IOSCO Publishes Report on Technological Challenges to Market Surveillance (with Lofchie Comment)
The Board of the International Organization of Securities Commissions ("IOSCO") published a final report on Technological Challenges to Effective Market Surveillance: Issues and Regulatory Tools, which makes recommendations to help market authorities address the technological challenges facing effective market surveillance.
This final report provides an overview of current market surveillance regimes and identifies the main challenges that technological developments pose to these regimes. It also makes final recommendations to help market authorities develop the regulatory tools for addressing these challenges, particularly with respect to (i) improving surveillance capabilities on a cross-market and cross-asset basis, and (ii) making the data collected for surveillance purposes more useful to market authorities.
To help market authorities achieve the two goals of an effective surveillance regime, this report considers new regulatory tools for dealing with the challenges they face, including:
- an audit trail, or surveillance data, that permits the reconstruction of trades and order books;
- a single reporting point for transactions within a jurisdiction; and
- unique entity identifiers.
Lofchie Comment:Although this report is directed at governmental authorities, it is also useful reading for compliance officers who are charged with monitoring trading at their own firms (see IOSCO news item linked below). While every recommendation within this report may be, and probably is, eminently reasonable in the abstract, it is all about MORE regulation. Part of the challenge that regulators have to begin facing is that regulation simply cannot be about more: it must be about VALUE that government provides relative to its costs. That is, I would like to see an IOSCO report which recommends not only that the government collect more information so that it can provide more regulation, but also that the government not require more information until (i) rules have been devised as to the format of the information so that it can be readily collected, (ii) the government has the means to store the information, (iii) the government has the means to analyze the information, (iv) the government has a theory as to what value it will find in the information and (v) the government has a reasonable basis on which to believe that the information which it collects will be worth the expense of collecting it.
Click here to view report in full (links externally to IOSCO website).See also the related story in yesterday's news: IOSCO Report on Investigating and Prosecuting Market Manipulation (with Lofchie Comment).