S&P DOWJONESINDICES

May 16, 2013

Mr. Alp ErogluInternational Organization of Securities Commissions (lOSeD)Calle Oquedo 12, 28006 Madrid, SpainVia electronic mail: BenchmarkPrinciplesconsultationresponses@lOSCO.org

Re: Public Comment on Financial Benchmark Principles

Dear Sir:

On behalf of McGraw-Hill Financial, which owns the controlling interest in S&P Dow JonesIndices LLC, I thank you for the opportunity to respond to the questions raised in Chapter 3 ofthe Board of IOSCO's Consultation Report on Principles for Financial Benchmarks, dated April2013 ("Consultation Report"). S&P Dow Jones Indices shares IOSCO's goal of enhancingconfidence, transparency. and integrity in key benchmarks.

As noted in our February 11, 2013 letter to you, S&P Dow Jones Indices is a leading publisher ofa wide variety of indices, many of which are used as benchmarks in the marketplace. Wepublish over 830,000 indices, including globally-recognized and industry-leading indices such asthe S&P 500, the Dow Jones Industrial Average, and the S&P/Case Shiller Horne Price Indices.In additional to calculating and publishing our own indices, we also have a great deal ofexperience working with third parties and owners of other benchmarks to leverage our oversightand governance protocols, as well as our transparent systems and processes, to act as a customindex calculation agent that calculates, maintains, and distributes over 50,000 custom indicesaround the globe.

We recognize that indices, used as the underlying reference in a broad range of financialproducts and as a reference by portfolio managers worldwide, are important to a dynamic androbust marketplace. Markets worldwide benefit from the increased liquidity and investmentopportunities that result from index-based products. We also appreciate that there are manytypes of indices that capture and provide information for a number of different uses from varioussources of information. Some of these indices are based on unsubstantiated estimates or surveys,while others, such as those published by S&P Dow Jones Indices, are tied to observable marketinformation, such as actual securities transactions, observable bids and offers, or other verifiablemarket data.

Not only are there many types of indices, but also there are different types of index providers.Whereas some indices are provided by securities exchanges or other market participants, S&PDow Jones Indices is independent and separate from market participants, product providers, andgovernment entities. S&P Dow Jones Indices does not participate in the markets it measures andhas no vested interest in the value of any of its indices at any given time. We do not create,manage, issue, trade or clear any index-linked investment product or derivative. Our role inindex publishing is purely analytical.

We continue to believe for the reasons set forth in our February II letter that a "one size fits all"approach is not appropriate. As set forth in more detail below, we believe that our own robustgovernance and controls, along with our structural independence, are more than sufficient toensure the confidence, transparency, and integrity upon which our entire business depends for itssuccess in the marketplace. Moreover, we and other members of the Index Industry Association(<<UA")are currently developing a set of Best Practices that set forth the high standards to whichUA members adhere, while providing greater flexibility in their implementation than the currentdraft ofIOSCO's Principles for Benclunarks. We appreciate the opportunity to provide ourcomments on the IOSCO's Principles for Benchmarks, and we set forth below our responses tothe four questions proposed in Chapter 3 of the Consultation Report.

Thank you again for the opportunity to respond to the Consultation Report. S&P Dow JonesIndices welcomes the opportunity to discuss these topics at any future stages of the consultationprocess.

Respectfully submitted,

sl Alexander J. Matturri. Jr.

Alexander J. Matturri, Jr.Chief Executive OfficerS&P Dow Jones Indices

CONSULTATION QUESTIONS

1. Equity indices: Indices may be used to measure a wide range orunderlring Interests,using a variety orca/entation methodologies and inputs. In the specific case of equityindices. inputs are typically based on transactions concluded on Regulated Markets. Inlight ofthis: are there any principles or parts ofthe principles that cannot, or should not.be applied [0 equity indices? 1[50, please identify these principles and explain why theirapplication is inappropriate.

As discussed in our previous comments submitted February 11,2013, S&P Dew Jones Indicesbelieves that its indices-including but not limited to equity indices-need not be subject toexternal regulation concerning any of the proposed principles. As a publisher whosepublications are voluntarily used by market participants and others worldwide, S&P Dow JonesIndices is not regulated in any country. The financial index provider industry is highlycompetitive, and one that provides high quality, substitutable indices, which are calculatedaccording to publicly available, transparent index methodologies. That competition provides anatural check and balance in that nmnerous competitors have incentives to publish indices whichreflect a given market to the best of their abilities. Once S&P Dow Jones Indices has developedan index, the market alone determines whether it will be adopted as a benchmark, not S&P DowJones Indices, its competitors, nor any other entity external to the markets. We believe theadaptation of benchmarks is for the market to decide based on the needs of its participants.

Our role in index publishing is purely analytical and does not encompass the same issues whichhave drawn attention to other benchmarks, such as interest rate indices. S&P Dow Jones Indicesis independent and separate from market participants, product providers, and goverrunententities. S&P Dow Jones Indices does not participate in the markets it measures and has novested interest in the value of any of its indices at any given time. We do not create, manage,issue, trade, or clear any index-linked investment product or derivative.

As an independent index provider, S&P Dow Jones Indices has an incentive to publish the bestproduct possible according to its established policies and procedures in order for it to be adoptedby the market as a viable benchmark. Accordingly, S&P Dow Jones Indices already follows bestpractices that, where appropriate, are similar to many of the draft principles set forth by IOSCO.For example, S&P Dow Jones Indices has robust independent oversight functions charged with:(a) reviewing its methodologies to ensure they meet its stated objectives and continue to addressmarket needs effectively and credibly; (b) publishing and adhering to a transparent constructionand calculation methodology; (c) ensuring that editorial functions, including index development,calculation and maintenance, are appropriately firewalled from commercial functions; (d)employing rigorous compliance practices designed to prevent inappropriate behavior andconflicts of interest; and (e) obtaining data and submissions from reputable sources andmonitoring of inbound and outbound data and sources to make sure they continue to meet ourhigh standards. S&P Dow Jones Indices is confident that its own policies and procedurescomprise robust governance and provide for transparency, as our reputation is staked onreliability and the market demands it. Moreover, we and other members of the Index IndustryAssociation ("IIA") are developing a set of Best Practices that set forth the high standards towhich IIA members adhere. These Best Practices reflect many of the same principles, and its

adoption, we respectfully submit, is a preferable marketplace alternative to governmentregulation. The current draft of the IIA Best Practices is attached hereto as Attachment A.

