IOSCO Publishes Recommendations For Market Interventions And Securitisation In Emerging Markets

The Emerging Markets Committee (EMC) of the International Organization of Securities Commissions (IOSCO) meeting in Istanbul this week has approved two reports containing recommendations for regulators in emerging markets jurisdictions aimed at assisting them in relation to market interventions and the securitisation market.

Mr Vedat Akgiray, Chairman of the Emerging Markets Committee, said:

“We are pleased to be able to publish today our reports and recommendations on Market Interventions and Securitisation in Emerging Markets. These two reports present a comprehensive and informative picture of the impact that the financial crisis had on securitised debt markets and the operation of exchanges and the manner in which regulators reacted to these events.

Both reports draw lessons from regulators’ actions and set out recommendations for best practice in these areas which will assist market authorities in mitigating vulnerabilities in their jurisdictions and supporting the long term development of their capital markets.”

Effectiveness of Market Interventions in Emerging Markets

The report on the Effectiveness of Market Interventions in Emerging Markets set out the following broad in implementing measures to intervene in markets:

• Regular review of the framework governing interventions in light of the changing trading landscape;
• Market interventions need to be considered in a holistic manner and not on a piece-meal basis;
• Market interventions need to be transparent and explicitly guided by clear criteria and parameters;
• Market interventions must be consistently applied across all exchanges and/or markets to prevent regulatory arbitrage; and
• A proper framework for coordination and communication between exchanges and/or regulators and exchanges for multi-listed securities is necessary.

Securitization and Securitized Debt in Emerging Markets

The Securitization and Securitized Debt in Emerging Markets including recommendations on both enabling condition necessary for the development of securitization markets and those required for the further development of these markets

Enabling Conditions

• A Stable Macroeconomic Environment;
• A Robust Legal Framework;
• A Robust Accounting Framework;
• A Neutral Tax System;
• Investor Education - Financial Literacy; and
• A Robust Framework for the Securities Regulator.

Further Development of Securitization Markets

• Regulators in Emerging Markets should collect a minimum set of information on securitization markets to monitor their development and identify potential sources of risk for financial stability or consumer protection;
• Regulators in Emerging Markets should strengthen disclosure requirements for Securitized Financial Product (SFP) vis-à-vis investors, both in the context of public as well as private offerings;
• Regulators in Emerging Markets should encourage trading of SFPs in public venues, and impose transparency in OTC markets;
• Regulators in Emerging Markets should encourage the development of pricing agencies, which should be regulated;
• Regulators in Emerging Markets should establish a minimum framework for key participants of the securitization process;
• Regulators in Emerging Markets should strengthen business conduct obligations; and
• Regulators in Emerging Markets should align credit rating agencies regulation with the IOSCO Code of Conduct

Background

1. Effectiveness of Market Interventions in Emerging Markets, Final Report of the Emerging Markets Committee of IOSCO.
2. Securitization and Securitized Debts in Emerging Markets, Final Report of the Emerging Markets Committee of IOSCO.
3. The Emerging Markets Committee Annual Conference is being hosted in Istanbul by the Capital Markets Board of Turkey.
4. IOSCO is recognized as the leading international policy forum for securities regulators. The organization's membership regulates more than 95% of the world's securities markets in over 100 jurisdictions and its membership is steadily growing.
5. The Emerging Markets Committee is a specialised working group established by IOSCO’s Executive Committee, representing the world’s emerging financial markets. It endeavors to promote the development and improvement of efficiency of emerging securities and futures markets by establishing principles and minimum standards, preparing training programs for the staff of members and facilitating exchange of information and transfer of technology and expertise.
6. Mr. Vedat Akgiray, Chairman of the Capital Markets Board of Turkey, currently acts as Chairman of the Emerging Markets Committee.
7. IOSCO aims through its permanent structures:
   • to cooperate in developing, implementing and promoting adherence to internationally recognised and consistent standards of regulation, oversight and enforcement in order to protect investors, maintain fair, efficient and transparent markets, and seek to address systemic risks;
   • to enhance investor protection and promote investor confidence in the integrity of securities markets, through strengthened information exchange and cooperation in enforcement against misconduct and in supervision of markets and market intermediaries; and
   • to exchange information at both global and regional levels on their respective experiences in order to assist the development of markets, strengthen market infrastructure and implement appropriate regulation.