.[33] False trading and market rigging can lead to benchmark manipulation when an individual creates an artificial price or level by trading that influences the financial benchmark. False or misleading statements can lead to benchmark manipulation when an individual shares information to induce others to trade in a way that influences the financial benchmark. Misleading or deceptive conduct is a broader provision that can lead to financial benchmark manipulation in many ways.
Misleading or deceptive conduct captures broader conduct provisions applicable to financial markets. It relates to any conduct about a financial product or service that does or is likely to mislead or deceive.[34] This provision has applicability beyond financial markets and benchmarks but captures more subtle misconduct that could lead to financial benchmark manipulation. Most relevantly, misleading or deceptive conduct could include taking advantage of gaps in calculation methodologies to influence where a financial benchmark is set.
The Market Integrity Rules cover more specific conduct standards enforceable for any market participant.[35] Established in 2017, the Market Integrity Rules exist in four forms, including rules for securities, futures, capital and IMB markets.[36] The Market Integrity Rules are legislative instruments enforced by section 798G of the Corporations Act 2001.[37] The Market Integrity Rules cover principles on how trading should be conducted in financial markets.[38] The Market Integrity Rules mandate behaviours that could mitigate financial benchmark manipulation.
The Market Integrity Rules provide more specific legislation on how market participants should participate in financial markets. They mandate key positive conduct behaviours that give the Australian Securities and Investment Commission (‘ASIC’) better visibility of markets and ensure best practice conduct is undertaken. The Market Integrity Rules discuss trade transparency, reporting and market operations.[39] These aspects, whilst not directly linked to manipulating a financial benchmark, can be mechanisms to identify financial benchmark manipulation.
Subsequent regulatory guides are also designed to give participants content on their relevant Market Integrity Rules. Regulatory Guides 265 and 266 cover securities and futures markets, respectively.[40] These regulatory guides are supplementary guidance to help participants interpret the Market Integrity Rules. They also encourage participants to seek clarification from ASIC on any areas of question or concern.[41] This highlights the challenge of regulatory compliance in financial markets and the need for a more collaborative regulatory relationship to encourage positive conduct behaviours. The AFS licence regime further emphasises the need to encourage positive conduct.
B Australian Financial Services Licence Legislation
AFS licence legislation applies to financial benchmark manipulation. Financial institutions and banks dealing in financial markets must hold an AFS licence.[42] Relevant AFS licence regulation relates to the conduct of banks and other financial institutions.[43] General obligations for AFS licence holders are listed in Part 7.6 (Licencing of Providers of Financial Services) of the Corporations Act 2001.[44]
AFS licencing legislation is broad enough to regulate emerging issues whilst more specific legislation is being developed.[45] The most relevant AFS licensee obligations to financial benchmark manipulation include the efficiently, honestly and fairly standard and unconscionable conduct.[46]
Section 912A(1)(a) of the Corporations Act 2001 requires AFS licence holders to do all things necessary to ensure that the financial services covered by the licence are provided efficiently, honestly and fairly.[47] This obligation is highly relevant to financial benchmark manipulation because it ensures that financial institutions operate in a way that makes them better participants.
Section 912A(1)(a) of the Corporations Act 2001 should be evaluated in parts to demonstrate its high applicability and relevance to financial benchmark manipulation.[48] Doing all things necessary requires active intervention from AFS licence holders.[49] Financial institutions must take meaningful actions to ensure they can meet this obligation in full. AFS licensees must have appropriate processes to demonstrate that they meet this obligation. The efficiently, honestly and fairly standard should also be evaluated by each word to understand how it best applies to financial benchmark manipulation.
Efficient financial markets ensure that a market can remain safe and stable. In the context of financial benchmark manipulation, efficient markets are more challenging to manipulate because they are not as susceptible to sudden changes in price.[50] It is more challenging to manipulate a financial benchmark in an efficient market because it is more difficult to manipulate the underlying market.
Honest financial markets ensure that behaviours are legitimate and are not based on misinformation. In the context of financial benchmark manipulation, honest markets are not subject to financial benchmark manipulation because there is no artificial information.[51]
Fair financial markets ensure that individuals appropriately balance the interests of every market participant.[52] This includes their interests. In the context of financial benchmark manipulation, fair markets are not subject to manipulation because individuals do not seek to change financial benchmarks to favour them.
Another critical aspect of AFS licence legislation is unconscionable conduct. Section 991A of the Corporations Act 2001 prohibits any AFS licensees from engaging in unconscionable conduct.[53] Section 991A defines unconscionable conduct as conduct that is, in all circumstances, unconscionable.[54] This includes conduct that is so unfair that a court would intervene.[55]
Unconscionable conduct influences how individuals participate in markets and mitigates the likelihood of financial benchmark manipulation. Further clarification of unconscionable conduct for AFS licensees is in sections 12CA, CB and CC of the Australian Securities and Investment Commission Act 2001 (‘ASIC Act 2001’).[56] Section 12CC of the ASIC Act 2001 details what unconscionable conduct should be in the context of the courts assessing relevant circumstances.[57] An example from section 12CC of the ASIC Act 2001 is breaching industry codes when a financial institution has committed to its compliance.[58]
The definition of industry codes in the ASIC Act 2001 is outlined in section 51ACA(1) of the Competition and Consumer Act 2010.[59] This definition includes mandatory and voluntary industry codes that bind an organisation.[60] Voluntary industry codes are standard practice in financial markets.[61] Voluntary industry codes aim to impose global minimum standards on their signatories. Voluntary industry codes in financial markets can explicitly discuss financial benchmarks and financial benchmark manipulation. The Global Precious Metals and FX Global Codes provide principles for handling financial benchmarks.
The Global Precious Metals Code is a voluntary industry code to which all London Bullion Market Association (‘LMBA’) members are signatories.[62] The Global Precious Metals Code aims to maintain effective, fair and transparent metal markets.[63] The Global Precious Metals Code adopts a principles-based approach that covers topical conduct issues in metal markets.
The Global Precious Metals Code requires signatories not to engage in practices that could disrupt the integrity of financial benchmarks.[64] This includes collusion, improper information sharing or trading to disrupt or abuse a financial benchmark. Financial benchmarks related to the code include LMBA gold, silver, platinum and palladium prices.[65] These global financial benchmarks are relevant to the Australian economy and are traded by Australian banks.
