February 18, 2019
On February 7, 2019, the International Organization of Securities Commissions (IOSCO),* a global organization consisting of securities regulatory authorities and securities exchanges in countries and regions around the world, formulated and released a Final Report on Commodity Storage and Delivery Infrastructures: Good or Sound Practices in light of comments from the public submitted concerning the Consultation Report thereof released in July 2018.
*Note: The IOSCO member organizations include the Ministry of Economy, Trade and Industry (METI), the Financial Services Agency (FSA), and the Ministry of Agriculture, Forestry and Fisheries (MAFF), as well as the Commodity Futures Trading Commission (CFTC) of the United States, and the Financial Conduct Authority of the United Kingdom, among others.
The Impact of Storage and Delivery Infrastructure on Commodity Derivatives Market Pricing, a report released by the IOSCO in May 2016, pointed out that some businesses continue storage in warehouses and delivery situations that have a potential to affect the price formation of commodity derivatives markets. In response, in July 2018, the IOSCO released a Consultation Report on Commodity Storage and Delivery Infrastructures: Good or Sound Practices that recommends introducing good and sound practices (conduct rules) into the operation of storage infrastructures with the aim of improving transparency and soundness, and it decided to broadly call for comments on the report.
In light of comments from the public submitted concerning the Consultation Report, the IOSCO finalized and released the Final Report.
2. Outline of the Final Report
The Final Report provides recommendations for introducing conduct rules for addressing case examples in five fields, which were highlighted in the Report on the Impact of Storage and Delivery Infrastructure on Commodity Derivatives Market Pricing, i.e., oversight; transparency; fees and incentives; conflicts of interest; and operations; targeting storage infrastructures, derivatives markets and authorities over derivatives. The good or sound practices in the final report aim not to prohibit markets from conducting certain behaviors, but to create a framework that incentivizes the markets towards best practices and self-correction.
- Final Report of the Commodity Storage and Delivery Infrastructures: Good or Sound Practices (released by the IOSCO)
Division in Charge
Office of Director for Commodity Market, Commerce and Service Industry Policy Group