Good Practices for OTC Commodity Derivatives Markets Consultation

Good Practices concerning over-the- counter Commodity Derivatives Markets

The Board of the International Organization of Securities Commissions

01/26 March 202

This paper is for public consultation purposes only. It has not been approved for any other purpose by the IOSCO Board or any of its members.

CR/ CONSULTATION REPORT

The International Organization of Securities Commissions website

© International Organization of Securities Commissions 2026. All rights reserved. Brief excerpts may be reproduced or translated provided the source is stated. ii Copies of publications are available from iosco.org

Foreword

How to Submit Comments

The Board of the International Organization of Comments may be submitted using this form Securities Commissions (IOSCO) is seeking on or before 19 June 2026. comments on this consultation report on Good Practices concerning over-the- If you require technical assistance on counter (OTC) markets which follows the completing the survey, please contact: IOSCO Report on the Targeted itsupport@iosco.org. Implementation Review (the Review) of the Principles for the Regulation and Supervision If you have questions about the report or the of Commodity Derivatives Markets. consultation, please contact CDWG.CR@iosco.org. IOSCO conducted the Review of five Selected Principles, as defined herein, that Important: All comments will be made aim to address excessive commodity market available publicly, unless anonymity is volatility, OTC commodity derivatives specifically requested. Comments will be transparency and orderly functioning of the converted to PDF format and posted on the commodity derivatives markets. The IOSCO IOSCO website. Personal identifying Report published in November 2024 outlines information will not be edited from the findings from the Review. IOSCO believes submissions. that appropriate implementation of the Selected Principles would help mitigate the Questions for Consultation impact of external factors that can disrupt commodity markets. Findings from the IOSCO invites comments generally on the Review showed that both regulators and proposed guidance in this report, as well as exchanges identified significant challenges in seeks views on the specific consultation implementing certain elements of the questions listed below. Selected Principles related to OTC commodity derivatives markets. To support Question 1: Do you agree with the key this, IOSCO set out recommendations for its aspects and scope of the proposed good members to improve implementation and practices outlined in this Consultation expressed its intention to conduct further Report? Please share any specific comment work in the OTC markets area. on any of the proposed good practices. This consultation report reflects the further Question 2: Are there any further key good work conducted by seeking to support the practices that could be considered? effective implementation of Principles 12, 15 Question 3: Under what conditions - such as and 16, which relate to the collection and relevant triggers, scope and frequency - aggregation of information about OTC should Market Authorities require OTC commodity derivatives positions and position data to be reported to them? What preventing and addressing disorderly markets. criteria should be used to determine the need for regular or ad-hoc reporting of OTC

position data for effective monitoring and Question 10: How do you contemplate that oversight of relevant exchange traded this consultation report may also be relevant contracts? to OTC execution venues, such as swap execution facilities, multilateral trading Question 4: Do you have suggestions for facilities and organised trading facilities?Market Authorities'improved use of existing data pipelines for purposes of ensuring market integrity? Question 5: What metrics or indicators do you consider appropriate for assessing the degree of interconnectedness between a related OTC market and an exchange-traded market? • At what level would such a measure be considered significant enough to indicate that activity in the OTC market can affect the orderly trading of the relevant exchange-traded market? • Would it be helpful for us to provide further guidance on what constitutes a significant impact in this context? Question 6: What types of information could help Market Authorities identify the beneficial owners of positions? Question 7: Do you foresee any challenges for Market Authorities in identifying, and obtaining data on, the underlying beneficial owners, and, if so, how could these be mitigated? Question 8: In what circumstances may it be necessary for regulators to intervene in OTC markets, and what potential impact, both positive and negative, might this cause? Question 9: What kind of cross-border cooperation do you think is necessary or beneficial to coordinate data collection, both generally and of OTC positions of underlying beneficiary owners?

Table of Contents

Executive Summary 1 List of Abbreviations 3

1. Introduction 4
2. Background and Context 9
3. Stakeholder views 12
4. Key areas for consideration and analysis 16
5. Proposed good practices 31 Executive Summary

