On December 22, 2015, IOSCO published a report on the mechanisms for trading venues to effectively manage electronic trading risks and plans for business continuity. The report focuses on how trading venues manage technology, in particular, the potential risks that technological innovations pose to the markets. It stems from an IOSCO investigation into causes of the recent market disruptions which sought to identify steps taken by market participants and regulators to address the causes and probe whether the IOSCO High-Level Principles for Business Continuity issued in 2006 should be updated. In addition, IOSCO surveyed trading venues across more than 30 jurisdictions. The report discusses IOSCO’s findings based on responses to the survey, makes recommendations to regulators and proposes sound practices for trading venues. IOSCO recommends that regulators should require trading venues to put mechanisms in place to help ensure the resiliency, reliability and integrity of critical systems and should require trading venues to establish, maintain and implement an appropriate business continuity plan. The proposed sound practices for trading practices include: (i) establishing and implementing policies and procedures that identify, monitor and address risks to critical systems; (ii) implementing mechanisms for critical systems that relate to capacity management, stress testing and systems reviews; (iii) establishing and implementing communication protocols that govern the sharing of information on new critical systems, or changes to existing critical systems; (iv) establishing and implementing mechanisms to manage external risks to critical systems, such as mechanisms to monitor a participant's compliance with the rules of the trading venue, pre-trade controls and post-trade monitoring; (v) establishing, implementing and updating cyber security programs; and (vi) establishing objectives and strategies in terms of business continuity planning and governance arrangements on planning for disruption.
The report is available at: http://www.iosco.org/library/pubdocs/pdf/IOSCOPD522.pdf.