The International Organisation of Securities Commission (Iosco) has published a set of principles designed to assist exchange operators and regulators when considering outsourcing arrangements.
The guidelines arise from an earlier Iosco probe into emerging regulatory issues, which identified outsourcing as a potential risk factor in the new business model of exchanges. In particular, the report focused on possible trouble spots once exchanges begin to consider outsourcing activities relating to regulatory and key operational functions.
"Outsourcing can bring substantial benefits for markets particularly through the lowering of costs whilst allowing access to a high level of expertise and the latest technology," notes Iosco. "However, it also raises a number of issues that may impact on the effectiveness and integrity of markets related to their ability to manage risks and monitor compliance with regulatory requirements."
Iosco says that exchanges must pay careful attention to six key issues before they enter into commercial outsourcing agreements, with a clear focus on due diligence, contractual arrangements, business continuity, security and confidentiality of information, termination procedures and access to books and records.
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