Commodity market participants often hold positions across exchange-traded, OTC and physical markets. This interconnectedness can affect price formation, increase market volatility, and heighten the risk of market abuse, particularly when Market Authorities lack visibility over large concentrated positions. Effective oversight therefore depends on timely access to comprehensive data across related markets. The Principles for the Regulation and Supervision of Commodity Derivatives Markets (the Principles) aim to ensure that commodity derivatives markets serve their core functions of facilitating price discovery and hedging, while remaining free from manipulation and abusive practices. Implementing these Principles remains challenging given the diversity of underlying spot markets, market participants, and trading purposes, thus requiring a framework tailored to each jurisdiction's specificities. In October 2023, IOSCO undertook the Review of five Selected Principles addressing excessive volatility, transparency - particularly regarding OTC positions - and orderly functioning of commodity derivatives markets. The Review found broad compliance among regulators and exchanges but identi fied persistent challenges in obtaining and aggregating OTC data, monitoring large positions, and intervening effectively during periods of market disruption. Past market events, including episodes of heightened volatility and trading suspensions, have demonstrated how risks arising from opaque or fragmented OTC positions can propagate across the financial system and undermine market integrity. Building on the Review's findings, IOSCO initiated the development of good practices to strengthen Market Authorities' monitoring and intervention mechanisms, with a primary focus on improving access to OTC position data. The proposed good practices - developed through engagement with market participants, trade associations, and exchanges - propose a flexible, risk- sensitive, and proportionate approach that recognises the heterogeneity of commodity markets, the varying relevance of OTC data across products, and the unique regulatory frameworks in each jurisdiction. The proposed good practices aim to:

• Strengthen the implementation of Principles 12, 15, and 16 in relation to
  the collection and aggregation of OTC derivatives data, including beneficial ownership, to support effective surveillance, alongside enhanced information-sharing and cooperation between exchanges and regulators, and among regulators, particularly in times of stress.

• Set expectations about the timely regulatory intervention to prevent or
  address disorderly market conditions, particularly where risks in OTC markets may spill over into exchange-traded markets, supported by transparent intervention policies and improved information flows.

• Promote proportionate, risk-based, and market specific approaches to
  OTC data collection and intervention powers. IOSCO invites feedback on these proposals with the objective of enhancing consistency, clarity, and resilience in the oversight of OTC commodity derivatives markets across jurisdictions. Input received will inform the final report, which will provide guidance to support effective implementation of the Principles and strengthen the integrity and stability of global commodity markets.

List of Abbreviations

EEOTC Economically equivalent over the counter EU European Union FCA Financial Conduct Authority IOSCO International Organization of Securities Commissions OTC Over the counter UK United Kingdom US United States

1. Introduction In 2022, commodity markets saw high volatility due to various external factors such as the Russia-Ukraine war, COVID recovery disruptions, inflation, interest rate hikes and extreme weather events. More recent price spikes in energy, metals, and agricultural derivatives underscore the importance of properly applying the Principles. In response to these market trends and changes within commodities and commodity derivatives markets, since the publication of the original Principles in 2011, IOSCO updated the Principles in January 2023 . 1 While commodity markets are largely driven by supply, demand, and other external factors beyond the control of financial regulators, compliance with the Principles - such as those that relate to large position management, transparency, trading interventions, OTC positions disclosure, addressing unexpected market disruptions - can help mitigate the impact of external factors to commodity derivatives markets. In consideration of the amended Principles published in January 2023, the Board agreed to a targeted implementation review (referred to as the Review 2 hereafter) of five Principles in March 2023. The targeted implementation review focused on five Principles (referred to as the Selected Principles hereafter), namely: Principle 9: OTC Transparency, Principle 12: Authority to Obtain Information, Principle 14: Large Positions, Principle 15: Intervention Powers in the Market and Principle 16: Unexpected Disruptions in the Market. Results of the Review showed that there is broad compliance with the Selected Principles. However, both regulators and exchanges identified significant challenges in implementing certain elements of the Selected Principles with respect to OTC markets. In November 2024, the IOSCO Board approved a mandate for IOSCO to carry out further work in relation to the implementation of the Selected Principles in the context of OTC markets. Principles for the Regulation and Supervision of Commodity Derivatives Markets Final 1 Report, January 2023 Available at: https://www.iosco.org/library/pubdocs/pdf/IOSCOPD726.pdf Targeted Implementation Review on Principles for the Regulation and Supervision of 2 Commodity Derivatives Markets, November 2024 Available at: https://www.iosco.org/news/pdf/IOSCONEWS753.pdf

The aim of this work is to strengthen the implementation of certain elements of the Selected Principles, as far as possible, in order to address challenges identified during the Review and to help mitigate the impact of external factors that may disrupt commodity derivatives markets.

Scope and approach

Consistent with the IOSCO Board mandate, IOSCO initiated work in November 2024 to develop good practices that support strengthening Market Authorities' monitoring and intervention mechanisms in order to help mitigate 3 risks where OTC activity may affect broader market stability. This work focuses on the following areas of the Selected Principles:

1. Collect and aggregate information about OTC positions
   Principle 12 recommends that relevant Market Authorities should have the power to obtain information on a market participant's transactions and positions, including in related OTC markets. While Principle 12 outlines the importance of collecting information on OTC positions, it may be helpful to clarify the circumstances and frequency with which such data should be obtainable, to support more effective collection and aggregation.

