18 October 2010

IOSCO publishes recommendations for market interventions and securitisation in emerging markets

 Both reports draw lessons from regulators’ actions and set out recommendations for best practice in these areas which will assist market authorities in mitigating vulnerabilities in their jurisdictions and supporting the long term development of their capital markets.

Mr Vedat Akgiray, Chairman of the Emerging Markets Committee, said: “We are pleased to be able to publish today our reports and recommendations on Market Interventions and Securitisation in Emerging Markets. These two reports present a comprehensive and informative picture of the impact that the financial crisis had on securitised debt markets and the operation of exchanges and the manner in which regulators reacted to these events.“

Effectiveness of Market Interventions in Emerging Markets 

The report on the Effectiveness of Market Interventions in Emerging Markets set out the following broad in implementing measures to intervene in markets: 

• Regular review of the framework governing interventions in light of the changing trading 
• landscape; 
• Market interventions need to be considered in a holistic manner and not on a piece-meal basis; 
• Market interventions need to be transparent and explicitly guided by clear criteria and parameters; 
• Market interventions must be consistently applied across all exchanges and/or markets to prevent regulatory arbitrage; and 
• A proper framework for coordination and communication between exchanges and/or regulators and exchanges for multi-listed securities is necessary. 

Securitization and Securitized Debt in Emerging Markets 

The Securitization and Securitized Debt in Emerging Markets including recommendations on both enabling condition necessary for the development of securitization markets and those required for the further development of these markets 

Enabling conditions include:

• Stable Macroeconomic Environment; 
• Robust Legal Framework; 
• Robust Accounting Framework; 
• Neutral Tax System; 
• Investor Education - Financial Literacy; and 
• Robust Framework for the Securities Regulator. 

Further development of securitization markets includes the following recommendations:

• Regulators in Emerging Markets should collect a minimum set of information on securitization markets to monitor their development and identify potential sources of risk for financial stability or consumer protection; 
• Regulators in Emerging Markets should strengthen disclosure requirements for 
• Securitized Financial Product (SFP) vis-à-vis investors, both in the context of public as well as private offerings; 
• Regulators in Emerging Markets should encourage trading of SFPs in public venues, and impose transparency in OTC markets; 
• Regulators in Emerging Markets should encourage the development of pricing agencies, which should be regulated; 
• Regulators in Emerging Markets should establish a minimum framework for key participants of the securitization process; 
• Regulators in Emerging Markets should strengthen business conduct obligations; and 
• Regulators in Emerging Markets should align credit rating agencies regulation with the IOSCO Code of Conduct.


Effectiveness of Market Interventions in Emerging Markets Report

Securitization and Securitized Debt in Emerging Markets Report

© IOSCO