25 November 2024

IOSCO:Targeted Implementation Review on Principles for the Regulation and Supervision of Commodity Derivatives Markets

Results of the surveys show that the majority of respondents were broadly compliant with the Selected Principles. However, both regulators and exchanges identified significant challenges in implementing certain elements of the Selected Principles within OTC markets.

Summary of Findings
Results of the surveys show that the majority of respondents3 were broadly compliant with the Selected Principles. However, both regulators and exchanges identified significant challenges in implementing certain elements of the Selected Principles within OTC markets. Further, some responses were unclear about the extent to which the Selected Principles are implemented.
More details of the survey results are provided in Section 4. Here are some of the highlights:

Principle 9: OTC Transparency
• Most regulators have access to the reporting of OTC commodity derivatives to trade repositories. However, the information reported to trade repositories is not available for exchanges to monitor their markets.

Principle 12: Authority to Obtain Information
• While some exchanges reported effective systems for identifying risks in exchange-traded derivatives, several others do not have the authority to obtain OTC position data. Where the exchanges have access to some data, through member submission (using their rulebook, regulatory framework or both),it comes with limitations, which inhibits their ability to identify and act on risks that may spill over from related markets to their own.
• Where the exchanges have access, the OTC position data is different from the separate data set reported to the trade repositories and typically obtained on an ad hoc basis or post-event when concerns arise or specific triggers are breached. This is further complicated by other challenges, such as data anonymity, cross-border issues, and variations in the types of financial instruments that are captured by relevant regulatory frameworks (particularly for physically-settled commodity forwards).

Principle 14: Large Positions
• Most exchanges are able to identify large positions and have processes for identifying positions under common ownership. Several exchanges have the ability to aggregate customer positions on other exchanges within the same group of entities. However, the majority have expressed that identification and aggregation of positions across different exchanges extends only to exchange-traded positions, not OTC positions.
• Most responding regulators have access to large position reports, at least on an ad hoc basis; however, only few regulators receive the large position reports directly....

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