Global Rules for Commodity Derivatives Trading Set for Overhaul

The international securities standards-setting body has proposed to reform international guidelines on the regulation and supervision of the commodity derivatives markets as a result of the emergence of new trading technologies and a growing reliance on electronic trading.

In calling for feedback on a proposed revision to its 2011 Principles for the Regulation and Supervision of the Commodity Derivatives Markets, the Madrid-based International Organization of Securities Commissions (IOSCO) wants to make sure that the commodity derivatives markets continue to facilitate price discovery and hedging and remain free from manipulation and abusive practices.

The principles were introduced in 2011 after the G20 Summit in South Korea the year before amid continued price pressures on commodities, which raised concern for commodity derivatives markets participants to be subject to appropriate regulation and supervision.

The principles have been adopted around the world and set out guidelines for the design of physical commodity derivatives contracts, procedures for the surveillance of commodity derivatives markets, guidelines for market authorities to intervene in the markets to address disorderly conditions, and procedures for enforcement and information sharing, among other measures. The key standards are here.

Its standards are endorsed or recognised by key international financial organisations such as the G20, the Financial Stability Board and the Basel Committee on Banking Supervision and as such form part of a global system of financial governance enforcement.

However, the body is asking market participants whether the principles reflect appropriately the changes, trends and activities in the commodity derivatives markets over the last decade, whether any areas are missing and/or merit IOSCO consideration, and whether the principles continue to serve as a sound framework for the regulation of the commodity derivatives markets.

IOSCO is governed by a board comprised of 34 global securities regulators, with its policy work conducted by eight committees. Its ordinary members comprise mostly securities regulators, its associate members comprise other government bodies such as banks and ministries, and its affiliate members include participants such as stock exchanges and industry associations.

IOSCO is asking for feedback on its updated principles at by email at consultation-05-2021@iosco.org on or before 17 January 2022.