Message from the Secretary General
I am honored that the WFE Board of Directors has appointed me to this position recognizing my commitment to the principals put forward by the Federation. I have now become a producer of WFE services after many years of being a consumer of WFE services. The WFE is a very familiar environment for me, as I served on the Board of WFE, first as the Chairman of the Working Committee and then as a Director for four years. My goal is to expand and enhance the WFE’s services and advocacy for well-regulated exchanges, particularly during this period of rapid global economic transformation, and to lead the WFE in articulating the unified global exchanges’ viewpoint on issues relating to regulation in the industry. In order to maintain a high level of visibility for WFE initiatives, I will continue to facilitate coordination between the WFE members and the policymakers, regulators as well as the members of academia.
As our varied business models questioned, challenged, spoken about by our clients, public officials and commentators, it is crucial for exchange leaders to come together to reiterate what our positions are as exchanges, and effectively communicate those arguments to the whole world. The 52nd WFE General Assembly and the Annual Meeting in Taipei this October aims to tackle some of these crucial issues. I would like to take this opportunity to thank Chairman Chi Schive and his team at the Taiwan Stock Exchange, for their efforts, and hard work to make this annual event possible.
An ongoing and overarching objective of the WFE is to promote the unique role of exchanges in facilitating capital formation and risk management to support economic growth. Besides their unique value proposition in market structure (price discovery and market efficiency), exchanges have other functions and responsibilities:
- Self-Regulatory Organization (SRO) responsibilities, with particular reference to market surveillance, trading rules and listing standards as well as disciplinary measures,
- Strong visibility in public view with a wide variety of stakeholders,
- The public role of exchanges in promoting fair practices among members, investors, listed companies, and other market participants,
- Ensure transparency through real time pre and post trade information as well as timely company disclosure
WFE has a long-standing commitment to bringing the world’s regulated exchanges together in order to improve the quality of markets. Over the last couple of years, we are seeing deterioration in the market quality, due to the lack of transparency, regulatory arbitrage, fragmentation, dark pools, etc.
If we take fragmentation and transparency, many instruments traded today on and off exchanges are either the same as in the case of equities and fixed income or so similar and substitutable as in the case of other derivatives in an economic sense that to have the information on some without the other is disruptive to efficient price discovery. The quality of price discovery is therefore deteriorating with serious implications to the health of the markets.
To ensure investor confidence, it seems imperative for public authorities to ensure that all market participants trading the same instruments are subject to the same standards and obligations, regardless of their actual licensed status. In many markets where our member exchanges operate, the WFE considers that the various structures and rules in place are no longer coherent to assure fair treatment and efficiency for investors and issuers.
A relationship which is critical for both listed companies and exchange operators is the contractual tie between issuers and their primary listing venue. This relationship has been all too often overlooked in today’s market structure debates. Many member exchanges are hard pressed to answer corporate treasurers’ valid questions as to what is happening with the trading of their company’s securities.
With regard to dark pools, the regulators should ensure that the market share of dark pools is not hindering or eroding the quality of price formation processes on transparent markets.
Fairness is an elusive objective, but exchanges are structured to provide neutral platforms for trading operations, independent of the interests of any one constituency; that neutrality is crucial for equality of access and treatment.
WFE is committed to tackle these market structure issues in the future with the help of more research and active participation in the debates with the regulators and policy makers.