We continue to be concerned that regulation of the processes by which S&P Dow Jones Indicesdevelops and maintains its indices, including methodologies and any associated decision making,would unnecessarily intrude into and compromise the very independence that makes S&P DowJones Indices a valuable resource to the market as an impartial market observer. We believe thatthe markets are the best arbiter of which indices are best suited to become benchmarks. Forexample, the S&P 500 is a widely-used benchmark precisely because it has a long track record ofeffectively reflecting the U.S. large cap equity market, without a vested interest in the value ofthe index at any given time and without undue external influences that could bias the outcome.

It is important to note that S&P Dow Jones Indices differs fundamentally from the BritishBankers' Association, and its indices (including but not limited to equity indices) arefundamentally different from LIBOR. The inputs are taken from a regulated exchange orotherwise constituted from actual market data rather than an estimate or opinion of the price atwhich a transaction might take place made by a small panel of interested parties. Further, asnoted above, our publicly available methodologies clearly explain how our indices are created,calculated, and maintained.

While we question the wisdom of additional regulation of index providers such as S&P DowJones that are independent and transparent, and have a proven track record of publishing reliableindices, we note that the following principles or parts of principles either should not be applied,or in some cases will not apply, to equity indices:

• The provisions of Principle 4 that would apply where a Benchmark is based onSubmissions. The definitions of "Submissions" and "Submitter" in the glossary areoverbroad and do not distinguish between vendors who supply data from actualtransactions or other actual market information and those who supply estimates orspeculation about the prices at which a transaction would take place in a highly illiquidmarket. The application of the additional provisions of Principle 4 to data suppliers whoprovide data about actual transactions in Regulated Markets could disrupt existingcontractual relationships and make data providers less willing to provide data to indexproviders, thereby likely contracting the breadth and depth of available indices.

• The disclosure provisions of Principle 5. S&P Dow Jones Indices does not object tothe general principle of internal oversight; indeed, S&P Dow Jones already maintains arobust system of internal oversight and controls. The requirements to disclose broadlyand publicly exactly how the internal oversight functions, including the identity ofindividuals involved, is unnecessarily onerous and likely to be counterproductive, asfirms will be dissuaded from adopting oversight mechanisms if their effectiveness wouldbe compromised by broad, public disclosure. These proposed disclosure requirementsare especially unwarranted for equity indices which, given the verifiable nature ofunderlying data, pose less risk than certain other types of indices like interest ratebenchmarks.

• The Benchmark design features of Principle 6. Not all of the listed benchmark designfeatures apply to all types of equity markets or equity indices. Accordingly, werecommend the following revision: "Where appropriate to the particular Interest,benchmark design should take into account the following generic non-exclusive features,and other factors SHOl:lldmay also be considered, as ElflpFOpria-teto tHe particularInterest:"

• Principle 8: Hierarchy of Data Inputs. S&P Dow Jones Indices does not think it isnecessary to mandate a hierarchy of inputs. In many cases, equity indices are based onconcluded Arm's-Length Transactions in the equities included in the index, and there isno need for an Administrator to Publish a hierarchy.

• The additional provision of Principle 10 that would apply where a Benchmark isbased on Submissions. This provision is overbroad and unnecessary in the context ofindices where the data being provided is based on actual market information rather thanunsubstantiated estimates.

• The consultation procedures of Principles 11 and 12. While S&P Dow Jones Indicesdoes seek certain types of input from marketplace participants in connection with itsequity indices, the breadth of the consultation requirements-and the requirement todisclose broadly all comments made-are inappropriate and unnecessary. While S&PDow Jones publishes the rationale of proposed material changes to its indices, itsdecision-making (including when to consult market participants) must remain a productof its sole discretion and the deliberative process itself is highly confidential and couldrun afoul of selective disclosure requirements in certain jurisdictions. CompromisingS&P Dow Jones's independence and the confidentiality of its deliberative process wouldbe counterproductive to the goals of index integrity and reliability that the principles areintended to foster.

• Principle 13: Submitter Code of Conduct. This provision is overbroad andunnecessary in the context of equity indices where the data being provided is based onactual transactions in Regulated Markets.

2. Additional measures to address risks resulting (rom Submission-based Benchmarks orownership or control structures: Additional measures have been specified within certainprinciples to address specific risks arising from a reliance on Submissions Cvrinciples 4.10, 13 and 17) and/or from ownership or conh'ol structures (principles 2. 5 and 16).

a. Should these additional requirements apply to Submitters and Administrators ofall submission-based Benchmarks or Benchmarks with the specifiedownership/control structures?

b. Ifnot, please explain why all or some submission-based Benchmarks orBenchmarks with the specified ownership/control structures should be exempt.

Submissions: S&P Dow Jones Indices believes that the additional measures specified inPrinciples 4, 10, 13, and 17 addressing reliance on Submissions should not apply to Submitters

and Administrators of all submission-based Benchmarks, as those terms are defined in thePrinciples. As an initial matter, the terms "Submitter" and "Submissions" are so broadly definedin Annex A to the Principles that they would appear to encompass almost any external source ofdata used to calculate a Benchmark. Thus, as drafted, the additional measures intended for onlyfor "submission-based" Benchmarks arguably would apply even to, for example, indices basedon transactions in Regulated Markets (such as equity indices), where data from such transactionsare supplied and maintained by a regulated entity (such as a stock exchange). We believe that ifthese additional measures are to apply at all, then the definitions of "Submitter" and"Submissions" should exclude, at a minimum, data reflecting observable transactions and otheractual market information.

