The Barings failure demonstrated that because global markets are linked through market members trading for themselves or customers in multiple jurisdictions, no one market authority will have all of the information on the material exposures of a market member, relevant financial intermediaries, and their material affiliates.
The absence of widely agreed arrangements between futures exchanges and futures industry regulators to share information about exposures arising in different jurisdictions was an issue relevant to Barings. The well-developed network of information sharing agreements that was already in place was developed initially in the 1 980's to respond to the exigencies of that era, and related primarily to enforcement and investigatory issues, not to supervision or surveillance of futures markets or the management of an ongoing futures market event.
Following Barings, however, an international consensus emerged on the need to facilitate the identification of large exposures in different markets, and to permit an integrated multilateral assessment of market risks identified as a result. The outcome was the development of the idea of sharing information on the basis of a trigger mechanism activated by certain exposure levels. This concept was articulated in the simultaneous negotiation and conclusion earlier this year of the Declaration referred to above, and the companion Memorandum of Understanding and Agreement ("MOU") which international futures exchanges and clearing organizations agreed under the auspices of the FIA Global Task Force.
The Declaration and MOU enable information to be shared on a bilateral basis between the relevant requesting and requested market authorities consistent with their legal and contractual obligations. The arrangements are unique in defining a range of events affecting an exchange member's financial resources or positions which, when occurring, trigger the sharing of information which helps to identify exposures that could adversely affect markets. The Declaration provides a conduit for information flow when local concerns or laws or special financial services issues necessitate the involvement of a governmental authority, and thus brings an added benefit.
These two documents were initially signed in Boca Raton, Florida on March 15, 1996 by 14 regulators1 and 49 futures exchanges and clearing organizations from 18 jurisdictions, respectively. And we are pleased to report that to date, one additional regulator, the Comissao Valores Mobiliarios of Brazil, has signed the Declaration, and 5 additional exchanges from Japan, Belgium, and Brazil and a US futures self-regulatory organization have signed the MOU. We wish to recognize the assistance of IOSCO in this endeavor through its agreement to act as a central repository for the Declaration and to coordinate the addition of any other regulators who may wish to execute the Declaration.
