The International Organisation of Securities Commissions (IOSCO) has outlined a number of good practices for mitigating the effects of market outages.
The recommendations, published in a report produced by the IOSCO board, are drawn from findings from recent market outages on listing trading venues in IOSCO jurisdictions and builds on IOSCO’s past work on operational resilience and business continuity.
On the recommendations, IOSCO said: “These good practices provide sufficient flexibility so that they can be considered for adoption across different types of trading venues, asset classes and market structures.
“While they were primarily developed for equities listing trading venues, IOSCO is of the view that some of these good practices may have relevance more broadly, for example, in the context of non-listing trading venues and derivatives markets.”
In the event of outages, the final report proposes that trading venues adopt a number of good practices. Primarily, venues should develop and publish an outage plan, which could include the venue’s communication plan and reopening strategy.
Venues should also implement a communication plan, which should allow for the publication of an initial notice of the outage to market participants and the general public. Venues should also keep communication channels open, providing clarity on the status of orders and ensuring an adequate period of notice before the resumption of trading.
The processes and procedures that trading venues would follow to operate a closing auction and/or to establish alternative closing prices should be published in the outage plan and communicated to all market participants during an outage. Trading venues should also consider including in the outage plan a cut-off time by which trading venues would inform market participants whether a closing auction will be run.
Venues should also conduct and share with the relevant regulators a lessons-learnt exercise of the market outage and adopt a post-outage plan, with clearly defined timelines and allocation of responsibilities for remediation, designed to reduce the likelihood of future incidents and to improve the ability of the trading venue to effectively respond to outages.
©Markets Media Europe 2024
