NO 245 – JULY 2013

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WFE Focus
Regulation
Peter Clifford
Chief Operating Officer,
WFE

As regulation of the financial industry becomes increasingly pervasive and complex, the relation between the World Federation of Exchanges and its members from around the world, and IOSCO and the global securities commissions takes on a primary importance.

First, from the IOSCO Emerging Markets Annual Meeting are excerpts from Eric Salomons' address on the question of commodity markets. As the Director, Markets at the Dubai Financial Services Authority, his perspective as to what drives concerns for greater regulation of the markets should help market participants and market regulators understand where future priorities are and how cooperation in providing more information and transparency for these markets could assuage fears.

Cyber crime is another area where governments are concerned about the potential that attacks on key market infrastructure could lead to systemic risk. This year the WFE and IOSCO partnered on a survey of exchanges and clearing houses on these risks. The report was released in July 2013, and the press release is found on page 10. Some of the key findings are that exchanges seem to be very well aware of the type of attacks that have targeted stock exchanges and other financial services providers. For exchanges, while the attacks have required constant vigilance, they tend to target the web sites rather than operational activities for trading and payments. WFE is looking to follow up this study with initiatives for further coordination between exchanges to share information on such attacks, while IOSCO is planning to continue its survey to other branches of the financial services industry.

Finally, one of the most successful market for small and medium sized enterprises (SMEs) reports on the use of asset backed securities (ABS) as a means of providing financing for small companies and for small fund raisings. Shenzhen Stock Exchange now has a formidable experience in innovating in its listings of smaller companies, while Shanghai Stock Exchange focuses on the blue chip sector. Innovations such as developing a specific ABS market for small companies seems to serve the dual purpose of new kinds of investment vehicles for qualified investors in the SME sector with new products of the firms seeking to finance their growth. SME financing remains one of the key challenges for governments, market participants and market operators. Look for more information on this topic from WFE in coming editions of Focus.