High frequency trading -02/08/11

IBFed has given IOSCO its reflection on high frequency trading (HFT). In doing so, IBFed expressed support for the recommendation that issues around automated and high frequency trading be given careful consideration. We noted that there is the recognition that HFT could benefit the market by increasing liquidity, reducing bid-offer spreads, and enabling market participants to obtain best execution. We also urged that any rules to regulate the provision of HFT or HFT firms themselves should be flexible and dynamic, in order to adapt to changing market conditions quickly.


IBFed responds to CPSS-IOSCO consultative report on “Principles for financial market infrastructures” - 29/07/11

IBFed has responded to the CPSS-IOSCO consultative report from the perspective of participants in financial market infrastructures (FMIs). Whilst IBFed is generally supportive of the IOSCO-CPSS public policy objectives and their Principles, we expressed concerns about the complexity resulting from the possible co-existence of differing regulatory frameworks applicable to FMIs. We also stressed the applicability of  the principles should be determined by the functions and responsibilities of FMI, and underscored the need to embark on as broad and thorough a reflection as possible to consider the overall impact that the implementation of the CPSS-IOSCO proposals may have on the levels of market liquidity.
The IBFed response is available here.


IBFed responds to IOSCO on the role of securities regulators in systemic risk mitigation -15/07/11

IBFed has given IOSCO its reflection on their discussion paper "Mitigating Systemic Risk - A Role for Securities Regulators".
We expressed our support for the efforts of regulatory authorities to improve their understanding of systemic risk and to strengthen their ability to detect it and devise tools to mitigate it. We also highlighted that each securities regulator should have or contribute to a process to monitor, mitigate and manage systemic risk, appropriate to its mandate.
The IBFed letter is available here.


Corporate bond markets in emerging markets – 18/4/11

IBFed has given IOSCO its reflections on corporate bond markets in emerging markets.  In doing so, IBFed suggested policy makers focus on the following issues: (1) Deepening of ongoing legal and tax reforms and improvements in financial reporting and information disclosure standards to successfully enhance investors’ protection and participation in the capital markets; (2) Further removal of obstacles to the participation of institutional investors in corporate bond markets and the promotion of the participation of retail investors in capital markets through local collective investment schemes; (3) Further deployment of actions to boost market demand in corporate bonds by means of “retailing” such investments, notably through investor education and institutional modernisation; and (4) Strengthening of property rights and policies which promote macroeconomic stability and stability of exchange rates.  IBFed will continue to engage with the policy makers on this subject.


IBFed responds to IOSCO consultation report on issues raised by dark liquidity – 10/02/11

IBFed has commented on an IOSCO consultation report on dark liquidity.  In commenting, IBFed has agreed with IOSCO that:

  • conceptually, a distinction needs be drawn between dark pools (i.e. pools of liquidity that provide no pre-trade transparency) and dark orders (i.e. orders for which there is no pre-trade transparency, notwithstanding the level of transparency of the venue where the order is received).
  • both dark pools and dark orders are not a new market feature and that both have existed - in levels that have not been subject to proper measurement - for a good reason, notably, to preserve an adequate level of anonymity for the quote and to execute orders minimising their market impact. Importantly, dark pools and dark orders meet a demand in the market.
  • dark pools and dark orders are currently more prominent due to automation and the use of electronic trading. The increasing notability of dark liquidity is, therefore, a consequence of the advent of technology and broad market innovation.

The IBFed comment is available here.


IBFed responds to Basel consultative document on capitalisation of bank exposure to CCPs – 10/02/11 

IBFed has expressed concerns about a consultative document from the Basel Committee on “Capitalisation of bank exposure to central counterparties”.  In responding, IBFed has reiterated the view that central counterparties (CCPs) are vital to the stability of the financial system, and welcomed the ongoing work to develop international standards to oversee their operation.  IBFed has asked the BCBS to consider these developments when agreeing rules on the capital banks should hold against exposures to CCPs and not to adopt the proposed rules which would reduce the existing capital relief available for central clearing.

The IBFed comment is available here.



IBFed provides observations on OTC derivatives contracts to regulators – 28/07/10 

IBFed has provided evidence to the Bank for International Settlements (BIS) on over-the-counter (OTC) derivatives contracts.  IBFed is aware that this issue is under discussion by regulators worldwide.  In addressing this issue, IBFed believes that regulators should seek consistency and balance with prudential regulation, capital requirements and the future structure of the OTC derivative markets.  In addition, IBFed is generally supportive of the introduction of Central Counterparties (CCP) for OTC derivatives, seeing them as an important means of mitigating risk.  It is important, however, that the Basel framework provides appropriate capital relief for CCP clearing.

Here is the IBFed letter and the observations are available here.


CPSS-IOSCO Joint Guidance on CCPs – 29/06/10

IBFed has produced an analysis of CPSS (Committee on Payment and Settlement System) –IOSCO (International Organisation of Securities Commissions)’s recent Guidance for Central Counterparties (CCPs) to over-the-counter (OTC) derivatives.  In doing so, IBFed supported the general direction of the guidance but proposed changes to avoid it resulting in undue and prohibitive cost for transactions.  IBFed will continue the dialogue with regulators. 

The IBFed analysis is available here.


Consideration for trade repositories (TRs) in OTC derivatives markets – 29/06/10

IBFed has responded to a consultative report about trade repositories (TRs) in OTC derivatives markets jointly published by the CPSS and IOSCO.  In responding, IBFed welcomed steps to enhance the transparency of OTC derivatives markets, but suggested that the regulators consider more targeted measures designed to the particular market to mitigate unduly increasing the costs of transactions.  IBFed will continue to engage with regulators. 

The IBFed comments are available here.


Letters to BIS and IOSCO on the Role of Markets – 14/06/10

IBFed has written to the BIS and IOSCO to provide observations on their work to build enhanced market resilience.  In contributing, IBFed proposed a more systematic approach to promote the well-functioning of markets in support of economic growth rather than drastic measures that could cause negative impacts on the financial system and real economy.  IBFed’s observations cover the use of CCP clearing for OTC instruments, strengthening existing tools to mitigate counterparty risks and mark-to-market valuation practices.

Here is the IBFed letter and here is the paper on the Role of Markets.

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