Be significant within its country of origin
Significant means that, in addition to being important based on its size, a market should also be dedicated to supporting, directly or indirectly, the formation of investment capital or the management of investment and economic risks, and be an important factor within the home country's economy.
It is important to keep some variety in the metrics of measuring 'significance'. Exchanges offering mainly cash equity services should conduct market operations such that they have important business with respect to at least one of the following metrics in line with the measurements of current members: market capitalisation, trading turnover, market share (of at least 10% in contested markets), or the market capitalisation/GDP ratio.
A fixed-income exchange is evaluated based on the fair and transparent operations it conducts with these instruments; its significance to the local bond market must be shown. The futures and options exchanges in membership must demonstrate that their contracts lead in these segments. Importance to the local market is what needs to be shown, and the point is to demonstrate leadership in the public, regulated marketplace.
Be regulated by a supervisory body, within a statutory framework
Apart from being regulated and supervised by an independent, public authority, exchanges should also have their own specific responsibilities to regulate the markets and market participants. The WFE member must be licensed as an exchange or CCP.
In each jurisdiction, there should be a public capital markets authority to oversee the markets, including the exchange. Those capital markets authorities should be members of IOSCO, and this is true for both current members and candidate exchanges. For cash and derivative market exchanges, the self-regulatory aspects are distinguishing features of WFE exchanges.
Capital raising and risk management
Listing is a distinctive element for cash market exchanges’ capital raising function. All WFE cash market exchanges should operate an active platform for raising initial and secondary capital. All WFE derivatives exchanges should provide options or futures contracts for managing risk.
Exchanges and CCPs should pursue purposes that are in the public interest, having as a goal to be fair, orderly and neutral to protect all public participants.
In fulfilment of its public good responsibilities, an exchange must remain neutral and fair to all actors. Questions can arise because of the changing ownership structure of exchanges, and also new entrants into the trading space, but neutrality and fairness remain key criteria for WFE members.
Full membership applications are subject to a desktop review, followed by an on-site inspection. The candidacies are opened to existing member comment and require final approval from the Board of Directors. Those wishing to apply for full membership must have completed at least one year as an affiliate and their regulator needs to be a member of IOSCO. The Board reviews applications from affiliates that wish to apply for membership before deciding to accept the candidacy. It is after Board acceptance that the WFE membership process starts formally.