IOSCO Consultation Report: Technological Challenges to Effective Market Surveillance Issues and Regulatory Tools

IOSCO released a consultation report which seeks public comments on a series of proposed high-level recommendations intended to improve market surveillance. The report responds to a 2010 G20 mandate, which called for significant policy actions in several areas, including an extensive reform of the financial sector. The G20 called on IOSCO to develop recommendations to promote "market integrity and efficiency" and mitigate the technological risks posed to the financial system, which IOSCO initially published in an October 2011 report. This report presents further recommendations to Market Authorities.

[Lofchie Comment: This report is a pretty engaging read for persons interested in the general concepts around market surveillance, and it also provides some interesting guidance (though generally not in much detail) on the state of surveillance in various jurisdictions. It's hard to say how much direct significance the report has in the United States, given, I suspect, that the U.S. has more developed surveillance than is common around the world (and that suspicion is borne out by the detail provided in Appendix B of the report). Market participants may also want to focus on the costs of developing such surveillance, as I would not be surprised if, in the United States, regulators' appetite for information has outpaced their ability to receive or store it, much less make use of it (at who knows what cost). Nonetheless, many of the regulatory concepts are worthy ones, or at least they are if they can be implemented at a reasonable price honestly determined.]

For examples of some of the recent SEC actions in this area, see, for example, newly adopted SEC Rule 13h-1 (large trader reporting); see also the recent news story on the SEC's new Data Analysis Group.

View report in full here (links externally to IOSCO website).Additional Materials: IOSCO Press Release.