Regulators need better powers on commodities: IOSCO
LONDON (Reuters) - Regulators need to ensure they have the information they need to detect manipulation in commodity markets and the powers to deal with it, the body grouping the world's securities regulators said on Thursday.
The International Organization of Securities Commissions (IOSCO) said regulators needed to be better informed, sophisticated in their understanding and powerful in enforcement when dealing with commodities derivatives.
"Regulators should take affirmative steps to request the necessary powers to enforce against attempted manipulation," IOSCO said in a release.
Regulators of commodity futures markets should seek to improve the availability and quality of their information on commodity markets, IOSCO said.
That would help them reduce market uncertainty and understand the fundamentals driving the market, it said.
"Efforts could include encouraging data providers to provide a greater level of detail to data that are already published."
Greater knowledge will help financial regulators to understand the role of speculative and commercial activity in commodity futures markets, IOSCO said.
"(Better information would also) detect, deter and prosecute manipulation and other trading abuses involving commodity futures, and related commodity markets," IOSCO said.
Recommendations by a task force set up by IOSCO include market surveillance, which should take account of a trader's related financial and underlying commodity positions.
"Manipulation of market prices is a clear threat to the integrity of the marketplace and to the fundamental purposes of futures markets -- risk management and price discovery," IOSCO said.
"One of the features of commodity futures markets is the difficulty in proving that manipulation has had or is likely to have a direct effect on market movement."
The task force identifies factors that inhibit the ability of regulators to access relevant information.
"The quality of the price which the futures market discovers reflects the ... the market's understanding of the available underlying data, and the quality of that data," IOSCO said.
"If data is inadequate or of poor quality it is not possible for futures market regulators and other relevant authorities to determine accurately whether or not certain activity or price movements are unusual."
IOSCO is an international policy forum for securities regulators. The task force on commodity futures markets is co-chaired by the U.S. Commodity Futures Trading Commission (CFTC) and Britain's Financial Services Authority (FSA).
The task force was formed after the commodities price surge last year and an increase in volatility.
This year there has been a drive across the financial markets for tightening of regulation as a result of the banking crisis and credit crunch, which has pushed the world into recession.
(Reporting by Pratima Desai; editing by Anthony Barker)
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