The International Organization of Securities Commissions (IOSCO) published a pair of reports on Tuesday that aim to enhance the ability of financial markets and investment firms to manage risks, withstand catastrophic events, and swiftly resume operations in the event of disruption.
“Recent disruptive events and emerging threats in major international financial markets highlighted the need to examine and identify the key measures and arrangements in place at trading venues and market intermediaries to restore their ‘critical’ functions should a disruption occur,” IOSCO says in a statement.
Mechanisms for Trading Venues to Effectively Manage Electronic Trading Risks and Plans for Business Continuity focuses on business continuity procedures and recovery planning for firms, which sets out standards for regulators, and practices that regulators could consider as part of their oversight of market intermediaries. It says that these practices could also help firms that are developing and implementing business continuity plans (BCPs).
Market Intermediary Business Continuity and Recovery Planning focuses on the same sorts of issues, including risks from electronic trading, for trading venues, such as exchanges and alternative trading systems (ATSs). It sets out the steps that trading venues should take to manage the risks of electronic trading, and the ways they can plan for, and manage, disruptions. This report also makes recommendations to help regulators ensure that trading venues are able to manage these sorts of risks; and it proposes best practices for adopting risk mitigation mechanisms and BCPs.
As technology continues to evolve, “leading to different ways to operate and access markets,” trading venues will also have to consider the impact of these changes “and adapt, to protect themselves, their participants and investors,” the IOSCO statement says.
Both reports are based on consultation reports published earlier this year. They also incorporate the results of surveys carried out by IOSCO, and feedback from roundtables organized with industry participants.