G-20 to Regulate ‘Market Integrity’

Jakarta Globe, November 04, 2011

Italy, under fierce pressure from financial markets and European peers,
 agreed to have the IMF monitor its progress with long-delayed reforms
 of pensions, labor markets and privatization, senior EU sources said
on Friday. (AP Photo)  

      

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Cannes, France. The leaders of the G-20 economic powers agreed on Friday to measures to regulate the “shadow banking sector,” hedge funds, derivatives trades and traders’ bonuses.

In the statement at the end of the two-day summit in Cannes, the leaders mandated the existing Financial Stability Board and the International Organization of Securities Commissions to take tighter charge.

“We will develop further our regulation on market integrity and efficiency, including addressing the risks posed by high frequency trading and dark liquidity,” the statement said.

The term “dark liquidity” refers to securities traded privately rather than on public exchanges, in a way that avoids influencing the broader market but which is seen as more open to abuse.

“All standardized over-the-counter derivatives contracts should be traded on exchanges or electronic trading platforms, where appropriate, and centrally cleared, by the end of 2012,” the statement said.

The group also agreed “to reform the FSB to improve its capacity to coordinate and monitor our financial regulation agenda,” and urged the Swiss-based bank regulator to close remaining loopholes in its monitoring.

The FSB was to publish on Friday a list of the “Global Systemic Financial Institutions” that are considered too big to fail and will be subjected to tougher requirements for capital ratios to protect the world economy.

The body is also to monitor and report on bankers’ bonuses, which leaders believe encourage risky trading practices and have sought to limit, and to spot “gaps and impediments to full implementation of these standards.”

The shadow of debt-laden Greece still hung heavily over the second and final day of the summit, but the focus of the crisis has switched to Italy, which saw its own borrowing costs soar this week when markets took fright at the Greek crisis.

Senior European officials said the Italian economy would be put under tight supervision by the European Commission and the International Monetary Fund to reassure investors that Prime Minister Silvio Berlusconi was serious about reform.

China warned on Thursday that it feared the euro zone crisis would persist and spread, and the world’s biggest economies agreed to attempt to fence in the crisis by bolstering the IMF’s resources.

“Australia, Brazil, Canada, China, Germany, Korea and Indonesia, where public finances remain relatively strong … agree to take discretionary measures to support domestic demand,” the statement said.

Agence France-Presse

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