3.1 With cross listing of securities (that is, listing a security for trading on more than one market, each of which is subject to different market authorities), the development of derivative products based on securities, including sovereign issues traded in different jurisdictions, and the fungible nature of derivative products which facilitate their replication on other markets, market authorities may not have direct access to information which could have an impact on the products and markets subject to their supervision.
3.2 In particular, concerns have been raised as to the availability of needed information where a derivative product is traded on a market other than the market on which the underlying cash product is traded and where each market is subject to oversight by different market authorities. 3.3 In determining whether and the extent to which specific arrangements for facilitating open and timely communications would be useful with respect to a cash product and a related derivative product traded on different markets, factors market authorities should consider are how and the extent to which such products are related, including price correlations, the extent to which market participants subject to their supervision trade both products, the amount of open interest on the market considered as a whole and/or the comparative sizes of the markets.
3.4 In analyzing the potential benefits of arrangements or mechanisms for open and timely communication as to related products another factor to take into account is whether the different markets on which such products trade are located in the same or different jurisdictions or under the jurisdiction of different supervisory authorities or supervisory regimes. Such differences may affect the determination of, among other things:
- (a) who has the needed information and in what form;
- (b) who is the appropriate market authority(s) to participate in the communication (either providing and/or receiving the information);
- (c) what means are available for obtaining the information under applicable law;
- (d) what are the permitted uses of such information under applicable law;
- (e) what are the confidentiality constraints relevant to the production, exchange and use of such information; and
- (f) the form and timing of sharing.
These considerations, as discussed in more detail below, will implicate the design and implementation of any mechanism for open and timely communication between market authorities during periods of market disruption and should be taken into account by market authorities in determining the relationship between products and markets which should give rise to effective communication arrangements.
3.5 The discussion herein may also be relevant to information sharing concerns which arise with the cross listing of securities, or when two derivative products which are traded on markets subject to oversight by different market authorities are related, whether by connected pricing mechanisms, similar underlying cash markets or other relationships. 3.6 Accordingly, Working Party members agree that:
• Although the points of consensus set forth in this paper were reached with respect to the oversight of related cash and derivative products, there may be analogous concerns as to the oversight of derivative markets whose products are correlated as to price and cross listed cash products.
