The International Organization of Securities Commissions’ Technical Committee has published a final report setting out principles designed to guide exchanges, and their regulators, when considering outsourcing arrangements.

The principles set out the factors that market operators should consider when deciding whether, and to whom, to outsource certain functions; and they are designed to assist market authorities in their oversight of these arrangements.

The principles discussed include: due diligence in selecting a service provider, contracting with it, and monitoring its performance; business continuity; security and confidentiality; termination procedures; and, ensuring access to books and records.

These principles were developed following an earlier IOSCO report, which identified outsourcing as one possible concern arising from the evolution in exchange business models (demutualization and the shift to for-profit structures). IOSCO notes that outsourcing can bring benefits, such as lower costs and access to cutting edge technology, but it says it “also raises a number of issues that may impact on the effectiveness and integrity of markets related to their ability to manage risks and monitor compliance with regulatory requirements.”

IE