The Global Precious Metals Code provides clear examples of best and worst practice conduct concerning financial benchmarks.[66] The Global Precious Metals Code prohibits activities that could lead to financial benchmark manipulation. These activities include taking considerable interest in a financial benchmark process, informing others of clients dealing at the financial benchmark rate or acting with other market participants to inflate or deflate the financial benchmark.[67]
The FX Global Code is a voluntary code managed by the Global Foreign Exchange Committee.[68] The FX Global Code provides minimum conduct standards for how participants should deal in foreign exchange markets.[69] The FX Global Code applies to a broad audience of participants, including asset managers, banks, financial advisors, central banks and corporate treasuries.[70]
The FX Global Code, whilst covering a different financial market, has similarities to the Global Precious Metals Code, particularly in how it discusses financial benchmarks.[71] The FX Global Code expects that signatories do not intentionally influence financial benchmarks via individual or client trading activity.[72] The FX Global Code also expects signories to follow the Financial Stability Board’s Foreign Exchange Benchmark Recommendations Report.[73] This report highlights that participants should be transparent about trading around financial benchmarks.[74]
Australia’s four major banks (Australia and New Zealand Bank, Commonwealth Bank of Australia, National Bank of Australia and Westpac Banking Corporation) are signatories to both codes.[75] Breaching either code would be an unconscionable conduct offence for these banks as they would breach their AFS licence obligations.
Including industry codes in the definition of unconscionable conduct creates a higher minimum conduct standard than current financial benchmark legislation. These codes prohibit activities that could lead to financial benchmark manipulation in metal markets rather than simply prohibiting benchmark manipulation.
Other AFS licence obligations listed in the Corporations Act 2001 relate to financial benchmark manipulation from a business conduct perspective. These requirements are listed in part 7.6 of the Corporations Act 2001 and are designed to influence the conduct and culture of the financial institution.[76] These include conflict management, information sharing, reporting and compensation.
When reviewing AFS licence legislation, AFS licensees should also be guided by detailed regulatory guides managed by ASIC.[77] These regulatory guides provide the necessary context of ASIC’s intentions.[78] Regulatory guides allow ASIC to set more explicit expectations and mitigate against more subtle behaviours that could evolve into more serious offences.
Managing conflicts of interest within a financial institution assists in lowering the potential of financial benchmark manipulation. Financial institutions are conflicted because they are involved in processes that set financial benchmarks and receive monetary gain from the performance of products tied to those financial benchmarks.[79] Financial institutions must have adequate processes to ensure that their institution does not collude within itself to create more favourable financial outcomes.
Conflicts of interest for AFS licences are regulated by section 912A(1)(aa) of the Corporations Act 2001.[80] This requirement mandates that AFS licensees make adequate arrangements to manage their conflicts of interest.[81] Conflicts of interest requirements are clarified in ASIC Regulatory Guide 181: Licensing Managing Conflicts of Interest (‘RG 181’).[82]
RG 181 interprets section 912A of the Corporations Act 2001.[83] RG 181 provides further guidance, including the mechanisms for avoiding conflicts of interest.[84] In the context of financial benchmark manipulation, it is necessary for financial institutions to have clear segregation between conflicted parts of their businesses.[85] They must also monitor this segregation.[86] This segregation mitigates the potential to manipulate a financial benchmark because it stops interactions that could facilitate financial benchmark manipulation.
The interconnected nature of financial services regulation means financial benchmark legislation exists throughout the Corporations Act 2001.[87] AFS licence legislation ensures that licensees can be monitored to meet their licencing and regulatory requirements. The broad nature of AFS legislation captures emerging issues before they can be regulated, but there is still a need to regulate financial benchmarks using more specific legislation. This is achieved by part 7.5B (Regulation of Financial Benchmarks) of the Corporations Act 2001.
C Part 7.5B (Regulation of Financial Benchmarks) of the Corporations Act 2001
Part 7.5B (Regulation of Financial Benchmarks) of the Corporations Act 2001 achieves two objectives. It clarifies that financial benchmark manipulation is a criminal and civil offence.[88] It also defines significant financial benchmarks and enforces the ABA licencing regime for significant financial benchmark administrators.[89] The ASIC Financial Benchmark (Administrator) Rules 2018 and ASIC Financial Benchmark (Compelled) Rules 2018 provide additional detail to part 7.5B of the Corporations Act 2001. These rules provide necessary detail on the responsibilities of ABA licensees as significant benchmark administrators.[90]
Part 7.5B of the Corporations Act 2001 was established after misconduct regarding the BBSW.[91] This misconduct highlighted a need for stricter financial benchmark regulation. This misconduct demonstrated a greater need to regulate financial benchmarks because of the potential economic impacts of financial benchmark manipulation.[92]
The intention of part 7.5B of the Corporations Act 2001 is discussed in the parliamentary press. Its purpose was to create transparent and well-functioning markets, mitigate against future misconduct and bring Australia to the global standard of financial benchmark legislation. [93] This standard reflects the United Kingdom and the European Union regulations.[94]
Significant financial benchmarks are defined in section 908AC of the Corporations Act 2001.[95] They are essential to the Australian economic system.[96] They create a material risk of contagion or instability if disrupted, or they impact retail or wholesale investors if disrupted.[97] Significant financial benchmarks have great influence over the Australian financial system and should be prioritised in regulation to avoid the heightened impacts of financial benchmark manipulation on the broader economy.
ASIC determines which financial benchmarks are significant financial benchmarks. ASIC has classified five significant financial benchmarks.[98] These are the Australian BBSW, S&P/ASX 200, ASX Bond Futures Settlement Price, Australian Interbank Overnight Cash Rate and the Australian Consumer Price Index.[99] These financial benchmarks were declared significant in 2018 following the introduction of Part 7.5B of the Corporations Act 2001. ASIC has kept all significant financial benchmarks the same since.[100]
The main requirement for significant financial benchmarks is that their administrators must be licensed.[101] This licencing regime is the ABA licence and is defined by section 908BA(1) of the Corporations Act 2001.[102] ASIC has a responsibility to supervise licensees.[103] ABA licensing allows ASIC to provide more prescriptive guidance and oversight to the most important financial benchmark administrators. This licencing regime also gives ASIC more powers to enforce rules by revoking licences for non-compliance.
Part 7.5B of the Corporations Act 2001 explicitly discusses financial benchmark manipulation. Manipulating a financial benchmark or a financial product used to determine a financial benchmark is a criminal and civil offence.[104] The extra rules in sections 908DA and DB of the Corporations Act 2001 allow for financial benchmark manipulation to be an offence even if there is no evidence of market manipulation.
