Asset owners pressuring index providers
Europe's markets regulator is reviewing rules for index funds to ensure investors can verify back-testing of indices. Investors in London welcome the move, which would have implications for Asia.
Passive indices have become subject to particular regulatory scrutiny in the aftermath of the scandal surrounding fraudulent actions connected to the London interbank offered rate (Libor).
Since passive indices are submission-based and require a provider to self-report data to demonstrate performance, they face similar potential conflicts of interest. (Libor desks at several banks have been found both to ‘low ball’ estimates to the benefit of trading counterparties and may have un…
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