Latin American Capital Markets

DESIGNING A DERIVATIVES COMPLEMENTTO CASH MARKETS 377Contractual RelationshipThe contractual relationship that an SRO has with the individuals and entities it regulatescan cross national boundaries, reaching where statutory powers may not.IOSCO (2002b) states that SROs should observe ethical standards that go beyondgovernment regulations.Transparency and AccountabilityProperly designed and representative SROs can reinforce good governance standards.Policymakers should ensure that SRO compliance programs are transparentand accountable and that SROs follow professional standards of behavior on mattersincluding confidentiality and procedural fairness. The inclusion of both public representativesand industry professionals on an SRO's governing body could provide thefoundation for an open organization. In some jurisdictions, SROs prepare regulatoryplans that are submitted to their statutory regulator and made available to the public.Theseregulatory plans describe the SRO's regulatory objectives, what the SRO intendsto do in the next yean how it will do it, and what it will cost.Coordination and Information SharingAs the markets become more globalized, coordination of market oversight becomesmore important. Coordination occurs among SROs and between SROs and regulators.SROs provide an excellent forum for bringing together various interests on regulatoryissues. Coordination and information sharing must be a priority among policymakersand markets in order to address cross-market issues and potential marketabuse or systemic risk concerns that may affect more than one market.Increasing Acceptance of a Culture of RegulationIn the optimal model, self-regulators are subject to oversight, so that the exerciseof self-regulatory responsibilities within the regulatory framework fosters a culture ofcompliance. The regulator can use the self-regulator to develop, implement, and enforcerules that govern its activities; to conserve government resources; and to ensureworkable rules to provide greater flexibility in resolving complex problems.Copyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub