IOSCO reviews implementation of commodity derivatives market principles
Date: Nov 01, 2012
Categories: Markets & Exchanges, Risk and Regulation
Madrid, October 29th 2012 - The International Organization of Securities Commissions has published today the final report Survey on the Principles for the Regulation and Supervision of Commodity Derivatives Markets, which reviews how Market Authorities comply with IOSCO’s recommendations on commodity derivatives markets.
Results of the survey indicate that the majority of respondents were broadly compliant with the IOSCO Principles on the Regulation and Supervision of Commodity Derivatives Markets, which were published in October 2011 and endorsed by the G20 a month later at its summit in Cannes. Also at Cannes, the G20 Leaders called on IOSCO to report on the implementation of its Principles by the end of 2012.
In April 2012, IOSCO commissioned a survey on implementation of the recommendations on commodity derivatives market regulation in response to the request from the G20 Leaders. Thirty-seven market regulators answered the questionnaire. Their responses show how regulators globally undertake and execute regulation of both financial and, in some cases, physical markets. The fact that the survey was conducted shortly after publication of the Principles highlights the importance that both IOSCO and the G20 Leaders give to the implementation—and not just the development-- of IOSCO recommendations on securities and derivatives regulation, oversight and enforcement.
At Cannes, the G20 Leaders also stipulated that Market Authorities should be granted effective intervention powers to address disorderly markets and prevent market abuses. In particular, they said market regulators should have the ability to use formal position management powers, including the power to set ex-ante position limits, particularly in the delivery month where appropriate, among other powers of intervention. The G20 Leaders also reaffirmed their commitment to enhance transparency and avoid market abuse in cash and financial commodity markets, including over-the-counter markets.
The 21 IOSCO Principles on commodity derivatives markets are grouped under the following five headings:
- Contract design:
Where commodity derivative markets did exist, and Market Authorities were non-compliant, many have initiatives underway aimed at achieving full compliance in time.
The following areas can be noted as among those where there was a lower rate of positive responses by IOSCO members:
- The collection by a Market Authority of information on underlying warehouse stocks or other deliverable supplies (Principle 10);
IOSCO will use this survey to discuss approaches to assist Market Authorities in implementing the Principles. For many IOSCO members, the process of completing the survey has provided the responding Market Authorities with the opportunity to self-audit current regulatory practices, which will prove useful for their on-going work.
Re-disseminated by The Asian Banker