Global markets watchdog vows to move more quickly

LONDON, June 27 Wed Jun 27, 2012 12:10pm EDT

LONDON, June 27 (Reuters) - The world's top securities watchdog will intervene earlier with new rules to help avert supervisory clashes like the transatlantic spat over derivatives markets, its head told a conference on Wednesday.

The International Organisation of Securities Commissions (IOSCO) comprises supervisors from all the world's top markets, such as the U.S. Securities and Exchange Commission, Japan's Financial Services Agency and France's AMF.

It drafts principles for securities rulemaking such as clearing, high-frequency trading and short-selling which member countries then apply locally.

"One thing we have to do as an organisation is to move upstream, to identify securities risks globally as early as possible," IOSCO Secretary General David Wright told the IDX derivatives conference in London.

"IOSCO needs to be in that early, ex-ante role, shaping how rules should apply. That is the space we need to be in and not when the Europeans and Americans have already draw up their rules. That is too late," Wright said.

The market for off-exchange instruments like credit default swaps and interest rate swaps is largely traded in London and New York. The industry fears U.S. rules to make the market more transparent will force European firms, already facing new local rules, to comply too and bump up costs.

There was a need for intense cooperation among regulators, particularly across the Atlantic, Wright said.

FULL HARMONISATION

"At the moment we do have, it seems to me, some difficulties here. My appeal would be to really sort this out. I won't be easy as it's a classic conflict of law situation here," he said.

A toolbox for regulatory cooperation was needed to help converge national rules, though full harmonisation will remain impossible for the foreseeable future, he said.

He singled out Britain, where IOSCO member the Financial Services Authority said last week a fifth of company announcements were preceded by unusual share price moves.

"That is 20 percent too much," Wright said.

Just three months in the job, the former top European Commission official wants to make the Madrid-based body more important.

It has been criticised for drafting bland rules late in the day that all members can agree on but with no regulatory bite.

The rise of the Financial Stability Board, the regulatory arm of the world's top 20 economies (G20), has put pressure on IOSCO and other global standard setters to raise their game and put more emphasis on consistent follow through on timely rules.

"If we can't apply what we agree, then we should be described as a talking shop and that is simply unacceptable," Wright said.

He warned the derivatives industry he would be coming cap in hand for money to fund an IOSCO research foundation.

The revamped IOSCO will still have no power to impose new rules or sanction breaches, but Wright would use "every technique in the book" to put pressure on members to comply.

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