Comparing financial benchmark and market manipulation provisions highlights how part 7.5B of the Corporations Act 2001 adds context to financial benchmark manipulation. Section 908DA of the Corporations Act 2001 defines financial benchmark manipulation as influencing or likely influencing the level at which a financial benchmark is generated or administered.[105] Compared to market manipulation in section 1041A of the Corporations Act 2001, as discussed above, section 908DA of the Corporations Act 2001 does not require proof of an artificial price or level in the associated securities. It only needs to show how the financial benchmark was artificial.
Comparing misleading statements and information in the context of financial benchmarks and market manipulation is more subtle. The critical difference between sections 908DB and 1041E of the Corporations Act 2001 is that under section 908DB, a person must know that the statements or information could be used to generate or administer a financial benchmark.[106] This means that section 908BD of the Corporations Act 2001 reinforces the importance of not spreading misleading statements in a financial benchmark. It does not add significant additional requirements in the context of financial benchmark manipulation.
The ASIC Financial Benchmark (Administrator) Rules 2018 provide specific details on the responsibilities of ABA licences, ensuring they can effectively administer a significant financial benchmark.[107] These administrator rules are mandatory legislation and detail how part 7.5B of the Corporations Act 2001 should be interpreted. They relate to their responsibilities, including financial benchmark design, governance, and transparency.[108] These rules ensure the financial benchmarks are administered as safely as possible. This practical guideline provides needed clarification to ensure administrators meet their responsibilities.
The ASIC Financial Benchmark (Compelled) Rules 2018 ensure that ASIC can effectively supervise financial benchmark administrators by giving ASIC legislated powers to seek relevant information on a significant financial benchmark’s data, calculation or methodology.[109] Effective surveillance is critical to ensuring that significant financial benchmarks are not subject to manipulation.
Part 7.5B (Regulation of Financial Benchmarks) of the Corporations Act 2001, the ASIC Financial Benchmark (Administrator) Rules 2018 and the ASIC Financial Benchmark (Compelled) Rules 2018 add meaningful financial benchmark-specific guidance, particularly for administrators of significant financial benchmarks. They clarify critical concepts relating to financial benchmark manipulation.
III THE IMPORTANCE OF AUSTRALIAN FINANCIAL BENCHMARK LEGISLATION
Misconduct regarding the BBSW teaches key lessons about the importance of financial benchmark legislation in Australia.[110] This section will explain the misconduct findings regarding the BBSW and demonstrate why these findings were essential to introducing Part 7.5B (Regulation of Financial Benchmarks) of the Corporations Act 2001.
This section will also highlight other global financial benchmark issues that link to Australia and demonstrate the importance of changes to Australian financial benchmark legislation. These global issues include transitioning from the LIBOR to the Secured Oversight Financing Rate (‘SOFR’) and the need for the IOSCO to establish the Principles of Financial Benchmarks.
A Misconduct Regarding the Bank Bill Swap Rate
The BBSW is Australia's primary short-term interest rate financial benchmark and is calculated using the bank bill market.[111] The BBSW is often tied to Australian financial contracts. The performance of the BBSW influences lending and bond markets. This means that accuracy in BBSW calculation has a broad economic impact.[112]
Misconduct regarding the BBSW related to banks taking advantage of gaps in its administration and calculation processes. This misconduct occurred between 2010 and 2014.[113] At this time, the calculation process of the BBSW required banks to manually post rates to the Australian Financial Markets Association (‘AFMA’). [114] AFMA administered the BBSW via a manual calculation process. AFMA is an independent financial markets industry association.[115] As a benchmark administrator, AFMA had a lower technical capability than other financial benchmark administrators.[116]
Misconduct relating to the BBSW extended across the Australian banking and financial services industry. Due to the details that can be shared in court findings, the most notable BBSW misconduct is from the Westpac Banking Corporation (‘Westpac’). Australian Securities and Investments Commission v Westpac Banking Corporate [No 2] (‘ASIC v Westpac [No 2]’) found that Westpac committed unconscionable conduct whilst participating in the BBSW calculation process.[117] Westpac engaged in unconscionable conduct on four occasions between 2010 and 2012 for their behaviours whilst trading prime back bills. This trading influenced the yields where the BBSW was set.[118]
As discussed above, unconscionable conduct is so unfair that it requires a court to intervene.[119] The examples proposed by section 12CC of the ASIC Act 2001 give courts flexibility to consider unconscionable conduct in many forms.[120] The unconscionable conduct referred to in ASIC v Westpac [No 2] related to Westpac prioritising financial gain above community standards.[121] Justice Beach highlighted the examples of unconscionable conduct in section 12CC of the ASIC Act 2001 as being broad enough to include unconscionable conduct that was against the values of the ASIC Act 2001 and the Corporations Act 2001.[122]
The findings of unconscionable conduct demonstrated the importance of financial benchmark legislation. As part 7.5B of the Corporations Act 2001 was not in force, the court could not rely on specific financial benchmark legislation. They could not find any misconduct other than unconscionable conduct.
Westpac was found not to have committed any market manipulation offences relating to its BBSW misconduct. As discussed above, market manipulation is defined in section 1041A of the Corporations Act 2001 as creating an artificial price or level for a financial product in a financial market.[123] Market manipulation is commonly seen as a challenging area to prove. It can be difficult to determine when prices or levels are artificial.[124] For market manipulation to have occurred in the ASIC v Westpac [No 2] case, there would have needed to be clear evidence of an artificial price or level of bank bills during the window where the BBSW was set. Justice Beach highlighted the challenge of linking financial benchmark manipulation to building an artificial price.[125] ASIC could not demonstrate how an artificial price was made in the bank bill market.[126] Justice Beach’s comments highlighted the need for specific financial benchmark legislation. This is the legislation in part 7.5B of the Corporations Act 2001.
Justice Beach also highlighted that future benchmark manipulation offences were likely to carry the maximum penalty imposed in the context of penalty increases between the misconduct and the judgment.[127] This shows that the courts have little tolerance for future offences. It is crucial for financial benchmark regulation to set a clear expectation for financial institutions. Financial institutions must adopt conservative practices around financial benchmarks to avoid higher penalties.
The misconduct relating to the BBSW is not unique to Westpac. The National Australia Bank, Australian and New Zealand Bank, Commonwealth Bank of Australia, UBS Group AG, Royal Bank of Scotland and Bank BNP Paribas have all had similar findings for various unconscionable conduct and market manipulation allegations relating to the BBSW.[128] This misconduct highlighted how systemic financial benchmark manipulation was and the need explicitly to regulate it.
