2.1 The Working Party proposed in its market disruption paper, and IOSCO agreed, that the Working Party should further consider, identify and describe appropriate mechanisms to enhance open and timely communication between cash and derivative markets during periods of unusual price volatility or market disruption. This paper summarizes the results of those considerations and addresses issues relevant to how best to foster communication between relevant market authorities during such periods. As such, it focuses on related cash and derivative products which trade on supervised markets. / 2.2 This paper addresses the scope, uses and benefits of communications, the markets which should be considered related, the types of information available to share, the methodology and mechanisms for sharing, and the types of market events best addressed by such communications.

2.3 Certain members suggested that the paper not limit itself to the need for open and timely communication during periods of market disruption but also address more generally the importance of such communication, consultation and coordination mechanisms for other regulatory or supervisory purposes when markets or products are related. In particular, two additional circumstances were identified as occasions during which market authorities may find it beneficial to engage in open and timely communication.

2.4 First, it was suggested that any discussion address non-episodic measures taken in one market which could have an impact on products traded in another market. Examples of these types of measures would include the introduction of new products in one market which may be related to products traded in another market or the adoption of regulatory measures such as position limits in one market which similarly could impact related products traded in another market. For example, some Working Party members believe that consultations are indispensable for coordination between cash and derivative markets when a market authority introduces new derivative products based upon foreign cash and derivative markets, such as futures or options or another jurisdiction's sovereign debt.

2.5 Second, it was suggested that market authorities may benefit from routine sharing of information to enhance each market authority's ability to monitor trading activity on its market. For example, as the monitoring for inter-market frontrunning (see paragraph 5.3) for general supervisory purposes is a matter with respect to which information must be obtained from another market authority, it was proposed that inter-market frontrunning could be identified as one "critical event" with respect to which market authorities may wish to engage in open and timely communication on a routine basis.

2.6 Such topics may be relevant to the general issue of open and timely communication between market authorities overseeing related products. However, they are not within the scope of this paper, which focuses on appropriate communications only as they may be relevant during (or when there is reasonable basis to anticipate) periods of market disruption. The Working Party may address these and related issues in the future taking into account the efforts of other IOSCO Working Parties.

2.7 Accordingly, Working Party members agree that:

• • To assure effective oversight of related cash and derivative markets during periods of market disruption, market authorities may need information about any related market that is subject to another authority's supervision.
• • Market authorities for related cash and derivative markets should consult with each other on a timely basis with a view toward minimizing the adverse effects of market disruption, especially during such a disruption.