The UK government plans to overhaul its financial benchmark regulations, aiming to ease the compliance burden on the industry. The reforms will narrow the regulatory focus to benchmarks that pose significant systemic risks to the UK financial system. Currently, all benchmarks produced in the UK are regulated by the Financial Conduct Authority (FCA). Industries such as commodity trading, foreign exchange, bond issuance, and derivatives clearing rely on benchmarks to allocate capital and manage risk.
Under the proposed changes, only benchmarks deemed to pose systemic risks to UK financial markets will remain under the regulatory scope, adhering to specific criteria. The finance ministry estimates that these changes could reduce the number of benchmark administrators subject to regulation by 80% to 90%. The reforms intend to create a more streamlined and efficient regulatory environment for financial benchmarks.
The Financial Conduct Authority stated that the reforms would allow it to align the regulatory regime more closely with current market conditions while also alleviating unnecessary burdens on the industry. The government is seeking industry feedback on the proposed changes, with a deadline of March 11, 2026, for submissions. The FTSE 100 index, which tracks the largest listed companies on the London Stock Exchange, is an example of a benchmark. MSCI has a series of indices that focus on specific segments like large and mid-cap companies, or those with high ESG ratings.
In May, the EU also finalised revisions to its Benchmarks Regulation, which similarly reduced the number of benchmarks subject to mandatory regulation. This global trend reflects a move towards more targeted and risk-based approaches to financial benchmark oversight.