All banks (other than Westpac) negotiated court-enforceable undertakings with ASIC.[129] A court-enforceable undertaking is an agreement between ASIC and another party to negotiate a penalty a court can enforce. As part of the court-enforceable undertaking, the other party admits to ASIC’s allegations.[130] Court-enforceable undertakings allow matters to reach an agreement quickly. They enable the market to react to ASIC’s concerns speedily and correct behaviours where appropriate.
As allegations that lead to a court-enforceable undertaking are not thoroughly tested in the courts, it is not possible to know the degree or detail of unconscionable conduct or market manipulation that has occurred. Understanding the full degree of BBSW manipulation across the industry is challenging. This makes the ASIC v Westpac [No 2] case more critical in understanding the importance of financial benchmark regulation in Australia. This highlights the need to regulate financial benchmarks because the degree to which they can be manipulated in Australia remains publicly unknown.
Part 7.5B (Regulation of Financial Benchmarks) of the Corporations Act 2001 was established after this misconduct regarding the BBSW. As discussed above, part 7.5B of the Corporations Act 2001 explicitly regulated financial benchmark manipulation, making it Australia's strictest and most detailed financial benchmark legislation.[131] As Part 7.5B of the Corporations Act 2001 went through the parliamentary process, speeches and media statements discussed the need for reform to avoid future financial benchmark misconduct similar to the BBSW.[132] This shows the importance of this legislation as it actively intends to avoid similar misconduct in the future.
Since this misconduct, the BBSW has been subject to an uplift in methodology, including calculation and administration. The BBSW is now calculated using the volume-weighted average price (‘VWAP’) method.[133] The VWAP method calculates a financial benchmark as an average over an extended period.[134] The BBSW is now a safer financial benchmark because it requires more capital over a longer time frame to manipulate.
The AFMA also gave administration responsibilities of the BBSW to the Australian Securities Exchange (‘ASX’) in 2017.[135] The ASX has more capability to administer a safe benchmark.[136]
The need to improve the calculation and administration of financial benchmarks demonstrates the importance of specific financial benchmark legislation. Appropriate regulation mitigates the potential for future misconduct by intervening in administration and calculation issues before financial benchmark manipulation occurs.
B London Interbank Offered Rate Misconduct and Transition
Financial benchmark misconduct is not unique to the BBSW. It has been a common theme in financial markets, as financial benchmarks lag in sophistication behind their associated markets. Financial benchmark misconduct has emphasised the need to regulate financial benchmarks.
The LIBOR is the most prominent financial benchmark misconduct example. The misconduct relating to LIBOR led to its removal and the introduction of various risk-free rates, including the SOFR and Sterling Overnight Index Average Benchmark (‘SONIA’).[137] Risk-free rates are calculated using more robust calculations designed only to include economic factors, making them harder to manipulate.[138]
LIBOR, like the BBSW before its misconduct, was calculated using manual bank submissions. The LIBOR manual calculation methodology gave rise to manipulation. Widespread manipulation was discovered in 2016 and was linked to five banks.[139] These banks included Deutsche Bank, Barclays, UBS, Rabobank and Royal Bank of Scotland.[140] These banks were found to have manipulated LIBOR for profit between 2003 and 2012.[141] These banks were subject to US and UK regulatory fines.[142] Individual traders from these banks were also found to have committed criminal offences, including conspiracy and fraud.[143]
Following the LIBOR scandal, the LIBOR market was closed in 2023.[144] Markets have now fully transitioned to risk-free benchmark alternatives. This lengthy process required an uplift of derivatives markets and other financial contracts.[145] The market needed to recalibrate to reflect the new financial benchmark alternatives.
The impact of the LIBOR scandal on financial markets across multiple jurisdictions shows the need to regulate financial benchmarks. Regulation needs to consider the financial benchmark method to decrease manipulation risk. Given the interconnected nature of financial markets, financial market regulators also need to have consistent views. The IOSCO’s Principles of Financial Benchmarks has helped build a consistent regulatory view of financial benchmark regulation.
C International Organisation of Securities Commission
The IOSCO is an international organisation that is developing global standards applicable to the regulation of financial markets.[146] ASIC is a member of IOSCO.[147]
In 2013, IOSCO published the Principles for Financial Benchmarks.[148] These principles discuss the conduct of financial benchmark administrators and relate to governance, quality, methodology, and accountability.[149] They show that regulating financial benchmarks is a global issue requiring regulatory intervention.
The importance of regulating financial benchmarks is a clear theme throughout these principles. IOSCO encourages its members to implement their principles through regulation.[150]
As a member of IOSCO, ASIC has committed to being guided by these principles.[151] This means that Australian financial benchmark regulation needs to align with the IOSCO Principles of Financial Benchmarks. The ASIC Financial Benchmark (Administrator) Rules 2018 aligns with aspects of the IOSCO principles, including governance, controls and conflicts for ABA licensees.[152] ASIC commits to fully aligning with these principles in Regulatory Guide 268: Licencing Regime for Financial Benchmark Administrators (‘RG 268’).[153]
RG 268 is a supplementary resource to part 7.5B (Regulation of Financial Benchmarks) in the Corporations Act 2001 and the ASIC Financial Benchmark (Administrator) Rules 2018.[154] As a regulatory guide, AFS licence holders are expected (but not mandated) to follow its contents.
RG 268 provides additional guidance to financial benchmark administrators, including governance, conflicts of interest, financial benchmark design, method and data, and contributors' conduct.[155] RG 268 is designed to cover each principle discussed in IOSCO Principles of Financial Benchmarks.[156] This means ABA licenced administrators are given a guideline that follows IOSCO Principles of Financial Benchmarks.
The ASIC Financial Benchmark (Administrator) Rules 2018 and RG 268 only apply to ABA licensees and cover only significant financial benchmarks. This means Australian regulation on the IOSCO Principles of Financial Benchmarks only guides licensed financial administrators.
Capturing significant financial benchmarks in the financial benchmark licencing regime ensures that the most important financial benchmarks to the Australian economy are handled correctly. A limited licencing regime creates gaps across the financial services industry.
IV ADDITIONAL FINANCIAL BENCHMARK REFORMS IN AUSTRALIA
Australian financial benchmark reforms, particularly the introduction of part 7.5B (Regulation of Financial Benchmarks) of the Corporations Act 2001, have positively impacted financial benchmarks.[157] There is a need to evolve further financial benchmark regulation.
