The growth of passive investing, the evolving use of technology in retail distribution, and emerging cryptoasset markets are among the top priorities for global securities regulators in the year ahead, according to the International Organization of Securities Commissions (IOSCO).
The umbrella group of global regulators published a report on Monday that provides an overview of its plans for the coming year, and details the policy areas where it will be focusing its attention.
IOSCO indicated it will carry out a review of the impact of passive investing, which currently represents around 20% of global assets under management (AUM), on markets, amid concerns about the possible impact on price discovery, the allocation of capital and corporate governance. It also said it intends to “… undertake a conduct-focused mandate on the role of index providers in asset management.”
On the retail investment front, the IOSCO report notes that “rapid growth in digitalization, especially social media, has changed the way financial products are promoted and distributed,” which has raised concerns about the impact of these developments. IOSCO said it’s planning to examine these issues.
In terms of the emerging crypto space, which brings a host of novel issues for regulators to consider, IOSCO said it will “focus on how platforms where crypto-assets are traded are regulated and will also examine regulation of investment funds with exposures to crypto-assets.”
The group noted it also plans to create a portal to allow regulators to share enforcement information involving cryptoassets, and said it will continue its work on initial coin offerings (ICOs), including the development of investor education material for retail investors who are considering cryptoasset allocations.
In terms of market fragmentation, IOSCO said it plans to analyze potential harms due to fragmentation, including the impact of cross-border regulation, and efforts at mutual reliance.
The group also intends to review financial firms’ growing use of AI and machine learning in areas such as order execution, portfolio management and research. It will also look at ethical challenges that arise due to the increasing use of these technologies.
Additionally, IOSCO said it will be hosting a conference, along with Quebec’s Autorité des marchés financiers (AMF), to look at the use of technology in enforcement.
Other key issues for the group include the use of leverage, emerging fintech, outsourcing, financial benchmark reform, cybersecurity and developments in sustainable finance.