On 25 November 2024, the International Organization of Securities Commissions (IOSCO) published its Final Report on Post Trade Risk Reduction Services: Sound Practices for Consideration, reflecting the results of IOSCO’s public consultation on the topic, which was launched on 26 January 2024.
IOSCO notes that it continues to follow the evolution of Post Trade Risk Reduction Services (PTRRS) which can provide certain clear benefits (such as risk reduction and improved efficiency) but may also present challenges for over-the-counter market participants (including risks relating to control and governance around algorithms, fair treatment of participants, data protection, legal certainty, and operational resilience).
The Report highlights potential policy considerations and risks associated with using and offering PTRRS and sets out seven sound practices in the following areas as guidance to IOSCO members and regulated users of PTRRS and designed to improve and complement existing market practices.
- Transparency, governance, comprehensibility and fairness of the algorithm.
- Operational risk.
- Data integrity and security and regulatory data.
- Legal certainty.
- Considerations of potential counterparty risk by IOSCO members and PTRRS users.
- Market concentration and competition.
- Standardisation and predictability of runs and file formats.