This section proposes three areas that should be implemented in this regulatory uplift.
The ABA licencing regime must be broadened to include more financial benchmark administrators. Safe calculation methodologies must be mandated to mitigate more systemic forms of financial benchmark manipulation. The Market Integrity Rules expanded to include financial benchmark integrity to ensure that all financial benchmark participants meet a minimum conduct standard in interacting with financial benchmarks.
A Expand the Financial Benchmark Administrator Licencing Regime
Part 7.5B (Regulation of Financial Benchmarks) of the Corporations Act 2001 requires significant benchmark administrators to apply for and maintain an ABA licence with ASIC.[158] Licensees must follow the ASIC Financial Benchmark (Administrator) Rules 2018. They should seek guidance from RG 268, the Licensing Regime for Financial Benchmark Administrators, which ensures they follow the IOSCO Principles of Financial Benchmarks.
As detailed above, significant financial benchmarks are defined in section 908AC of the Corporations Act 2001.[159] Significant financial benchmarks are systemically important to the Australian economic system, creating a material risk of contagion or instability if disrupted or impacting retail or wholesale investors if disrupted.[160] Licencing significant financial benchmark administrators ensure that ASIC supervises the most critical financial benchmarks. It mitigates the likelihood of financial benchmark manipulation, where it has a substantial economic impact.
Given the interconnected nature of financial markets, it is essential to note that financial benchmarks in smaller markets can significantly impact the economy.[161] In Australia, this is heightened by the importance of commodity markets, which tend to be less liquid due to product and market size.[162] Financial benchmark manipulation in these markets could lead to significant issues in commodity prices. The Australian Dollar is heavily linked to commodity prices.[163] Currency changes can have a substantial impact on the Australian economy. This means more financial benchmark administrators must be licenced to ensure limited economic impact from financial benchmark manipulation. All financial benchmark administrators linked to publicly traded markets should be licenced.
Australian commodities financial benchmarks include the Western and Eastern Australian Wheat prices.[164] Wheat is a commodity that Australia exports primarily to emerging economies that will be seeking more supply.[165] As a critical export expected to grow and because of the interconnected nature of global markets, Western and Eastern wheat prices are an essential benchmark for the Australian economy. For the long-term competitiveness and growth of the Australian economy, it must be priced accurately. Not being a significant benchmark means less control over its accuracy. The ASX administers these wheat financial benchmarks.[166] Whilst this reduces the risk of financial benchmark manipulation as they are a licenced administrator for other financial benchmarks, it does remove the importance of regulating licencing for more financial benchmark administrators.
An expanded licencing regime would ensure that financial benchmark administrators are all held to a similar conduct standard. This expanded licencing regime should include any financial benchmark for any Australian publicly traded market. This would ensure all administrators are better equipped to meet the IOSCO Principles of Financial Markets. This would ensure that financial benchmarks are better managed and lower the risk of their financial benchmark manipulation.
B Mandate Safe Calculation Methodologies
Technology in financial markets has advanced rapidly over the last decade.[167] There was a need to uplift how financial benchmarks were calculated across financial markets. There were more opportunities to manipulate financial benchmarks with gaps in methodology. The speed of new systems makes it easier to find these gaps.
Whilst financial benchmark calculations have improved, as the financial markets continue to become more sophisticated, calculation methods must evolve alongside them. This means regulatory intervention is necessary to ensure that financial benchmarks remain accurate in the future and do not carry a higher risk of being manipulated as technology continues to improve.
Misconducts regarding the BBSW and the LIBOR demonstrate the need for strict guidelines around calculating financial benchmarks. Both benchmarks had systemic unconscionable conduct and market manipulation issues because they were calculated using manual methods over a short time horizon.
ASIC Financial Benchmark (Administration) Rules 2018 provides some regulations for ABA licensees, including guidance and approval processes for calculation methodology.[168] ASIC Financial Benchmark (Administration) Rules 2018 provide principles to consider when setting a methodology, but there is no preference or minimum standard for a methodology.[169]
RG 268 expands on ASIC Financial Benchmark (Administration) Rules with greater practicality.[170] RG 268 recommends that ABA-licenced financial benchmark administrators have a method, guideline, or code of conduct that details how they calculate their financial benchmark.[171] Similar to ASIC Financial Benchmark (Administration) Rules 2018, RG 268 has no requirements for what this method, guideline or code of conduct should include.[172]
While articulating how a financial benchmark is calculated allows ASIC to investigate any gaps, it does not guide financial benchmark administrators to calculate their financial benchmark in a robust and technologically advanced way.
The ASIC Financial Benchmark (Administration) Rules 2018 should be expanded to include more detailed requirements for financial benchmark calculation. The administrator rules should mandate the method, guideline or code discussed in RG 268. They should also mandate that financial benchmarks be calculated in a robust and technologically advanced way. Their calculation methods should consider alternative methodologies and fallbacks, automatic systems, volume weightings and longer time windows. This additional context in the ASIC Financial Benchmark (Administration) Rules 2018 would ensure that financial benchmark administrators calculate their financial benchmarks effectively.
As part of the recommendations to expand the ASIC Financial Benchmark (Administration) Rules 2018 to regulate financial benchmark calculation better, it is essential to note that administrators not required to be licenced are outside the scope of the ASIC Financial Benchmark (Administration) Rules 2018 or RG 268. This reinforces the importance of an expanded ABA licence regime to ensure that ASIC can regulate all administrators effectively.
C Add Benchmark Integrity Rules
Financial benchmark regulation, including that detailed in part 7.5B (Regulation of Financial Benchmarks) of the Corporations Act 2001, focuses on the conduct of financial benchmark administrators and outlaws financial benchmark manipulation. Part 7.5B of the Corporations Act 2001 does not discuss how participants should interact with a financial benchmark to avoid manipulating it.[173] The ASIC Financial Benchmark (Compelled) Rules 2018 discusses how benchmark participants should act towards their administrator but does not provide details on their specific behaviours in the market.[174]
Part 7.5B (Regulation of Financial Benchmarks) of the Corporations Act 2001 focused on regulating administrators. There is a need to continue building positive conduct across the financial market for all participants. This further mitigates the likelihood of future financial benchmark manipulation.
