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Alternative Market Briefing

IOSCO issues recommendations to help trading venues manage extreme volatility

Thursday, August 02, 2018

Matthias Knab, Opalesque:

The Board of the International Organization of Securities Commissions (IOSCO) today published eight recommendations to assist trading venues and regulatory authorities in the implementation of mechanisms to manage extreme volatility and preserve orderly trading.

Following recent extreme volatility events, regulatory authorities and trading venues have been reviewing their approaches to managing extreme volatility, particularly through the use of volatility control mechanisms. Volatility control mechanisms seek to minimize market disruption triggered by events such as erroneous orders, by halting or temporarily constraining trading. IOSCO believes that these mechanisms support the goal of ensuring that markets are fair, efficient and transparent, thereby increasing market integrity and investor confidence.

Today's final report, Mechanisms Used by Trading Venues to Manage Extreme Volatility and Preserve Orderly Trading, therefore recommends that trading venues should have volatility control mechanisms to manage extreme volatility and these mechanisms should be appropriately calibrated and monitored.

The report assists trading venues and regulatory authorities in implementing, operating and monitoring volatility control mechanisms by making recommendations that trading venues should, among other things, regularly monitor volatility control mechanisms to ensure they are working as designed and identify circumstances that w......................

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