IOSCO chief calls for greater global collaboration
David Wright, secretary general at the International
Organisation of Securities Commissions (IOSCO), has issued a rallying call for
greater global cooperation on financial standards, to help investors trade anywhere
in the world with greater confidence.
“There’s a need for transatlantic cooperation,” he said during a keynote speech at the International Derivatives Expo held in London on Wednesday. “We
shouldn’t have unnecessary overlapping and conflicting rules from Congress and
the European Parliament. That adds cost for investors.”
Following the commitment of the G-20 nations to reduce
systemic risk in OTC derivatives markets through centralised clearing and trading, regulators across the globe have sought
to understand questions such as how much capital should be required for
non-cleared derivatives, what kind of organisations the new rules should apply
to, and where the rules should apply. Often, the answers to those questions
have varied between jurisdictions, creating a web of complexity for buy- and sell-side
firms and adding time and cost for end-investors.
Referring to reforms on OTC derivatives and the reporting of
trades to central securities depositories, Wright added that the situation for
large international companies was being complicated by a conflation of rules
between the US, the European Union, and various Asian regulators.
“The answer is for IOSCO to be involved at an early stage,
before it’s too late,” he said. “It’s no good trying to come up with a
solution, if the US and Europe have already separately decided on their own
rules. That’s too late.”
Created as a federation of regulators dedicated to oversee
global securities regulation, IOSCO currently has around 200 securities
regulator members from around the world. The organisation has already
collaborated with the Committee
on Payment and Settlement Systems to release international standards for central
securities depositories (CSDs), central counterparty clearing houses (CCPs),
securities settlement systems, payment systems and trade repositories.
The discussions encompassed what kind of data should be reported and what
format it should take, among other issues.
But Wright insisted that there is a need for mutual
recognition, particularly over enforcement and monitoring, that goes beyond the
adoption of common principles.
“We still need more cooperation,” he said. “The US
regulators must trust the UK’s Financial Services Authority to do the
job, and vice versa. There can’t be ring-fencing of businesses and standards
around the world – that would make business near-impossible.”
A common standard
IOSCO standards are not legally binding – so the
organisation cannot force individual states to comply in full with its
standards. But the body has set up an assessment and enforcement division, which
is tasked with examining whether its standards have been applied. In extreme
cases, it could expel a member country for not complying – although that would
be a last resort.
“It is unlikely we will see a single regulator with the
legal power in every country in the world to enforce standards,” said Wright.
“But no country wants to see its name last on a list of countries adopting
high-quality practices. Our role is to encourage compliance as far as humanly
The organisation is also building the IOSCO Foundation, to
provide education, training and practical assistance for the 80% of our members
that come from emerging markets. The goal is to help take high-quality financial
standards global, creating a more efficient and safe global securities market.
“Imagine in ten years, we’ll have the best set of rules not
just in a few countries, but all around the world,” said Wright. “If we can do
this job of supporting high quality securities standards around the world,
investors can have confidence they will be treated, wherever they trade. That’s
a world we should aspire to.”