Regulating positive behaviour has become a more common theme in financial markets. The Market Integrity Rules and the inclusion of industry codes in the definition of unconscionable conduct have shown this.[175] The Market Integrity Rules legislate minimum conduct standards in financial markets rather than outlawing certain behaviours or outcomes and clarify procedural issues in financial markets.[176] This ensures that banks and financial institutions comply with these procedural requirements as ASIC intended.
Industry codes, including the Global Precious Metals and Global FX Codes, provide a clear example of best practice conduct concerning financial benchmarks and guide what should be discussed in regulating conduct.[177] They place minimum standards on participants to ensure financial benchmarks can be accurate. Principles of collusion and trading activities around financial benchmarks must be mandated to avoid financial benchmark manipulation. This allows financial institutions to be guided by a minimum conduct standard and in the context of their business.
A minimum conduct standard for financial benchmark participants would enable banks and financial institutions to implement existing financial benchmark regulations better. It would also allow ASIC to intervene in minor conduct breaches before progressing to more significant issues. This minimum conduct standard should adopt a principles-based approach like the Global Precious Metals and FX Global Codes.
The Market Integrity Rules should be expanded to include financial benchmark-specific guidance. This would ensure that the most critical conduct behaviours are regulated, including conduct around collusion and trading that could lead to changes in a financial benchmark. This emphasis on correct behaviour is crucial given the impacts of financial benchmark manipulation on the broader economy.
V CONCLUSION
Strict financial benchmark regulation is critical to the long-term stability of the global economy.[178] Financial benchmarks are regulated by the Corporations Act 2001.[179] Multiple aspects of financial services regulation apply to financial benchmarks, including market manipulation legislation, the Market Integrity Rules and AFS licensee obligations. Since 2018, part 7.5B (Regulation of Financial Benchmarks) of the Corporations Act 2001 is now the primary legislative tool for financial benchmarks.[180] Part 7.5B of the Corporations Act 2001 defines benchmark manipulation as a criminal and civil offence and mandates ABA licences for significant financial benchmark administrators.[181]
Scandals relating to misconduct in financial benchmarks, including the BBSW and LIBOR, have highlighted the need for stricter regulation of financial benchmark administrators and market participants. The IOSCO’s Principles of Financial Benchmarks highlighted the importance of a consistent global approach to regulating financial benchmarks.
In Australia, misconduct relating to the BBSW highlights the most prominent issues regarding benchmark manipulation.[182] Whilst most banks admitted to wrongdoings via court-enforceable undertakings, findings from ASIC v Westpac [No 2] demonstrated the importance of strict benchmark regulation.[183] Part 7.5B (Regulation of Financial Benchmarks) of the Corporations Act 2001 has provided a needed legislative guide. Still, there is a need to further evolve the regulation of financial benchmarks.
The ABA licencing regime must be expanded to include all financial benchmark administrators linked to publicly traded markets. This would ensure that more financial benchmark administrators are accountable for the higher standards of the IOSCO Principles of Financial Benchmarks. Mandating calculation methodologies would ensure that financial benchmark calculations continue to evolve as technology advances in their associated financial markets. Expanding the Market Integrity Rules to include financial benchmark integrity would ensure that all market participants better conduct standards regarding how they interact with financial benchmarks.
Financial markets evolve quickly. Financial benchmark legislation must evolve faster for the safety and stability of financial markets.
[1] Darrell Duffie and Jeremy Stein, ‘Reforming LIBOR and Other Financial Benchmarks’ (2015) 29(2) Journal of Economic Perspectives 191, 194.
[2] ‘Interest Rate Benchmark Reform in Australia’, Reserve Bank of Australia (Web Page, 2024) <https://www.rba.gov.au/mkt-operations/resources/interest-rate-benchmark-reform.html>.
[3] Corporations Act 2001 (Cth) s 908AB (‘Corporations Act’).
[4] See ibid.
[5] ‘Interest Rate Benchmark Reform in Australia’ (n 2).
[6] ASIC Corporations (Significant Financial Benchmarks Instrument) 2018/420 (Cth) s 5 (‘Significant Financial Benchmarks Instrument’).
[7] International Organisation of Securities Commissions, Principles of Financial Benchmarks (Final Report No FR07/13, July 2013) 3–4 (‘Principles of Financial Benchmarks’).
[8] ‘Significant Financial Benchmarks’ Australian Securities and Investment Commission (Web Page, 2024) <https://asic.gov.au/regulatory-resources/markets/financial-benchmarks/#licensed-administrators/>.
[9] Corporations Act (n 3) s 908AB.
[10] See ibid.
[11] Australian Securities and Investment Commission, Regulatory Guide 268 Licencing Regime for Financial Benchmark Administrators (April 2022) 5–7 (‘Regulatory Guide 268’).
[12] Corporations Act (n 3) pt 7.5B.
[13] See ibid.
[14] ‘Significant Financial Benchmarks’ (n 8).
[15] ASIC Financial Benchmark (Administrator) Rules 2018 (Cth) (‘ASIC Financial Benchmark (Administrator) Rules’); ASIC Financial Benchmark (Compelled) Rules 2018 (Cth) (ASIC Financial Benchmark (Compelled) Rules’).
[16] Australian Law Reform Commission, Financial Services Legislation (Report No 140, June 2023) 6–7.
[17] Scott Morrison, ‘Clamping Down on Market Manipulation of Financial Benchmarks’ (Media Statement, 4 October 2016).
[18] Duffie and Stein (n 1) 196.
[19] Principles of Financial Benchmarks (n 7) 1.
[20] See ibid.
[21] Duffie and Stein (n 1) 194.
[22] Australian Securities and Investments Commission, Financial Benchmarks (Report No 440, July 2015) 14 (‘Financial Benchmarks’).
[23] ‘Market Integrity Rules’, Australian Securities and Investment Commission (Web Page, 1 August 2024) <https://asic.gov.au/regulatory-resources/markets/market-integrity-rules/>.
[24] Ibid 4.
[25] Financial Benchmarks (n 22) 14.
[26] Ibid.
[27] See ibid.
[28] Duffie and Stein (n 1) 198.
[29] Corporations Act (n 3) s 1041A.
[30] See ibid.
[31] Ibid ss 1041A–H.
[32] See ibid.
[33] Morrison (n 17).
[34] Ibid s 1041H.
[35] Australian Securities and Investment Commission, Regulatory Guide 265: Guidance on ASIC Market Integrity Rules for Participants in Securities Markets (2022) 5 (‘Regulatory Guide 265’).
