| Indices are fundamental to model finance,and regarded as the barometer of economy,in terms of model infrastructure in the society.Also,Indices have been increasingly valuable to economy structure,such as CPI,CSI 300 and Shibor,which are taken as essential economical indictors to measure price inflation,stock market and capital cost.However,investors may ignore subjective factors associated with discretion related to benchmark,and misunderstand those factors in any objective point of view.In fact,based on objective data,Indices are still manipulated in any chance,and bewilder us on the belief of data truth because Indices are not seemingly accurate as was expected.For this reason,the mechanism of Indices should be reformed globally,triggering the intention of author to conduct the research on the benchmark.On June 26~thh and 27~thh 2012,DOJ,CFTC and FSA announced that non-prosecution agreement had been reached with Barclays Group which pledged to pay the fine amounted to 490 million dollars.The scandal of manipulation of Libor broke out,and the regulators seized a large amount date in the terminal in which investigators found out that serious problem of data manipulation in international currency market.A number of foreign exchange market makers,including JP Morgan,Citigroup and Royal bank of Scotland manipulate the benchmark market,and accepted huge fines under the law of anti-monopoly.Subsequently,benchmark market targeted on gold,milk,gasoline,biological fuels,natural gas and alumni had been identified the cases of benchmark manipulation.In view of international experience,there is no obvious evidence of security benchmark manipulation occurred in the collective bidding of stock market.The over-the-counter financial benchmarks,such as Libor and WM/R,have the potential to be manipulated.Pre-reform Libor is administrated by the British Banker’s Association and published by Thompson Reuters Thomson Reuters.In essence,Libor reform tun out to be the indicators of capital borrowing cost used by quotation banks.WM/R benchmark is widely used as the exchange standard and compiled through real trade date from global market participators from different district around the clock.,and cited as the data median when it take place between the first30 seconds and the second 30 seconds around 4 PM.After the benchmark manipulation was revealed in the public,civil and criminal lawsuits have exploded over the past six years.Administrative.In addition to administrative penalties imposed by industry regulators,the existing legal cases and benchmark reform plans of the international community provide excellent materials for the study of this paper,which is also the main basis of the author’s paper.It is worth noting that the benchmark interest rates and foreign exchange manipulation not only has impact on the international syndicated loan,interest rate swap,interest rate options,futures,floating rate notes and other lending market,but also cause significant damage to the derivatives market because the price of listed companies are the important participants in the securities market.Hence,the manipulation of benchmark also triggered systemic risks across markets.More interestingly,benchmark manipulation should be centered on financial-industry regulation law,such as benchmark manipulation as a new form of market manipulation.However,the author found that investors and financial consumers in the United States have adopted the anti-monopoly law to initiate the prosecution due to benchmark manipulation in the United Kingdom,the United States,Europe and the United States.According to the cases of benchmark fraud and manipulation,it give rise to concern and questions on critical path to financial laws against manipulation.Firstly,does regulations on manipulation of financial benchmarks,an antitrust issue,or a macro-prudential regulatory issue for central bank come into being a problem Secondly,given the fact that the manipulation of financial benchmarks violate different department laws at the same time,how do different law enforcement agencies respond and coordinate to illegal behaviors.Thirdly,in the case of financial benchmark manipulation,what kind of litigation should be selected by the investors or financial consumers whose rights and interests are violated to obtain civil compensation?Fourthly,what about the future of financial benchmarks?What can we learn from the related system construction in China?Based on the guidance of mentioned-above problems,this paper comes up with the following ideas step by step in the paper.The first chapter of this paper first analyzes the concept,classification and nature of"financial benchmark"where it is seen as the premise of basic research on financial benchmark and also the theoretical basis of relevant legal regulation path and reform path.In the first place,the concept of defining financial benchmarks and other concepts that can easily be confused with it,such as securities indices.EU benchmark ordinance(EBR)in 2016,EU regulations on the financial markets(MiFIR)and the UK"financial service act of 2012"to the provisions of the benchmark can be defined as:one or more of the value of assets or price can be accessed and calculated directly,periodically on the basis of asset value and it can be released to the public or to pay any unknown rate(rate).Subsequently,this chapter divides the base into public base,commodity base and combined base according to the different intention of the base supply.As the mixed index features in both public and private goods,the ownership relationship is unclear.Meantime,rights and responsibility relationship is unclear,and the occurrence of serious manipulation scandal is concentrated on the third kind of mixed index.Only by defining the different concept of the benchmark in terms of data,assets and prices,diversified operating benchmark mechanisms can be clarified and prevent different risks.Finally,the thesis is proposed in this chapter that benchmark is data-oriented,and benchmark is intersected with the concept of information,news,big data and others.The"misappropriation"of assets is prohibited by intellectual property or unfair competition law in order to protect the interests of benchmark holders.The second chapter of this paper analyzes the behavior nature,the reason of manipulation,the main character and the solutions which has been explored.First,benchmark manipulation is beyond the theoretical premise of existing"market manipulation",in which the manipulator’s objective is to influence the price of the entire market by trading large enough assets(such as continuously trading and mutual delegation).Manipulating price benchmarks would eliminate the cost of shipping and warehousing physical goods,in a convenient way instead of manipulating physical prices or the underlying market.At the same time,due to its special data capture and information disclosure practices,the benchmark generation often lacks the"false statements"and"dependencies"which is necessary to constitute"fraud".This has made"benchmark manipulation"become the most fashionable form of"market manipulation".Second,existing market-rigging legislation has failed to meet the needs of the development of the situation,。