Security & Commodity Exchanges

Promoting Transparent & Efficient Capital Markets

Security and commodity exchanges have a responsibility to ensure equal access to capital markets for all investors. As public markets, these companies play a critical role in efficient capital allocation and the equal application of rules to all participants. In addition, companies must manage the release of public information to prevent asymmetries. Further, with the advent of high-frequency trading there is heightened concern that technology can lead to advantages for certain traders at the expense of others. Information asymmetries that lead to unfair arbitrage could result in litigations and, potentially, regulatory penalties, additional regulatory oversight and compliance costs, as well as reputational damage that may hurt trading volumes and thus revenues. Disclosure of policies relating to information releases, halts of trading, and the risks and opportunities associated with algorithmic or high-frequency trading will allow investors to further understand how security and commodity exchanges protect shareholder value.

Managing Conflicts of Interest

Security and commodity exchanges are responsible for the oversight of member companies. Specifically, firms in this industry monitor membership information and regulatory compliance to ensure market integrity and transparency. For example, in the U.S., they investigate and prosecute member companies that violate the Securities and Exchange Act. Recent controversies relating to market manipulation, tax fraud, investor protection rules, and anti-trust have raised concern about conflicts of interest that arise due to security and commodity exchanges’ position as self-regulatory organizations (SROs). Rapid innovation in financial markets provides significant opportunities to enhance profitability. However, exchanges must continue to fulfill their responsibilities as SROs to ensure open and fair access to all investors, to publish rules and fees, and to oversee trading. Companies that avoid fraudulent or unethical activities will maintain market integrity, limit reputational damage, and ensure their long-term sustainable growth.

Managing Business Continuity & Technology Risks

安全及商品交易所面临增加risks and opportunities associated with information technology. The industry’s central position in the proper functioning of financial markets requires that issues including security breaches and technology errors are managed to prevent market disruptions. As security and commodity exchanges face increased volumes of trading associated with the clearing and execution of derivative trades and increased frequency of cyber attacks, the industry will be exposed to new risks and opportunities associated with its reliance on information technology. Failure to ensure continuity of trading may erode customer trust and result in lower trading volumes, thus loss of revenue. Increased disclosure of efforts taken to prevent these risks, in addition to the current performance, will allow shareholders to accurately assess value.