[36] ‘Market Integrity Rules’ (n 23).
[37] Corporations Act (n 3) s 798G.
[38] Regulatory Guide 265 (n 35) 5.
[39] ASIC Market Integrity Rules (Securities Markets) 2017 (Cth); ASIC Market Integrity Rules (Futures Markets) 2018 (Cth); ASIC Market Integrity Rules (Capital) 2021 (Cth); ASIC Market Integrity Rules (IMB Market) 2010 (Cth).
[40] Regulatory Guide 265 (n 35) 5; Australian Securities and Investment Commission, Regulatory Guide 266: Guidance on ASIC Market Integrity Rules for Participants in Futures Markets (2022) 5 (‘Regulatory Guide 266’).
[41] Regulatory Guide 265 (n 35) 5; Regulatory Guide 266 (n 40) 5.
[42] ‘Do You Need an AFS Licence?’, Australian Securities and Investment Commission (Web Page, 20 October 2014) <https://asic.gov.au/for-finance-professionals/afs-licensees/do-you-need-an-afs-licence/>.
[43] Financial Benchmarks (n 22) 14.
[44] Corporations Act (n 3) pt 7.6.
[45] Australian Securities and Investment Commission, Regulatory Guide 104: AFS licencing: Meeting the general obligations (2022) 14–17 (‘Regulatory Guide 104’).
[46] See ibid.
[47] Corporations Act (n 3) s 912A(1)a.
[48] Regulatory Guide 104 (n 45) 14–17.
[49] See ibid.
[50] Australian Stock Exchange, Fair, Orderly and Transparent Markets (Paper, 1 February 2022) 1.
[51] See ibid.
[52] See ibid.
[53] Corporations Act (n 3) s 991A.
[54] Ibid.
[55] Encyclopaedic Australian Legal Dictionary (online at 10 August 2024) ‘unconscionable’ (def 1).
[56] Australian Securities and Investment Commission Act 2001 (Cth) ss 12CA–CC (‘ASIC Act’).
[57] Ibid s 12CC.
[58] See ibid.
[59] ASIC Act (n 56) s 12CA; Competition and Consumer Act 2010 (Cth) s 51ACA(1).
[60] See ibid.
[61] Olaf Weber, ‘Financial Sector Sustainability Regulations and Voluntary Codes of Conduct: Do They Help Create a More Sustainable Financial System?’ in Thomas Walker, Stefanie Kibsey, et al (eds) (Palgrave MacMillian, 2018) 383, 384–5.
[62] London Bullion Metals Association, Global Precious Metals Code (December 2022) 3.
[63] See ibid.
[64] Ibid 23–4.
[65] Ibid 37.
[66] Ibid 29–36
[67] Ibid 24.
[68] Global Foreign Exchange Committee, FX Global Code (July 2021) 1 (‘FX Global Code’).
[69] Ibid 2.
[70] ‘Global Index of Public Registers’, Global Foreign Exchange Committee (Web Page) <https://www.globalfxc.org/global-index-of-public-registers/>.
[71] FX Global Code (n 68) 16.
[72] See ibid.
[73] See ibid.
[74] See ibid.
[75] FX Global Code (n 68); ‘Current Members’, London Metal Bullion Association (Web Page, 2024) <https://www.lbma.org.uk/membership/current-membership>.
[76] Regulatory Guide 104 (n 45) 14–17.
[77] Ibid 2.
[78] See ibid.
[79] Australian Securities and Investment Commission, Managing Conflicts of Interest in Wholesale Financial Markets (Report 742, 25 October 2022) 5.
[80] Corporations Act (n 3) s 912A(1)(aa).
[81] Australian Securities and Investment Commission, Regulatory Guide 181 Licensing: Managing Conflicts of Interest (July 2007) 1–3.
[82] See ibid.
[83] See ibid.
[84] See ibid.
[85] Managing Conflicts of Interest in Wholesale Financial Markets (n 79) 5.
[86] See ibid.
[87] Regulatory Guide 104 (n 45) 14–17.
[88] Corporations Act (n 3) pt 7.5B.
[89] See ibid.
[90] ASIC Financial Benchmark (Administrator) Rules (n 15); ASIC Financial Benchmark (Compelled) Rules (n 15).
[91] Morrison (n 17).
[92] See ibid.
[93] See ibid.
[94] See ibid.
[95] Corporations Act (n 3) s 908AC.
[96] See ibid.
[97] See ibid.
[98] Significant Financial Benchmarks Instrument (n 6) s 5.
[99] See ibid.
[100] See ibid.
[101] Corporations Act (n 3) s 908BA(1).
[102] See ibid.
[103] Ibid s 908AF.
[104] Corporations Act (n 3) s 908DA.
[105] See ibid.
[106] Corporations Act (n 3) s 908DB.
[107] ASIC Financial Benchmark (Administrator) Rules (n 15).
[108] See ibid.
[109] ASIC Financial Benchmark (Compelled) Rules (n 15).
[110] Morrison (n 17).
[111] ‘Interest Rate Benchmark Reform in Australia’ (n 2).
[112] Australian Securities Exchange, ASX Benchmarks (Brochure, 2022) 2 (‘ASX Benchmarks’).
[113] Australian Securities and Investments Commission, ‘ASIC Commences Civil Penalty Proceedings against ANZ for BBSW Conduct’ (Media Release, 4 March 2016) <https://asic.gov.au/about-asic/news-centre/find-a-media-release/2016-releases/16-060mr-asic-commences-civil-penalty-proceedings-against-anz-for-bbsw-conduct/>; Australian Securities and Investments Commission, ‘ASIC Commences Civil Penalty Proceedings against Commonwealth Bank of Australia for BBSW Conduct’ (Media Release, 30 January 2018) <https://asic.gov.au/about-asic/news-centre/find-a-media-release/2018-releases/18-024mr-asic-commences-civil-penalty-proceedings-against-commonwealth-bank-of-australia-for-bbsw-conduct/>.
[114] Australian Financial Markets Association, AFMA BBSW A Guide to the Bank Bill Swap (BBSW) Benchmark Rate (Guide, October 2015) 6–7.
[115] ‘About Us’, Australian Financial Markets Association (Web Page, 2024) <https://www.afma.com.au/about-us>.
[116] Ibid 21; ASX Benchmarks (n 112) 2.
[117] [2018] FCA 751; (2018) 357 ALR 240, 240–1(‘ASIC v Westpac [No 2]’).
[118] See ibid.