2. Prevent or address disorderly markets
   Principles 15 and 16 relate to powers to intervene in commodity derivatives markets to prevent or address disorderly market conditions. While Principles 15 and 16 provide a framework for intervention in commodity derivatives markets, it may be helpful to further explore how these powers apply in the context of OTC markets. IOSCO undertook this work with the following objectives in mind:

• To set out good practices for reporting of OTC derivatives data to relevant Market Authorities to foster a better understanding of OTC "Market Authorities" is defined in the Principles as "the relevant governmental 3 regulator, an SRO or operator of the regulated market." The identification of the relevant Market Authority or Market Authorities depends on the regulatory and legal structure and may differ across jurisdictions.

and exchange-traded positions held by firms and support position management to maintain orderly markets. While Market Authorities include exchanges, in practice, the risks posed by OTC markets may also affect other types of trading venues - such as multilateral trading facilities or organised trading facilities - where commodity derivatives are traded. As such, this consultation report may also be relevant to those venues. • To establis h good practices regarding intervention powers in OTC markets to prevent or address disorderly markets and to ensure market integrity and stability. This consultation report seeks to support the appropriate implementation of Principles 12, 15 and 16 (each Principle outlined in the boxes below) on the collection and aggregation of information about OTC positions and preventing and addressing disorderly markets where risks arise from related OTC markets.

on a routine and non- positions in related over-the-co Authorities should have the power to:

trail); ii) Relevant Market Authorities should have the authority to obtain information of the market in question; routine basis for regulated commodity derivatives iii) obtain information, if needed, on the size and beneficial markets as well as the power to obtain information on a market participant's unter (OTC) commodity derivatives and the aggregate positions held under common ownership and control; underlying physical commodity markets. In particular, relevant Market iv) positions in related OTC and physical commodity markets; and

1. obtain information that allows the reconstruction of all transactions on a regulated commodity derivatives market (audit obtain information that permits them to identify large positions informatio(i.e., "large exposures" or "concentrations") and the composition ownership of positions held by a market participant in order to obtain information about a market participant's transactions and 6 take appropriate action where a commodity derivatives market participant does not make requested market information available to the relevant Market Authority. Relevant Market Authorities should review the scope of their authority to obtain such Principle 12: Authority to Obtain Information n, and if necessary, to request such power from the relevant legislature or other appropriate governmental bodies.

markets and to ensure the efficiency of the markets. These powers should include the following:

1. Position Management Powers, including the power to set position limits - position management powers, including the power to set ex-ante position limits, particularly in the delivery month. Relevant Market Authorities should have, and use, effective powers to These should necessarily include position management powers that: intervene in commodity derivatives markets to prevent or address disorderly i)

market functioning, taRelevant Market Authorities should have and use formal to increase a position or to decrease a position; and ii) Authorize a relevant Market Authority to place ex-ante Establish a trader's automatic consent to follow an order of take in a commodity derivatives contract (i.e., position limits). the relevant Market Authority when that trader's position reaches a defined threshold size or any size, which the 2) Other Discretionary Powers - relevant Market Authority considers prejudicial to orderly king into account all relevant circumstances. They should also require such a trader to such disruption or to assist market surveillance efforts: comply with the relevant Market Authority's order, either not i) the imposition of price movement limits;

clearing members on behalf of their clients; restrictions on the size of a position a market participant can iii) ordering the liquidation or transfer of open positions;

halts and circuit breakers); v) altering the delivery terms or conditions; Relevant Market Authorities should vi) cancelling trades; also have the powers to employ any of the following measures, as vii) appropriate to address market disruption or the perceived threat of and viii) calling for additional margin, either from customers or from physical market positions. suspending or curtailing trading on the market (e.g., trading

7 requiring owners of positions to specify delivery intentions; requiring traders to disclose related OTC derivatives or large Principle 15: Intervention Powers in the Market

unexpected disruption and ensure market participants have a process and adequate plans to address unexpected disruptions.

Outline of the consultation report

In preparing this report, IOSCO conducted roundtables with market participants, trade associations, and exchanges. This consultation report presents the findings from that engagement, followed by proposed good practices developed based on that process, and requests public feedback.

Next steps

IOSCO invites comments on the proposed good practices and questions in this consultation report. Following the consultation, IOSCO will consider the feedback provided and prepare a Final Report. The Final Report will set out good practices as guidance for IOSCO members to consider implementing in their jurisdictions, in order to support the effective application of the Selected Principles and help mitigate the impact of external factors that can disrupt commodity markets.

