IOSCO Calls for Increased Oversight of OTC Markets
The International Organization of Securities Commissions (IOSCO) has highlighted the need for stronger oversight of commodity derivatives markets, specifically in over-the-counter (OTC) markets.
In a recent report, IOSCO reviewed the implementation of its principles for regulating and supervising commodity derivatives markets. While there is generally good compliance with these standards, challenges persist in applying them to OTC markets, limiting regulators’ ability to detect emerging risks.
One key issue identified was the lack of access to market data by exchanges for overseeing OTC positions. While regulators have access to trade repository data, exchanges do not have the same access, hindering their risk detection capabilities.
Additionally, there are concerns about the authority of regulators and exchanges to intervene in OTC markets during disruptions. IOSCO’s recommendations emphasize the importance of enhancing implementation of its principles to promote market transparency, information sharing, cooperation, and communication.
Establishing open communication channels between exchanges and regulators is crucial to address regulatory uncertainties and ensure timely information exchange during crises. This collaboration enables coordinated responses to manage market disruptions, enhancing the overall integrity and resilience of commodity derivative markets.
IOSCO underscores the significance of robust implementation of its principles, especially in light of recent commodity market volatility. By following these recommendations, regulators can bolster market resilience, support price discovery and hedging, and safeguard against market abuse.
Kevin Fine, Chair of IOSCO’s Committee on Derivatives, and a senior vice-president at the Ontario Securities Commission, emphasized the importance of these recommendations in enhancing market resilience and prioritizing the stability of commodities markets globally.
