INTERNATIONAL: IOSCO Releases Consultation Paper to Assist Trading Venues in Managing Extreme Volatility

Thursday March 8 2018

On 7^th March 2018, the International Organization of Securities Commissions (IOSCO) issued a Consultation Paper which recommends how trading venues and regulatory authorities should manage extreme volatility.

The Consultation Paper titled  “Mechanisms Used by Trading Venues to Manage Extreme Volatility and Preserve Orderly Trading” recommends that:

• trading venues should have mechanisms to manage extreme volatility and these mechanisms should be appropriately calibrated and monitored;
• regulatory authorities should consider what information they require to effectively monitor the overall volatility control mechanism framework in their jurisdiction, and ensure that trading venues maintain relevant records;
• information about volatility control mechanisms and when they are triggered should be made available to regulatory authorities, market participants and, if appropriate, the public; and
• communication amongst trading venues should be considered where the same or related securities are traded on multiple trading venues in a particular jurisdiction. In addition, where the same or related instruments are traded in different jurisdictions and the mechanism is triggered, communication may be appropriate.

This consultation paper and its recommendations is very useful given that extreme volatility in securities markets can undermine IOSCO’s objective of ensuring that markets are fair, efficient and transparent, weaken market integrity and reduce investor confidence.

Market participants are encouraged to submit proposals to IOSCO on this consultation. The deadline for submission is the 6^th May 2018

For additional Information please click the link above.