SC to head study on recent market turbulence in emerging markets

Kuala Lumpur, 10 November 1997

The Securities Commission (SC) has been given the mandate by the International Organisation of Securities Commissions (IOSCO) to head a study on the causes and effects of the market turbulence faced by emerging markets.

The mandate was given at the recent IOSCO annual conference held in Taipei from 2-7 November. The conference was attended by regulatory authorities from 75 countries.

In its press communiqué, IOSCO recognised the ramifications of the recent market turbulence in certain jurisdictions in disrupting financial activity and market development efforts. The organisation also discussed the linkages between the recent market turbulence with macroeconomic conditions.

SC Chairman, Dato' Dr. Mohd Munir Abdul Majid, who is also the Chairman of the Emerging Markets Committee (EMC) of IOSCO, said that an examination of recent developments in emerging markets is timely and extremely important for capital market regulators given current market conditions.

"The study will provide emerging market regulators with a better understanding of the sources of severe market stress and primarily aims to analyse relevant regulatory and market implications for capital market regulators in order to form appropriate responses, "said Dato' Munir.

The details of the study will be worked out with other emerging market countries in the coming weeks and will be discussed at the next Emerging Markets Committee meeting in Kuala Lumpur in May 1998.

Apart from the Chair of the EMC, the SC also heads one of five working groups of the EMC that examines issues relating to the regulation of secondary markets. Over the past three years, Malaysia's working group has among others, studied and published a report on the legal and regulatory framework for exchange-traded derivatives. At the conference last week, the working group released two other reports - "Towards a Legal Framework for Clearing and Settlement in Emerging Markets" and "Financial Risk Management in Emerging Markets".

IOSCO has also formed a tripartite committee comprising Chairmen of the Executive, Technical and Emerging Markets (headed by SC Malaysia) Committees to prepare a document on the principles of securities and derivatives regulation which would, if adopted, act as a basis for effective system of regulation.

"The principles will form a yardstick which regulators could use to pace and measure developments and regulatory effectiveness of their respective jurisdictions against desired international standards," said Dato' Munir.

Evident in this year's conference was the increased cooperation with other international bodies such as Basle Committee on Banking Supervision and the International Association of Insurance Supervisors. A Joint Forum between these three organisation was formed in 1995 to develop principles for the regulation of financial conglomerates. In addition, these organizations along with the association of exchanges (FIBV) are working together to address the Year 2000 problem.

The IOSCO is a forum for securities regulators worldwide to address issues and demands related to the securities and futures markets regulations. Eighty-nine national securities regulators form IOSCO's ordinary membership, of which 63 are members of EMC. There also 51 affiliate members and 12 associate members. SC joined the organisation in 1993 and was elected to Chair the Working Group on the Regulation of Secondary Markets in 1994. In 1996, SC Chairman Dato' Munir was elected by members of the Emerging Markets to head its Committee for a two-year term.


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