Moreover, S&P Dow Jones Indices already has its own system of checks and balances that applyto all input types to ensure that the data provided by our data sources are robust and dependable,including redundancy of price information and the ability to confirm the accuracy of a price withthe underlying source (e.g., the New York Stock Exchange) if there is a question about a specificdatum. For example, with regard to data received consisting of actual securities transactions, wehave routine error-checking procedures; with regard to indices driven by committed quotes, wehave periodic verification procedures from our pricing vendors as well as price-challengeprocedures. As such, S&P Dow Jones Indices is confident that its own policies and procedurescomprise robust governance and provide for transparency, and no third-party prescribed code ofconduct for Submitters is necessary.

S&P Dow Jones Indices believes that Benchmark submissions do not require new, additionalregulation, and that any perceived benefits of regulation would be far outweighed by thesignificant disadvantages of doing so. Many of the entities contributing price data used in theindices published by S&P Dow Jones Indices, via our data vendors or financial institutions, areregulated exchanges or other regulated entities. Those sources that are not already regulated arevendors providing robust and dependable data. Apart from creating an unnecessary additionalregulatory layer, regulating contributions of such data used for S&P Dow Jones Indices coulddisrupt contractual arrangements with our data vendors (e.g., IDC), with no appreciable benefitto the quality or integrity of the data we receive, and could create disincentives for data vendorsto enter into such agreements with index providers, thereby reducing the number of indicesavailable to the public. Indices driven by prices obtained from voluntary submitters could seeparticipation wane if too much regulatory activity is undertaken. Indeed, for less liquid assetclasses like fixed income, the result could be far less transparency, to the detriment of all marketparticipants.

Ownership or Control Structures: Principle 2(c) would require S&P Dow Jones Indices andother Administrators to disclose broadly and publicly all third parties involved in the collectionof inputs. S&P Dow Jones Indices supports the principle that index publishers need to maintainappropriate oversight over third parties who participate in data collection or calculation, and haslong maintained a robust system of appropriate oversight over its vendors to ensure the integrityand reliability of its indices. The requirement to disclose publicly the identity of all such vendorsin all cases, however, is overbroad and unnecessary.

Principle 5 provides for independent oversight by "a balanced representation of a range ofStakeholders where known, Subscribers and Submitters," in cases where conflicts may arise due

to the Administrator's ownership or control structures. S&P Dow Jones Indices believes that thisprovision should more expressly exclude Administrators that, like S&P Dow Jones Indices: (1)are independent and separate from market participants, product providers, and governmententities; (2) do not participate in the markets they measure and have no vested interest in thevalue of any of their indices at any given time; and (3) do not create, manage, issue, trade, orclear any index-linked investment product or derivative.

Principle 16 is also overbroad for independent and transparent Administrators such as S&P DowJones Indices. The size and complexity of an Administrator's operations, and the breadth anddepth of use of Benchrnark use by Stakeholders are important considerations for determining theneed for and frequency of audits, but there are others as well. S&P Dow Jones respectfullysubmits that that this principle, if adopted, should be modified to clarify that other factors mayaffect the frequency of audits as well. In addition, S&P Dow Jones Indices is concerned that therequirement that the outcome of external audits be promptly published will be counterproductiveto the goals that the Principles are intended to foster in that such a requirement may discouragefirms from undertaking external audits or encourage firms to limit the scope of any such audits.

3. Notice Conceming Use of Expert Judgment: Should Administrators be required tobriefly describe and publish with each benchmark assessment:

a. a concise explanatian. sufflcient to [Gcilitate a User's or Market Authority'sability to understand haw the assessment was developed, terms referring ta thepricing methodology should be included (e.g., spread-based.interpolated/extrapolated or estimate-based): and

b. a concise explanation ofthe extent to which and the basis upon which judgment fl.e.exclusions ordata which otherwise conformed to the requirements ofthe relevantmethodology fOrthat assessment, basing assessments on spreads.interpolation/extrapolation or estimates, or weighting bids or offers higher thanconcluded transactions etc.), irany, was used in establishing an assessment.

We believe that additional requirements of this nature are tmnecessary. S&P Dow Jones Indicesalready has robust policies and procedures designed to ensure the integrity of its indices, and ithas detailed methodologies which allow users to understand how the indices are constructed andcalculated, including how our experts will exercise judgment in maintaining the indices.Transparency is a core value at S&P Dow Jones Indices; we provide broad access to ourmethodologies and research because we believe the dissemination of such information helpsparticipants understand the markets in which they operate. Indeed, our index methodologies arepublicly available on our website. S&P Dow Jones firmly believes that the detailed nature of itspublished methodologies is sufficient to allow users to assess the credibility, representativeness,relevance, and suitability of its indices on an ongoing basis. Our methodologies include adetailed description of how we intend to measure the given market, how we will choose indexconstituents, how those constituents will be weighted, and other relevant information about howthe index will be calculated, as well as how S&P Dow Jones Indices will exercise its expertjudgment in maintaining the index.

While our methodologies, and changes to them, are transparent and publicly available, indexgovernance does include a degree of judgment in applying those methodologies. For example,S&P's U.S. Indices such as the S&P 500 are maintained by the U.S. Index Conunittee, whichmeets monthly to review such things as pending corporate actions that may affect indexconstituents, statistics comparing the composition of the indices to the market, companies thatare being considered as candidates for addition to an index, and any significant market events. Inaddition, the Index Committee may revise index policy covering rules for selecting companies,treatment of dividends, share counts or other matters. S&P Dow Jones Indices regularly engageswith market participants through Index Advisory Committees to seek input into its indexmethodologies and proposed changes, although retains independent judgment as to whether toimplement suggestions by market participants. S&P Dow Jones Indices considers informationabout potential, prospective changes to its indices and related matters to be potentially market-moving, and therefore all Index Committee discussions are confidential. To reiterate, however,our methodologies, processes and procedures are transparent and open to the public.

4. Revisions to the principles: Please provMe any suggested changes to specific principlesor definitions of key terms set out in Annex A, including drafting proposals and rationale.

• IOSeD Should Modify Requirements to "Make Available" Certain Types ofInformation: S&P Dow Jones Indices believes that several of the Principles should berevised so that (i) an Administrator is not required to "Make Available" competitivelysensitive documents and information to "Stakeholders and relevant Regulatory Authorities,"and (ii) disclosure requirements would not be counterproductive to the goals that thePrinciples are intended to foster. The Principles should distinguish between information thatshould be made available broadly and publicly, such as the methodology for an index, andinformation that is not appropriate for dissemination to all market participants, such ascontingency plans in the event of market disruption (Principle 12) and the specifics ofparticular control procedures. A narrower form of disclosure, such as to a regulator in thecontext of specific inquiry, may be appropriate for such categories. To the extent thatsponsors of financial products and their customers need access to non-public informationabout Benclunarks or an Administrator's controls and contingency plans, such access is bestaccomplished through contractual arrangements, rather than broad disclosure compelled byregulators. In addition, index providers should not have to reveal information about bespoke,customized indices calculated at the behest of a specific client to anyone outside of thatclient. S&P Dow Jones believes the following disclosure requirements are overbroad:

• Principle 2(c): the requirement to Make Available the identity and roles of all datavendors.

• Principle 4: the requirement to Make Available the Administrator's control framework.

• Principle 5: the requirement to Make Available "procedures regarding {theAdministrator's] oversight function," including but not limited to "{t]he details ofmembership of any committee or arrangement charged with the oversight function."

• Principle II: the requirement to "make accessible" comments made as part of anAdministrators consideration of changes to the methodology of a Benchmark.

• Principle 12: the requirement to Make Available all written policies and proceduresconcerning the need for "possible cessation of a Benchmark." S&P Dow Jones Indicesagrees that index providers should be prepared for such contingencies that might requirecessation of a Benchmark, but many elements of these plans are competitively sensitivein nature. Sponsors of financial products based on Benchmarks can protect themselvesand their customers through contracts with Administrators, and public disclosure ofcontingency plans may be counterproductive to the goals the Principles are intended tofoster.

• IOSCO Should Distinguish Between Submissions Based on Actual Transactions orOther Verifiable Market Information and Submissions Based on Estimates orSpeculation of the Prices at Which a Transaction in an Unregulated, Illiquid MarketWould Occur. See S&P Dow Jones Response to Consultation Question 1.

• In Addition, IOSCO Should Modify the Following Principles:

• Principle 5: Internal Oversight. S&P Dow Jones Indices believes that while an InternalOversight function is essential for any Administrator, the particular responsibilities oftheoversight function as set forth in Principle 5 are not appropriate as a "one size fits all"solution. As noted above, S&P Dow Jones Indices does not participate in any of themarkets it measures, and we ensure that our editorial functions (including indexdevelopment, calculation and maintenance) are appropriately firewalled from commercialfunctions. Accordingly, many of the detailed responsibilities listed in Principle 5-suchas "assessing whether [an index] Methodology continues to appropriately measure theunderlying Interest"-are appropriately within the province of our index experts whooversee the development, calculation and maintenance of our indices, entirelyindependent of our commercial functions. We therefore believe that for some indexproviders (including S&P Dow Jones Indices), the responsibilities ofa separate oversightcommittee may be more limited and focused on ensuring that the index provider hascomplied with its established policies and practices and that the employees to whom thedesign and calculation functions have been delegated have the appropriate qualificationsand experience. In many instances, "commissioning external reviews of the Benchmark"will be unnecessary.

• Principle 10: Content of the Methodology. S&P Dow Jones Indices agrees that thecontent listed in Principle 10 is typically appropriate for publication in the Methodology.But given the enormous variety of indices developed by index providers, not everyelement listed may be applicable or appropriate for publication in every case.Accordingly, S&P Dow Jones Indices reconnnends the following line edit to Principle10: "At a minimum, the Methodology should typically contain: ... " Moreover, items (g)and (h) in the list are not actually aspects of a Benchmark methodology and would nottypically appear in a description of a methodology. Those items should be removed fromthe list.

• Principle 11: Changes to tbe Methodology. The last paragraph of Principle 11(including subparagraphs (a) and (b» appears to create a "notice and comment"requirement whenever an Administrator makes changes to its Methodologies. AlthoughS&P Dow Jones Indices publishes its methodologies on its website (including anychanges to the same), and we do regularly engage with market participants to seek inputinto our methodologies and proposed changes when we deem such consultationappropriate, we do not believe it is either necessary or appropriate to require advancenotice and consultation with Stakeholders for any change to an index methodology. S&PDow Jones Indices is a publisher whose publications are voluntarily used by marketparticipants and others worldwide. Requirements to consult with third parties inmaintaining our indices-including in advance of revising our methodologies-wouldnot only infringe upon our rights as a publisher and proprietor of intellectual property, butwould also be an intrusion into the very independence that makes S&P Dow JonesIndices a valuable resource to the market as an impartial market observer.

• Principle 12: Transition. While S&P Dow Jones Indices agrees that it is prudent forsponsors of financial products based on a Benchmark to have robust fall-back plans in theevent an Administrator determines to cease publication of the Benchmark, we do notbelieve that it is the Administrator's burden to ensure that such plans are in place. Thesematters are best handled through Benchmark license agreements or through regulation ofthe relevant product sponsor, rather than regulation of independent Administrators suchas S&P Dow Jones Indices. Moreover, we believe the markets are best suited todetermine a timeframe for movement between a Benchmark and its replacement withoutexternal pressure or mandates.

