This chapter addresses benchmarks. A benchmark is essentially a standard or point of reference against which things may be compared. Benchmarks are referenced in many contracts including commodity derivatives. They can be determined in a number of different ways, from calculation of factual data such as information about transactions executed through to exercise of expert judgement. In recent years, there has been a focus on the need to ensure that benchmarks accurately reflect the market they claim to measure, are transparent about how they are determined, and that they are not influenced by potential conflicts of interest. This action started at international level, with the G20 leaders declaring in 2011 to prepare recommendations to improve the functioning and oversight of the oil price reporting agencies (PRAs). PRAs are publishers and information providers who report prices transacted in physical and some derivatives markets, and give an informed assessment of price levels at distinct points in time. The International Organization of Securities Commissions (IOSCO) subsequently published a set of Principles for Financial Benchmarks (IOSCO Principles) in light of investigations and enforcement actions regarding attempted manipulation of major interest rate benchmarks.
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