In April2014,the European Union assess the behavior or any effect",belonging to"market manipulation",to give reference on supervising and control in the industry in a particular legal way through the latest regulations on the abuse of market,regulations"any false or misleading information,or provide false or misleading elements.Third,market-making is the essence of Libor as quoted or WM/R as transaction-driven.Therefore,this paper points out that market makers play the main role in manipulating the financial benchmark,and discusses the restrictive influence of market makers on market competition and relevant countermeasures based on a survey of relevant market monopoly cases in different periods and markets in the world.Finally,this paper introduces the failure case of the holder of interest rate derivative that is contract to file a lawsuit against the quotation bank on the basis of contractual relationship.As a transaction carrier,the extensive contractual relationship between market-making Banks and investors cannot help investors obtain civil compensation.This leads to the analysis of chapter III anti-monopoly law.The third chapter of this paper first introduces the phenomenon that the majority of investors and financial consumers who have suffered from losses on account of the benchmark manipulation have to seek for civil compensation by means of the lawsuit of anti-monopoly group.In the wake of the WM/R manipulation,an antitrust suit brought by investors against currency market makers was upheld in federal court in the United States.The court held that the consultation between market makers through E-mail,instant message and other means constituted the principle of"violation of the law itself"in terms of the horizontal price monopoly agreement and the application of the anti-monopoly law which is not only a great victory for the vast number of investors and financial consumers.This chapter also continues to argue that,on the basis of comprehensible principles of implied exemption of financial industry’s anti-monopoly,when the department law leads to competition and cooperation on the regulation of the same behavior,the law of a country should reasonably allocate the authority of financial benchmark associated with anti-monopoly regulation and industry regulation.But at the same time,because financial benchmarks are a global issue of economic governance,it is also realistic to apply them to increase deterrence in cases where coordination mechanisms are difficult to achieve a heavy penalty across the boarders.As for the institutional designed to prevent the manipulation of financial standards,it can be divided into two categories:one is discipline,the other is incentive.In September 2013,the European commission submitted the regulatory legislative proposal to the European parliament and the European council on the use of indexes as benchmarks in financial instruments and financial contracts.The elements of the legislative proposal rely on establishment of a"suitability"standard(a"suitability"standard)for when and by what standards financial instruments and financial contracts should refer to,and the proposed reform of existing financial benchmarks.The proposed legislation was approved by the European parliament in June 2016,the EU bench regulation 2016/1011,most of which took effect on January1,2018,and is seen as by far the most comprehensive written law on the establishment and use of benchmarks.The first section of the fourth chapter of this paper will introduce the EU’s experience in the management of benchmark classification and the hierarchical management of benchmark source data by combining the UK’s 2014"Fair,Effective Markets Review(FEMR)"and the EU benchmark regulations.This part proposes that the principle of compulsory and modest standard supervision should be adhered to.Meanwhile,the absence of criminal responsibility of the anti-monopoly law in China has affected its equal application with the industry regulation law to some extent,and the crime of manipulating securities and futures market in article 182 of the criminal law cannot be applied to the benchmark of fixed income,foreign exchange and bulk commodities.Therefore,in the last part of the fourth chapter,the author will introduce the individual imprisonment cases involved in financial benchmark manipulation and its breakthrough of the"minimum correlation principle"for international criminals’extraterritorial jurisdiction,and then put forward Suggestions on China’s criminal law.The last chapter of this paper considers the incentive system for financial benchmark manipulation is in need of institutional improvement.An important part of the existing reform is to enhance the objectivity of benchmarking data.But in my humble opinion,the motion may not be the crux of the matter.The most obvious counter example is the manipulation of the WMR,a global currency index based entirely on real trading data.Hence,this paper realizes that the data providers and publishers of the benchmark need to provide accurate and adequate demanding index only by examining the interests of law enforcement related subjects,analyzing the essence of relevant objects and exploring incentive compatible rule measures can.The above incentive compatible mechanisms include a clear understanding of the rights and responsibilities of different subjects,strengthening the property rights of index makers,especially intellectual property protection;It also guides the transition from mixed to commodity indices to ensure the fairness of the"paid available"products(that is,indices).In the mean time,this paper argues that the central bank should have the remaining legislative and executive powers of financial benchmark regulation,based on the macro-prudential functional supervised by the central bank and the need of penetrating supervision.Finally,in order to realize effective judicial guarantee,this paper suggests constructing the flexible and applicable mode and deepening of China’s group litigation.Market economy features in decentralized economic decision made by the policy maker who allocation of resources and the cost of factors independently according to the market price.Consequently,the law guarantees people’s right to actively participate in price setting whereas the financial benchmark manipulation,both in the public interest and in financial soundness,is intolerable by the law.Moreover,in the post-crisis era,it is also necessary for the public interest to maintain financial stability and strictly take control on financial risks.With the continuous deepening of the"One Belt And One Road"strategy to promote the internationalization of RMB,the opportunity for China to master the interest rate market and the pricing power in the foreign exchange market is increasingly mature though the task is more urgent.It is of practical significance to study financial benchmark theoretically. |
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