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WFE Focus February 2011

CPSS-IOSCO launches consultation on principles for financial market infrastructures
New and more demanding international standards for payment, clearing and settlement systems have been issued for public consultation by the Committee on Payment and Settlement Systems (CPSS) and the Technical Committee of the International Organization of Securities Commissions (IOSCO). The new standards, called principles, are designed to ensure that the essential infrastructure supporting global financial markets is even more robust and thus even better placed to withstand financial shocks than at present. They are set out in a consultative report, “Principles for financial market infrastructures”, which contains a single, comprehensive set of 24 principles designed to apply to all systemically important payment systems, central securities depositories, securities settlement systems, central counterparties and trade repositories. When finalized, the new principles will replace the three existing sets of CPSS and CPSS-IOSCO standards, the core principles for systemically important payment systems (2001); the recommendations for securities settlement systems (2001); and the recommendations for central counterparties (2004). The CPSS and IOSCO believe that a single set of principles will provide greater consistency in the oversight and regulation.

Osaka Securities Exchange establishes executable price range rule, price limits and circuit breaker rule
In order to prevent sudden price fluctuations, such as caused by erroneous orders, the Osaka Securities Exchange has established a rule to temporarily halt trading when an order placed will trade beyond a set price range from the last traded price. With respect to the price limits for stock index futures and options contracts, the base price for calculating the range of price limits will be calculated by using the latest reference prices over a time period, and the range for price limits will be calculated multiplying the base price by each following rate. The price limit will be expanded in stages upon Circuit Breaker trigger situation. With respect to price limits for security options contracts, the price limit range will be calculated by multiplying the reference price for price limits of an underlying security on the designated market by 25%, and the range will be recalculated daily. The circuit breaker rule is applied to temporarily halt trading in order to allow investors to calm down when the market is overly volatile.

Stock Exchange of Thailand changes ceiling and floor for derivatives warrants, warrants and subscription rights

The Stock Exchange of Thailand has changed the ceiling and floor for derivative warrants, warrants and transferable subscription rights in order to limit risks of price volatility that investors may face and to reduce improper trade orders. Presently, warrants and subscription rights prices are not allowed to change from the previous day’s closing level by more than +/- 30% of the last closing price of the underlying security. The new regulation will also be put into effect for derivatives warrants.

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