• Principle 13: Submitter Code of Conduct. As a general proposition, S&P Dow JonesIndices believes this Principle is overbroad and unnecessary. A Submitter Code ofConduct should be significantly reduced in scope or eliminated altogether, as onerousrequirements may discourage reliable data vendors from supplying information toAdministrators for use in connection with Benchmark calculations.

• Principle 16: Audits. As noted above, the requirement to publish external audit resultsmay discourage Administrators from undertaking external audits or encourage limits onthe scope of any such audit.

• Principle 17: Audit Trail. While S&P Dow Jones Indices does maintain informationrelated to its indices, including the identities of those who participate in index committeesand other areas where judgment is exercised, a reasonableness standard should be appliedto the maintenance of such records so as not to hinder regular business operations.

• Principle 18: Cooperation with Regulatory Authorities. S&P Dow Jones Indices isnot regulated in any country. While we routinely cooperate voluntarily with appropriaterequests for information from market regulators, this provision is exceedingly overbroadin terms of the obligations it purports to impose on unregulated entities and should bestricken. Determinations of the appropriate supervisory powers of market regulatorsshould be made by the appropriate legislative bodies, and the Principles should not be a

vehicle for delegating investigative powers that the appropriate legislature has determinednot to grant.

• Annex A: Definition of "Interest." We recommend that the defInition of «Interest" beexpanded to expressly include "rea! estate," and that the example of "interest rates" berevised to include "interest and other rates,"

• •II a

index~TION

1270 Avenue of the Americas28th Floor

New York, NY 10020

May 16,2013

Mr. Alp ErogluInternational Organization of Securities CommissionsCalle Oquendo 1228006 MadridSpain

Re: Public Comment on Principles for Financial Benchmarks (CR04/13)

On behalf of the Index Industry Association ("IIA"), we are pleased to respond to theInternational Organization of Securities Commissions' ("IOSeO") Consultation Report onPrinciples for Financial Benchmarks (the "Principles"). The Principles are the product ofextensive dialogue between the IOSeO Task Force on Financial Market Benchmarks (the"Task Force") and market participants resulting from the publication of IOSCO'sConsultation Report on Financial Benchmarks (the "Consultation Report") earlier this year.The Principles reflect a set of standards relating to the benchmark calculation. methodology.and maintenance process and are a key step in strengthening confidence and integrity infmancial markets, particularly with respect to survey and estimate-based benchmarks.

Founded in 2012, IIA is an independent, not-for-profit organization representing theglobal index industry. The purpose of IIA is to represent the global index industry and theneeds of investors by working with market participants, regulators, and other representativebodies to promote sound practices in the index industry that strengthen markets byadvocating the highest level of ethics and integrity. Several of the leading index providers inthe world are members of llA, including Barclays, FTSE Group, Markit, MSCI Inc.,NASDAQ OMX, Russell Investments, and S&PlDow Jones Indices, LLC. Our membershave calculated indices since 1896 and, in the aggregate, the members of IIA calculate overone million indices for their clients, covering a number of different asset classes, includingequities, fixed income, and commodities.

IIA commends IOSCO for engaging in a thorough two step consultation process withstakeholders on formulating uniform standards for financial benchmarks and benchmarkadministrators. In so doing, IOSCO has correctly recognized that a "one-size-fits-all"approach is inappropriate for benchmarks, as the universe of benchmarks differs substantiallywith regard to methodology, sources of data, governance, existing regulation, andtransparency. For example, the Principles highlight several areas, such as the content ofmethodology or a submitter code of conduct, where certain standards may be inappropriate orshould not apply.

IIA shares IOSCO's goal of ensuring the integrity of all financial benchmarks anddeveloping uniform, high quality standards for benchmarks and benchmark administrators.A key motivation behind forming IIA was the desire by our members to ab'Teeupon anddevelop a best practices framework for the calculation and dissemination of indices. Sinceits formation, IIA members have continued to dialogue and collaborate on the contents ofsuch a best practices framework and how that framework can best meet the needs of marketparticipants. In so doing. members of the IIA drew upon their extensive experience as theleading index providers in the world to develop a best practices framework for the indexindustry.

The Principles correctly focus on structural weaknesses associated with !BORs andshould maintain their focus on ensuring that these benchmarks are held to the higheststandards of quality and integrity. However, the IlA believes that a best practices frameworktailored to benchmarks outside of the IBOR context would be an important complement tothe Principles. Consequently, the IIA has developed the Index Industry Association BestPractices (the «Best Practices." attached hereto).

The Best Practices establish high quality standards for indices that do not pose thesame risks as those that came to light during the recent IBOR incidents. They represent acommon agreement among independent index providers as to the standards that should applyto the administration, maintenance, and calculation of indices, the necessity of maintaining astrong governance body accountable for maintaining such standards, and the need to identifyand address conflicts of interest arising in connection with index administration, calculation,and maintenance. The value of the Best Practices is its focus on promoting high qualitystandards that are specific to the index industry outside of the IBOR context.

The Best Practices represent a product of extensive and thorough deliberation by IIAmembers. IlA members and signatories to the Best Practices commit to meeting the highstandards and principles of good governance required and promoted by the Best Practicesand are required to adopt policies and procedures that effectuate the Best Practices.

Importantly, the Best Practices were designed with the goal of establishing anappropriate balance between prescriptive requirements for index calculation, maintenance.and administration and high quality standards to be followed by signatories to the Best

Practices. We believe that the Best Practices have met this goal. As a result. adoption of theBest Practices by index providers mitigates the need for direct regulation of index providersand their calculation, maintenance, and administration activities.

We note that IOSCO specifically asks if the Principles should apply to equity indicesgiven their diversity, transparency, and the existing regulation of its data inputs. We agreethat several of the Principles are inapplicable to equity indices. IIA members have beencalculating, creating, and maintaining indices since at least 1896, and the index industry hascontinually provided high quality equity indices since that time. No failure of equity indicesakin to the recent IBOR benchmark scandals has occurred since then. This is largely due inpart to the market's demand for transparent, objective, and accurate equity indices, based onprices from regulated exchanges that leave little room for potential conflicts of interest ormanipulation.

The Best Practices address the transparency, governance, confidentiality, and dataquality standards listed in the Principles and, consequently, reduce the need for directregulation of index providers as suggested by the Principles. As a result, we do not believethat the Principles should apply to index providers that adopt the Best Practices. However, inresponse to Question #1, we note that the following principles in particular should not applyto equity indices and equity index providers:

1. Principle 2 - Oversight of Third Parties. The Principles envision that benchmarkadministrators will be responsible for oversight of third parties with respect totheir data collection activities. We note that equity index providers primarily relyon regulated exchanges to provide the data underlying an index. It may beinappropriate or impossible to require exchanges to be overseen by an indexprovider given their preexisting regulatory requirements and the nature of the datasubmitted to index providers.

2. Principle 5 -Internal Oversight. The Principles require benchmark administratorsto share potential conflicts of interest with stakeholders, subscribers, andsubmitters. The case for sharing such information is strong for TBOR benchmarksbased on surveys or estimates, where such information can be manipulated.However, since equity indices are highly transparent, users of equity indices maynot gain any appreciable benefits from such additional disclosure. Instead, werecommend that conflicts of interest, to the extent they even arise. should beidentified and addressed by an index provider at each step of the index calculationand maintenance process.

3. Principle 10 - Content of the Methodology; Principle 11 - Changes toMethodology. Index providers continually invest in intellectual propertyunderlying their indices to provide the best products possible to their clients.Those investments have allowed investors to benefit from access to an

unprecedented number of new markets and opportunities. While we agree thatthe methodology underlying an index should be clearly documented and publiclyavailable, such methodology should only be published to the extent practicableand without violating any agreements or applicable laws restricting suchpublication.

We invite loseo and the Task Force to provide their feedback on the Best Practicesand continue the discussion on appropriate and proportionate index industry standards. TheIIA will also continue to solicit feedback from other key stakeholders to improve and refinethe standards established by the Best Practices. The IIA is obtaining valuable input from keystakeholders and hopes, along with comments received from key governmental andregulatory authorities, to finalize the Best Practices in the near term.

In closing, we note that the Best Practices are an important step for the IIA and itsmembers in establishing a common, high quality set of standards for the index industry. TheBest Practices properly distinguish between IrA member indices and benchmarks that posemanipulation or conflicts of interest risks while also recognizing the preexisting incentive ofIlA members to produce and maintain the integrity of their high quality indices. We hopethat IOSeO will join us in promoting the Best Practices and IlA's mission to establishuniform, global, and high quality Best Practices for the index industry.

Sincerely,

(s( Rick Redding

Rick ReddingExecutive Director, Index Industry Association

THE INDEX INDUSTRY ASSOCIATION

BEST PRACTICES

THE INDEX INDUSTRY ASSOCIATION BEST PRACTICES

The members of the Index Industry Association (IIA) have prepared and adopted these BestPractices (the Practices) and are the original signatories to them. The Practices apply only toactivities, policies, and structures of an index provider (an IP) associated with the administration,maintenance, and calculation activities with respect to its indices_ To the extent that an IP conductsany subset of the foregoing activities the Practices will apply to those activities. The Practices do notapply to any other business activities by an lP or its affiliated entities.

In addition to the original signatories, an IP may adopt the Practices by becoming a signatory to thePractices and by stating publicly that it has signed the Practices and confirming its compliance withthe Practices (as they may be amended from time to time). These Practices are available to thepublic without charge on the website of the IIA and each signatory to them.

From time to time, the Practices may be updated to reflect changes in market, legal, and regulatorycircumstances. Any revision to the Practices will require the approval of the majority of the IIA Boardand the consent of not less than two-thirds of the IIA members.

Introduction

Indices are administered, maintained, and calculated by IPs, including IIA members, and are widelyused to provide a representation of a particular market segment or index objective. The IIArecognizes that the high quality, reliability, and timely availability of those indices are important andthe Practices seek to promote the integrity and efficiency of processes and controls related to indexadministration, maintenance, and calculation.

Definition of Index

As used throughout the Practices, an index means a number, calculated by reference to a theoreticalcollection of securities or derivatives, whose periodic difference relates to the performance of thetheoretical collection over that period.

Third parties may be involved in the administration, maintenance, or calculation of an index. To theextent that an IP relies on a third party for the administration, maintenance, and/or calculation of anindex, the lP should establish clear roles and responsibilities for that party and receive adequateassurances that the party's index-relevant activities facilitate delivering the index according to itsmethodology.

Purpose

The purpose of these Practices is to set forth the standards developed by the IIA that are designed toensure the high quality and integrity of indices administered, maintained, or calculated by IPs.Adherence to the Practices demonstrates that an lP has committed to meet the high standards andprinciples of good governance required and promoted by the Practices. IPs that wish to claimcompliance with the Practices must adopt policies and procedures that effectuate the Practices, butIPs remain free to take measures which go beyond those addressed in the Practices.

The standards contained in the Practices are designed to ensure not only high quality and integritybut also to do so in a way that fosters improvement, innovation, and vigorous competition in allaspects of the index industry. Signatories to the Practices reaffirm their commitment to abide by the

antitrust and competition laws of all jurisdictions in which they do business, a commitment embodiedin the If A Antitrust Guidelines.

Scope and Interpretation

The Practices apply in full to any IP that becomes a signatory. IPs may not choose to adopt only aportion of the Practices, except to the extent obligations Imposed by the Practices conflict with otherapplicable legal or regulatory obligations.

Where relevant, the standards prescribed in the Practices are intended to apply equally to all personsemployed or otherwise engaged by and operating under the control of an IP to the extent they areinvolved in the administration, maintenance or calculation of indices.

The Practices are comprised of a number of standards, each of which is set out below in bold text.Following each standard are additional guidelines, the purpose of which is to provide guidance onhow each of the standards may be interpreted and how IPs may achieve compliance with them.

Monitoring Compliance

As set forth in Standard 10 below, each IP should provide for periodic reviews of its compliance withthe requirements of the Practices. The first such review should be completed within one year of the IPbecoming a signatory. Subsequent reviews should take place periodically to ensure continuingadherence to the Practices.

No Third-Party Beneficiaries

Neither the IIA nor any IP assumes, nor may it be inferred that any of them assume, any obligation,duty, or liability to any third party by virtue of becoming or being a signatory to the Practices or bymaking the Practices available to the public. Nor shall the Practices create any contract with any thirdparty or create third-party rights to enforce any provision of the Practices (directly or indirectly,contractual or otherwise) against an IP. Nothing in the Practices shall constitute a representation forlegal purposes.

IIA BEST PRACTICES

1. STANDARD1: Governance

An IP shall maintain robust governance arrangements, including a clearly definedmanagement structure with transparent lines of reporting and appropriate allocation ofauthorit and res onsibili .

1.1 An IP's Board, the senior management of the IP, its ultimate corporate parent, or anequivalent body should appoint and empower a governance body accountable for the administration,calculation, or maintenance of its indices (the Governance Body). The nature of the GovernanceBody may vary depending on the type of index and may comprise a formal board, a dedicatedcommittee, or an individual manager. In all instances, however, it is essential that there be anidentifiable authority within the IP with specific accountability for the governance of the index.

1.2 The Governance Body should provide oversight designed to ensure that:

(A) The IP's senior managers within the governance function have the requisiteskills, capacity, knowledge, and experience to perform the duties assigned to them;

(B) The relevant employees of the IP are allocated specific duties andresponsibilities in relation to oversight and control functions, including a complianceinfrastructure regarding index services, and have sufficient resources to be able toperform those duties and responsibilities effectively; and

(C) The IP continues to act in compliance with the Practices, as certified throughperiodic reviews.

1.3 An IP should have in place appropriate reporting lines and organizational structuresto facilitate effective checks and balances and transfers of management information to appropriatesenior managers in the IP's organization.

1.4 If an IP engages a third party as its agent to administer, calculate, or maintain anindex, or it enters into a joint venture, partnership or other similar arrangement for the administration,calculation or maintenance of an index, the IP should establish clear roles and responsibilities for thatparty and receive adequate assurances that the party's index-relevant activities facilitate deliveringthe index according to its methodology.

1.5 If an IP jointly owns an index with another partner, the IP should establish clear rolesand responsibilities for the partnership and design clear standards for its activities to facilitatedelivering the index according to the IP's methodology.

1.6 An IP should conduct regular training for relevant staff on the relevant policies andprocedures in relation to its index operations, such as the handling of confidential information,

conflicts of interest, personal account dealing, editorial independence, data integrity, and businesscontinuity and disaster recovery plans.

2. STANDARD 2: Quality and transparency of index methodologies

An IP shall publish or otherwise make available the index methodologies for indicesthat are intended for commercial use and shall ensure sound administrative review ofits index methodologies and the processes related to their calculation andmaintenance.

2.1 An IP should clearly document the methodology for each of its indices and, subject tothose qualifications set out below in this Standard 2, for each index intended for commercial use,publish the methodology on its website, to the extent practicable and without violating anyagreements or applicable laws restricting such publication. Published index methodologies shouldinclude a description of the objective of the index and how the index is calculated and maintained,described in sufficient detail to allow users and potential users to assess the objectives of the indexand the relevance and suitability of the index to their purposes on an ongoing basis.

2.2 Material changes to index methodologies should be rigorous and updated in a timelymanner. Substantive amendments to an established methodology should be made according to aclear and documented process.

2.3 An IP should, as appropriate, periodically review its index methodologies to ensurethat they continue to be designed to meet the stated objectives of the index.

2.4 An IP should consider feedback received from subscribers, data contributors, andother market participants in the context of review of its index methodologies, as appropriate.

3. STANDARD 3: Quality and transparency of data collection

An IP shall take appropriate steps to utilize reliable sources of data and shall maintainclearly defined policies and processes for collecting, evaluating, and utilizing relevantdata in connection with index calculation.

3.1 An IP should specify in its internal records the criteria that define the sources of datawhich are or may be used in connection with index calculation.

3.2 An IP should establish and follow consistent procedures designed to ensure that itselects reputable, reliable vendors or institutions as sources of data used in calculating indices.

3.3 An IP should establish. implement, and maintain adequate internal controls designedto ensure that data utilized in index calculation are robust and dependable.

3-4 An IP should, commensurate with a risk-based analysis of its data providers, and tothe extent practicable, establish policies and procedures for identifying anomalous data received fromsources, excluding such data from the index calculation process as appropriate, and takingappropriate remedial actions where practicable to minimize the possibility of recurrence.

3.5 An IP will maintain records of the sources of data used in connection with indexcalculation to the extent practicable and without violating any agreements or applicable laws for thepurpose of enabling the verification of the calculation of the index.

3.6 IPs should construct indices using data that are best suited to measure an index'sobjectives. Such data should reflect an existing underlying market based on prices, rates and priceassessments derived from price evaluation sources that should be separate from the indexmaintenance functions to ensure all prices used in the calculation of the index are anchored by arm's-length or other market-observable validation.

4. STANDARD 4: Index calculation and verification

IAn IP shall ensure that ITs indices are calculated in accordance with its methodologies. I

4.1 An IP should establish policies and procedures to ensure that its indices can becalculated on a consistent, regular, and timely basis.

4.2 Where practicable and commensurate with a risk-based analysis of its data providers,an IP should implement processes to validate incoming data.

