Global regulators deepen anti-market abuse ties

Friday, 16 September 2011 01:56 -     - {{hitsCtrl.values.hits}}

LONDON, Reuters:  Global regulators have revised their rules so they can more easily track down commodity market abuses that cut across national borders.

Many of the provisions mapped out in the updated principles of the International Organisation of Securities Commissions (IOSCO) have already been introduced or are in the pipeline, in major jurisdictions such as the U.S. and the European Union.

Ensuring all 115 IOSCO member countries comply will make enforcement easier and give market abusers fewer places to hide.

“We urge all relevant market authorities to review their policies to put these principles into effect,” IOSCO technical committee chairman Masamichi Kono said in a statement on Thursday.

Leaders of the world’s top 20 economies (G20) called last year for the revision as part of wider efforts to shine a light on commodity markets.

The sector has become a favoured asset class for investors, and IOSCO says the revised principles take into account trends such as the scale, speed and cross-border nature of trading and novel forms of market abuse.

Some leaders, including President Nicolas Sarkozy of France, the current G20 president, blame the record-high food and energy prices of recent years on commodity market speculators.

The IOSCO principles stop short, however, of insisting on the pre-set position limits in commodity markets being introduced in the United States.

Instead, this would be one of several “tools” supervisors could use, including position management and ad hoc intervention by regulators.

Commodity brokers are likely to seize on this to water down draft EU plans to reform the bloc’s trading rules which lean heavily towards fixing position limits.

The aim of the IOSCO principles is to improve the functioning and transparency of commodity markets and do not directly address speculation, an issue over which there is no consensus among regulators.

A top banking lobby said this week there is no link between speculation and volatile commodity prices.

The new principles go into greater detail on what should be included in the design of commodity contracts to ensure that specified delivery locations are usable and practical.

IOSCO has no remit to directly cover physical markets, a key gap the G20 is trying to fill through work elsewhere.

G20 agriculture ministers agreed this year to launch a database to improve transparency of food stocks.

The EU is updating its market abuse rules and a draft obtained by Reuters on Wednesday showed their scope will be extended to probe trading systems in spot commodity markets.

An IOSCO taskforce is also still working with international energy agencies on how price reporting agencies calculate prices from spot oil markets.

The International Monetary Fund, which regularly “audits” country compliance with international standard setters such as IOSCO, will help ensure the revised principles are applied.