Responses to the Consultation Report Entitled Regulatory Issues Arising from Exchange Evolution

Regulatory Issues Arising from Exchange Evolution Responses to the Consultation Report June 2006 1 Responses to IOSCO Consultation Report Regulatory issues arising from exchange evolution The Advisory Committee of the CNMV-Spain ........................................................................ 2 Australian Stock Exchange .......................................................................................................4 Chicago Mercantile Exchange .................................................................................................. 9 Deutsche Börse ....................................................................................................................... 20 European Association of Listed Companies AISBL-IVZW................................................... 26 Federation of European Stock Exchanges .............................................................................. 27 French Association of Investment Firms ................................................................................ 32 International Capital Market Association ............................................................................... 42 International Council of Securities Associations .................................................................... 46 London Stock Exchange ......................................................................................................... 54 National Futures Association .................................................................................................. 57 New York Stock Exchange ..................................................................................................... 59 SWX Swiss Exchange.............................................................................................................60 World Federation of Exchanges.............................................................................................. 61 SRO Consultative Committee Responses to SC2 Questions on Demutualization .................................................................. 72 2The Advisory Committee of the CNMV-Spain A. General comments The IOSCO Technical Committee's Consultation Paper is a review of the 2001 "Issues Paper on Exchange Demutualization". Since then, the trend towards demutualisation and listing of exchange management companies has accelerated, with the result that, by 2005 year-end, 16 exchanges or holding companies operating in SC2 jurisdictions had obtained public listings. The IOSCO considers that this change in structure, i.e. from a ownership by members to profit-making companies, may raise a number of problems or risks, basically for the exchanges' regulatory role and for supervision by the respective authorities. The Advisory Committee1 of the CNMV is concerned at the possible changes in the sector insofar as they may lead to an increase in fees, as a result of shareholder pressure with regard to the market's bottom line, which is not matched by an improvement in this public service. Nevertheless, it welcomes the consultation document, but considers that the fact that it raises just two specific questions is insufficient for such a broad issue. Since Europe has a number of trading platforms which are not regulated markets, and this document appears to refer solely to the latter, the Advisory Committee considers that the principles governing the markets or which may be established for the markets should apply to all operators. B. Specific comments With regard to the two specific questions which are raised: (i) Do the existing regulatory requirements for exchange licensing / registration and operation continue to be adequate and easily adaptable to the emerging issues or are new tools necessary? (ii) How should the new business activities of exchanges be considered and included in the regulatory framework? 1 The Advisory Committee of the CNMV plays an important role within the Spanish securities supervisory system. It was created by the Securities Markets Law and its brief to advise the CNMV Board on any issues that are referred to it. The Advisory Committee comprises representatives of the Spanish securities industry, such as operators of regulated markets, issuers, credit institutions, consumer associations, investment firms, regional governments, clearing and settlement systems, insurance companies and collective investment associations. Moreover, the Board is legally obliged to seek the Committee's advice on the following issues, among others: a) Legislation issued by the CNMV. b) Sanctions for serious breaches of law. c) Authorisation, revocation and mergers/acquisitions of investment firms. d) Authorisation and revocation of branches of investment firms from third countries. In addition to its role in providing advice to the N