The technology-driven revolution in securities markets in recent years requires regulators to overhaul their surveillance operations with a focus on the micro-management of trade data, says a report from the International Organization of Securities Commissions (Iosco).
Rapid technological advances and regulatory developments have produced fundamental changes in the structure of securities markets, the types of participants, the trading strategies employed, the increase in the speed of trading and the array of products traded, says the Iosco.
Automation, the body's report warns, can increase the risk of illegal conduct because market participants have the ability to trade large volumes of numerous products in just fractions of a second.
Meanwhile, because trading has become more dispersed across multiple centres, it has become more difficult to monitor and trace orders and transactions.
The report sets out recommendations designed to help authorities develop the regulatory rules to address these issues, calling on them to ensure they put in place the organisational and technical capabilities to monitor markets.
Iosco's recommendations focus on harnessing data, for example suggesting that authorities should have the capability to associate market participants with each order and transaction and demand that data is reported in a usable, standardised format.
Regulators should also consider, says Iosco, requiring trading venues and their participants to synchronise, consistent with industry standards, the business clocks they use to record the date and time of any reportable event.
Meanwhile, in a global market authorities should make sure that, at a minimum, they map and are aware of the extent of their cross-border surveillance capabilities and work with their colleagues around the world.
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