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Final Report from the Co-Chairmen of the May 1995 Windsor Meeting to the Technical Committee of IOSCO
Initiatives to increase the transparency of the market protection and procedures
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Another matter on which international consensus emerged was the need for greater transparency about default procedures at exchanges, and about the nature and scope of financial protection afforded customer positions, funds, and assets, whether held at the market or by firms. As we have already noted, the Barings crisis revealed the extent to which market users either could not or did not appreciate the wide differences between the regulatory protections and procedures available in different jurisdictions. For example, not all markets have established policies and procedures for the transfer of customer positions and funds from a defaulting to a non-defaulting member. And the practice of segregating customer and member assets at the clearing entity or exchange is not universal.
Progress has been made in respect of client asset protection and default procedures within IOSCO and the FIA Global Task Force: - a March 1996 IOSCO Technical Committee Report containing a paper on Default Procedures sets out lOSCO's views in favor of transparency of market default procedures, and identifies information which should be available to market participants about exchange procedures that apply when a member defaults; and
- the work of the FIA Global Task Force is encouraging futures exchanges and their related clearing organizations to make publicly available information regarding their market protection mechanisms, sources of financial support and default procedures, as well as financial information about themselves.
In relation to the second of these two initiatives, the Global Task Force completed a standard form questionnaire on market protection which its members and other exchanges and clearing organizations have been invited to complete. The questionnaire is intended to guide the development of an exchange information statement that should enable market intermediaries and customers alike to evaluate the market protection mechanisms in place to support the financial integrity of the clearing system, to protect customer property, the financial resources and arrangements available to cover a clearing member default, and default procedures. This private sector initiative should facilitate future customers' understanding of the differences among jurisdictions in these matters.
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Final Report from the Co-Chairmen of the May 1995 Windsor Meeting to the Technical Committee of IOSCO
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