[119] Encyclopaedic Australian Legal Dictionary (n 55).
[120] ASIC Act (n 56) s 12CC.
[121] ASIC v Westpac [No 2] (n 117) 241–2 (Bench J).
[122] Ibid 242.
[123] Corporations Act (n 3) s 1041A.
[124] Technical Committee of the International Organisation of Securities Commissions, Investing and Prosecuting Market Manipulation (Report, May 2000) 12.
[125] ASIC v Westpac [No 2] (n 117) 270 (Bench J).
[126] See ibid.
[127] Ibid 274.
[128] Australian Securities and Investments Commission, ‘ASIC Commences Civil Penalty Proceedings against ANZ for BBSW Conduct’ (Media Release, 4 March 2016) <https://asic.gov.au/about-asic/news-centre/find-a-media-release/2016-releases/16-060mr-asic-commences-civil-penalty-proceedings-against-anz-for-bbsw-conduct/>; Australian Securities and Investments Commission, ‘ASIC Commences Civil Penalty Proceedings against National Australia Bank for BBSW Conduct’ (Media Release, 7 June 2016) <https://asic.gov.au/about-asic/news-centre/find-a-media-release/2016-releases/16-183mr-asic-commences-civil-penalty-proceedings-against-national-australia-bank-for-bbsw-conduct/>; Australian Securities and Investments Commission, ‘ASIC Commences Civil Penalty Proceedings against Commonwealth Bank of Australia for BBSW Conduct’ (Media Release, 30 January 2018) <https://asic.gov.au/about-asic/news-centre/find-a-media-release/2018-releases/18-024mr-asic-commences-civil-penalty-proceedings-against-commonwealth-bank-of-australia-for-bbsw-conduct/>.
[129] ‘Court Enforceable Undertakings Register’, Australian Securities and Investment Commission (Web Page, 20 June 2014) <https://asic.gov.au/online-services/search-asic-s-registers/additional-searches/court-enforceable-undertakings-register/>.
[130] See ibid.
[131] Morrison (n 17).
[132] See ibid.
[133] ASX Benchmarks (n 112) 2.
[134] See ibid.
[135] Australian Securities Exchange, ‘ASX to Administer BBSW Rate Benchmark’ (Media Release, 1 December 2016) <https://asic.gov.au/about-asic/news-centre/find-a-media-release/2018-releases/18-024mr-asic-commences-civil-penalty-proceedings-against-commonwealth-bank-of-australia-for-bbsw-conduct/>.
[136] ASX Benchmarks (n 112) 2.
[137] Bank of England, ‘The USD LIBOR panel ceases at end June 2023: Are you ready?’ (News Release, 12 April 2023) <https://www.bankofengland.co.uk/news/2023/april/usd-libor-panel-ceases-end-june-2023-are-you-ready>.
[138] Thomson Reuters Practical Law Glossary (online at 12 August 2024) ‘risk-free rate’ (def 1).
[139] James McBride ‘Understanding the LIBOR Scandal’, Council on Foreign Relations (Web Page, 12 October 2016) <https://www.cfr.org/backgrounder/understanding-libor-scandal>.
[140] See ibid.
[141] See ibid.
[142] McBride (n 139).
[143] Office of Public Affairs US Department of Justice ‘Two Former Deutsche Bank Traders Convicted for Role in Scheme to Manipulate a Critical Global Benchmark Rate’ (Press Release, 17 October 2018) <https://www.justice.gov/opa/pr/two-former-deutsche-bank-traders-convicted-role-scheme-manipulate-critical-global-benchmark>; ‘Libor Rigging Scandal: Former Barclays Bankers Jailed’, BBC News (online at 7 July 2016) <https://www.bbc.com/news/business-36737666>.
[144] Bank of England (n 137).
[145] See ibid.
[146] ‘About IOSCO’, International Organisation of Securities Commissions (Web Page) <https://www.iosco.org/v2/about/?subsection=about_iosco>.
[147] ‘Ordinary Members of IOSCO’, International Organisation of Securities Commissions (Web Page) <https://www.iosco.org/v2/about/?subsection=membership>.
[148] Principles of Financial Benchmarks (n 7) 3–4.
[149] See ibid.
[150] Ibid 7.
[151] Ordinary Members of IOSCO (n 147).
[152] ASIC Financial Benchmark (Administration) Rules 2018 (n 7).
[153] Regulatory Guide 268 (n 11) 4.
[154] Ibid 5–7.
[155] Ibid.
[156] Ibid 5.
[157] Corporations Act (n 3) pt 7.5B
[158] See ibid.
[159] Corporations Act (n 3) s 908AC.
[160] See ibid.
[161] Omar Bashar and Sarkar Kabir, ‘Relationship between Commodity Prices and Exchange Rates in Light of the Global Financial Crisis: Evidence from Australia’ (2013) 4(5) International Journal of Trade, Economics and Finance 265, 267.
[162] Matthias Raddant and Dror Kenett, ‘Interconnectedness in the Global Financial Market’ (2021) 110 Journal of International Money and Finance, 15–16.
[163] Bashar and Kabir (n 161) 267.
[164] ‘Grain Derivatives’, Australian Securities Exchange (Web Page) <https://www.asx.com.au/markets/trade-our-derivatives-market/derivatives-market-prices/grain-derivatives>.
[165] See ibid.
[166] ‘Grain Derivatives’ (n 164).
[167] George Walker, ‘Financial Technology Law: A New Beginning and a New Future’ (2017) 50(1) The International Lawyer 137, 137.
[168] ASIC Financial Benchmark (Administration) Rules 2018 (n 15) 1.
[169] Ibid pt 2.2.
[170] See ibid.
[171] Regulatory Guide 268 (n 11) 15.
[172] See ibid.
[173] Corporations Act (n 3) pt 7.5B.
[174] ASIC Financial Benchmark (Compelled) Rules 2018 (n 15).
[175] Regulatory Guide 268 (n 11) 4.
[176] ASIC Market Integrity Rules (Securities Markets) 2017 (Cth); ASIC Market Integrity Rules (Futures Markets) 2018 (Cth).
[177] London Bullion Metals Association (n 62) 3; FX Global Code (n 68) 16.
[178] Duffie and Stein (n 1) 194.
[179] Financial Benchmarks (n 22) 14.
[180] Regulatory Guide 268 (n 11) 5–7.
[181] Corporations Act (n 3) pt 7.5B.
[182] Morrison (n 17).
[183] See ibid.
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