The World Federation of Exchanges (WFE), the global industry association for exchanges and central counterparties (CCPs), has called for enhanced oversight and policy coordination as private investment markets balloon.
Traditionally a complement to public capital markets, private markets have expanded rapidly, aided by policy incentives, raising critical questions about how this unchecked growth could pose significant risks to market integrity, retail investors and potentially even financial stability. In a new paper, Strengthening Private Markets, the WFE calls for improved data and supervisory scrutiny, more global policy focus, and a fairer balance of incentives between public and private markets.
The key risks of unsupervised growth of private markets are identified in the paper:
- Systemic risk: Increased leverage, opaque valuations, and the bundling of private credit with equity introduce complex risks. These need closer scrutiny to avoid destabilising impacts on the wider financial system.
- Risk to retail investors: Disclosures must be strengthened, and risks clearly communicated. High fees and illiquidity pose additional concerns for non-professional investors.
- Unmonitored secondary trading: The emergence of new trading platforms for private assets could affect public market pricing and integrity. There must be supervisory reporting of such trades and potential disclosure to the public.
To meet these challenges, the WFE recommends policy co-ordination that will:
- Develop harmonised transparency standards across public and private markets.
- Review regulatory and tax treatment regimes, that currently favour private capital.
- Assess the systemic risks associated with the combination of leverage and illiquid secondary trading.
- Promote public listings by ensuring a level playing field and reducing unnecessary burdens.
Nandini Sukumar, CEO of the WFE, said, “Public markets remain the critical infrastructure that underpin capital markets – they are the gold standard, providing liquidity, authoritative pricing, equal access, regulatory oversight and system-wide confidence. Private markets have their place in the ecosystem. However, they need public markets. Ensuring private markets develop without undermining these benefits is the vital policy objective here. As private assets proliferate and begin to target retail investors, policymakers must ensure that transparency, risk management, and investor protection standards keep pace. Private must evolve within a framework that supports stability, fairness, and long-term economic growth.”
Richard Metcalfe, Head of Regulatory Affairs at the WFE, said, “Transparency, effective oversight, and informed regulation are not constraints - they are prerequisites for sustainable growth. Some national regulators, such as the UK’s FCA, France’s AMF, Singapore’s MAS, and Australia’s ASIC, are starting to look more closely at how to bring more accountability to private markets, and valuable work has been done by the international standard setters at IOSCO, but the rapid growth of private markets means that efforts must be redoubled.”
Read the full paper here.