4.3 Any demonstrable failure by IP staff or third parties engaged as agents to adhere topublished index methodologies or processes in calculating indices should be subject to internalreview, and, as needed, a remediation process.

5. STANDARD 5: Timely publication

An IP shall ensure that information about its indices is published or otherwise madeavailable in a timel manner, as a ro riate to each index.

5.1 An IP should establish policies and procedures to ensure the well-controlled andtimely dissemination of indices that it has agreed to publish.

5.2 An IP should establish policies and procedures to ensure that any changes to indicesor index methodologies are published or otherwise made available in a timely manner.

5.3 An IP should establish policies and procedures to ensure that any corrections toinformation published about an index (in accordance with its stated policies) are disseminated

promptly after it is determined that a correction will be implemented with appropriate transparencyand breadth of distribution.

5.4 An IP should maintain appropriate policies and procedures to govern its publicannouncements concerning its indices.

6. STANDARD 6: Conflicts of interest

An IP shall take appropriate steps to identify and address conflicts of interest arisingin connection with index calculation and maintenance.

6.1 An IP should adopt and maintain appropriate policies to address conflicts of interest.A conflict of interest framework should seek to mitigate existing or potential conflicts created by theIP's ownership structure or control, or due to other interests the IP's staff or wider group may have inrelation to index calculation and maintenance. To this end, a conflict of interest framework shouldestablish clear boundaries between index calculation and maintenance within an IP and otherbusinesses/commercial functional areas within the IP or its broader organizational framework andwhat action should be taken if any potential/actual conflicts of interest arise.

6.2 In addition, an IP should:

(A) ensure that personal interests or business connections do not compromisethe IP's performance of its functions;

(8) establish a segregation of reporting lines within the IP, where appropriate, toclearly define responsibilities and prevent unnecessary or undisclosed conflicts ofinterest or the perception of such conflicts;

(C) put in place effective procedures to control the exchange of informationamong staff engaged in activities involving a risk of conflicts of interest or between staffand third parties, where that information may reasonably affect any index calculationand maintenance activities;

(0) establish appropriate remuneration policies for those responsible for indexcalculation and maintenance to ensure that those policies do not create conflicts ofinterest; and

(E) adopt policies regarding the proper use of material non~public information andcompliance with applicable anti-bribery and anti·money laundering laws or regulations.

7. STANDARD 7: Business Continuity and Disaster Recovery

An IP shall maintain appropriate business continuity and disaster recovery plans toensure that, as far as practicable, indices can continue to be calculated and publishedin an orderlv and timelv manner notwithstandina the occurrence of disruptive events.

7.1 An IP should develop plans designed to ensure continuing index calculation andpublication in the event of extreme weather, natural disasters, or other events that could affect theIP's offices.

7.2 An IP should develop and maintain appropriate security and recovery measuresdesigned to protect its computer networks against viruses, hackers, and other intentional efforts todisrupt or compromise its operation.

7.3 An IP should develop plans designed to ensure continuing index calculation andpublication in the event of the incapacity or unavailability of key business personnel.

8. STANDARD 8: Confidentiality and Recordkeeping

An IP shall maintain appropriate and up-to-date records in connection with indexservices and implement and maintain appropriate safeguards to protect confidentialinfonnation.

8.1 An IP should maintain adequate internal records in connection with index services,such as official publications, evidence of supervisory reviews or approvals, any material complaints,and any methodology changes_ Such records should be maintained for at least five (5) years (orotherwise in accordance with applicable laws or corporate recordkeeping policies).

8.2 An IP should adopt appropriate control systems and procedures to preserve theconfidentiality of sensitive information. An IP should consider such measures as an e-mail anddocument encryption policy, network firewalls, and restrictions on physical and electronic access toconfidential information.

9. STANDARD 9: Responding to complaints

An IP shall maintain written policies and procedures for promptly and appropriatelyres ondin to com laints about its indices.

9.1 An IP should ensure that there are appropriately documented procedures for thecommunication, management, and timely resolution of complaints related to its indices or third partiesengaged as data suppliers or calculation agents.

9.2 If the cause of the complaint is attributable to an IP's third-party supplier of data orcalculation agent, the IP should provide prompt notice of the complaint to the relevant third party.

9.3 If the cause of the complaint is systematic or likely to recur, an IP should considerappropriate remedial measures to reduce the likelihood of such complaints arising in the future.

10. STANDARD10: Internal controls and reviews

An IPshall establish an appropriate internal control framework to support itscompliance with the Practices; its compliance shall be subjected to appropriate reviewon a Deriodic basis. -

10.1 An IP should allocate appropriate resources, and have in place adequate controlsystems, so that the IP and its staff can comply with the Practices.

10.2 An IP's executives and staff should be held to high professional standards of integrityand propriety.

10.3 In accordance with local law, an IP should maintain appropriate escalation policiesand procedures for members of staff to raise concerns regarding inappropriate or unlawful practicesrelating to the indices (for example, a ~whistleblowing policy~ or an "insider dealing" policy).

10.4 An IP's compliance with the Practices should be reviewed periodically as appropriategiven the IP's organizational structure.

10.5 If material deficiencies in compliance are identified in the course of any such review,an IP should implement remedial measures promptly.

10.6 The IP's Board, its senior management, orthe senior management of its ultimatecorporate parent, should be able to confirm that (i) periodic compliance reviews of the Practices havebeen conducted, (ii) any necessary remedial measures have been taken, and (iil) appropriate partieshave been advised as needed of matters arising from the review.

10.7 Following each periodic review of the IP's control framework, an IP should considerthe detailed findings of that review, consider whether remedial measures are necessary orappropriate to address the findings of that review, and, when remedial measures are necessary orappropriate, implement those measures to address the findings of the review. An IP will document allreviews of its control framework, the work papers underlying those reviews, the details andsummaries of the results of those reviews and the IP's responses to those reviews in accordance withthe Practices and any applicable law or regulation .

• •