The Board of the International Organization of Securities Commissions (IOSCO) published a consultation report proposing revisions to the principles for regulation and supervision of the commodity derivatives markets, to reflect recent market developments. The revised principles seek to ensure that commodity derivatives markets continue to facilitate price discovery and hedging, while remaining free from manipulation and abusive practices. The principles will assist relevant market authorities in constructing an appropriate regulatory and supervisory approach that furthers these objectives and fosters proper conduct in commodity derivatives markets. These principles should be implemented with due consideration to the jurisdictional specificities of the underlying market.
IOSCO had published the original principles in September 2011, in response to a G20 request for further work on regulation and supervision of the commodity derivatives markets, due to continued volatility and price pressure on certain commodities. While the principles reflected the characteristics of the markets at that time, these markets have continued to evolve over the last decade. New trends arising from the regulatory reforms, the growing reliance on electronic trading and data, emerging new technologies and products, and unexpected disruptions beyond market dynamics, among other developments, have influenced how commodity derivatives markets and price formation in these markets have evolved in this period. Thus, IOSCO conducted a review of the recent developments and their impact on the commodity derivatives markets and is proposing to update the 2011 IOSCO principles to help ensure that these developments are appropriately addressed and the principles continue to provide a resilient framework for the regulation and oversight of commodity derivatives markets.
In developing the revised principles, IOSCO considered the importance of mitigating the impact of unexpected disruptive external events, such as spikes in oil prices or the COVID-19 pandemic, on commodity derivatives markets and how the principles might help address such events. Additionally, the revised principles aim to address certain market transparency issues that stem from the increasing role of data and data providers in commodity derivatives markets. This IOSCO consultation report sets out principles on:
- design and/or review of physical commodity derivatives contracts
- data and market transparency
- surveillance of commodity derivatives markets
- addressing disorderly commodity derivatives markets
- enforcement and information-sharing
- technological developments in commodities markets
- promotion of investor education and awareness
Keywords: International, Banking, Securities, Commodity Derivatives, G20, COVID-19, Derivatives, Reporting, IOSCO
Scott is a Director in the Regulatory and Accounting Solutions team responsible for providing accounting expertise across solutions, products, and services offered by Moody’s Analytics in the US. He has over 15 years of experience leading auditing, consulting and accounting policy initiatives for financial institutions.
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