IOSCO/MR/02/2023 – Madrid, 31 January 2023
The Board of the International Organization of Securities Commissions today has published a revised version of its 2011 Principles for the Regulation and Supervision of Commodity Derivatives Markets. The aim of the revision is to ensure that these Principles continue to provide a resilient framework for the regulation and oversight of the commodity derivatives markets.
While the Principles reflected the characteristics of commodity derivatives markets in 2011, these markets have continued to evolve over the past decade, spurred by various market developments and international events in the form of external disruptions, such as the COVID-19 pandemic and the Russia-Ukraine conflict.
IOSCO Board Chair Jean-Paul Servais said: “Various events last year highlighted how continued geopolitical tensions and heightened macroeconomic uncertainty can disrupt global commodity markets and create significant volatility, with potential knock-on effects on the broader financial system. Originally published in 2011 as a G-20 mandate, the IOSCO Principles aim to ensure the integrity of commodity derivatives markets. As recent events demonstrate, proper implementation of the Principles is essential for sound price formation in commodity derivates markets and the underlying physical energy, metals and food markets, which all are core to the functioning of the global economy.”
The 24 revised Principles seek to support the physical commodity derivatives markets in providing their fundamental price discovery and hedging functions, while operating free from manipulation and abusive trading schemes.
In revising its Principles, IOSCO focused on market surveillance; transparency; price discovery; the correlation with physical markets; addressing disorderly markets; responding to market abuse; and strengthening the enforcement powers of trading venues against end-user behaviors. The Principles in general and the revisions address various issues highlighted during the recent commodity markets turmoil and volatility. Specifically, the new Principle 16 on Unexpected Disruptions aims to guide regulators in restoring orderly markets in the case of an unexpected disruption and ensure market participants have a process and adequate plans to address these events.
IOSCO believes that relevant Market Authorities should review their policies and regulation to ensure that the Principles are put into effect.