8 Relevant Market Authorities should have a process to respond to unexpected disruptions in commodity derivatives markets and the power to intervene, as necessary, to restore orderly markets in the event of an Principle 16: Unexpected Disruptions in the Market

1. Background and

Context

Background

In October 2023, the IOSCO Board approved a project to conduct the Review of the Selected Principles that aim to address excessive commodity market volatility, transparency (with a particular focus on the disclosure of positions in related OTC derivatives) and orderly functioning of the commodity derivatives markets. IOSCO views that an appropriate implementation of the Selected Principles would help mitigate the impact of external factors which may disrupt commodity markets. IOSCO distributed two surveys: one for governmental regulators and Self- Regulatory Organizations (SROs) (Regulator Survey), and another for operators of regulated markets or exchanges (Exchange Survey). The Regulator Survey and Exchange Survey included targeted questions on the implementation of specific elements of the Selected Principles within the commodity derivatives markets (e.g. position limit monitoring of large positions and assessment of the effectiveness and general suitability of the measures used to maintain orderly markets and prevent abuses). IOSCO published a report outlining the findings from the Review in November

2024.

Key insights from the Review

Results of the surveys show that the majority of respondents were broadly compliant with the Selected Principles. However, both regulators and exchanges identified notable challenges in implementing certain elements of the Selected Principles with respect to OTC markets. The report noted that: Principle 9: OTC Transparency

• Most regulators have access to the reporting of OTC commodity derivatives to trade repositories. However, the information reported to

trade repositories is not available for exchanges to monitor their markets. Principle 12: Authority to Obtain Information

• While some exchanges reported effective systems for identifying risks
  in exchange-traded derivatives, several others do not have the authority to obtain OTC position data. Where the exchanges have access to some data, through member submission (using their rulebook, regulatory framework, or both), it comes with limitations, which inhibits their ability to identify and act on risks that may spill over from related markets to their own. • For the exchanges that do have access, the OTC position data is different from the separate data set reported to the trade repositories and typically obtained on an ad hoc basis or post-event when concerns arise or specific triggers are breached. This is further complicated by other challenges, such as data anonymity, cross-border issues, and variations in the types of financial instruments that are captured by relevant regulatory frameworks (particularly for physically-settled commodity forwards). Principle 14: Large Positions

• Most exchanges are able to identify large positions and have processes
  for identifying positions under common ownership. Several exchanges have the ability to aggregate customer positions on other exchanges within the same group of entities. However, the majority have expressed that identification and aggregation of positions across different exchanges extends only to exchange-traded positions, not OTC positions. • Most responding regulators have access to large position reports, at least on an ad hoc basis, and some regulators receive large position reports directly. Principle 15: Intervention Powers in the Market and Principle 16: Unexpected Disruptions in the Market

• A majority of regulators indicated that they possess varying degrees of
  authority to intervene in market operations in exceptional circumstances, though it is not clear whether these powers include OTC markets.

• Most exchanges considered that they have effective arrangements to
  intervene in commodity derivatives markets to prevent or address disorderly markets and ensure their markets' efficiency. Some exchanges raised issues in relation to intervening in OTC markets.

1. Stakeholder views

Introduction

As a result of the review, the IOSCO Board mandated that further work on improving implementation of certain elements of the Selected Principles be undertaken. Therefore, to strengthen certain elements of the implementation of Selected Principles as they apply in the context of OTC markets, IOSCO sought stakeholder views with the aim to develop good practices which focus on collecting and aggregating information about OTC positions (Principle 12) and preventing or addressing disorderly markets (Principles 15 and 16) as described above. IOSCO engaged with market participants, trade associations, and exchanges through two roundtables on 29 April 2025 and engaged in bilateral discussions. In each roundtable, speakers were invited to give a brief introduction and share their insights on questions related to Principles 12, 15, and 16, which were circulated in advance.

Key takeaways from the Roundtables

The first roundtable session with exchanges featured speakers from five exchanges and one trade association across the United States (US), Canada, Europe (EU), United Kingdom (UK), and Asia. The second roundtable session included speakers from three trade associations, one law firm, and one energy company, across the US, Canada, UK and EU. This section summarises the insights from each roundtable discussion. a. Exchanges' perspective Overall, the exchanges provided broad support for increased visibility into OTC markets but had varying views on the scope and mechanisms for obtaining the OTC data. The exchanges highlighted that the need for OTC data varies depending on the type of commodity, the size and relevance of the OTC market, and associated risks to market integrity.

There was general opposition by the exchanges to any requirement that they be mandated to establish regular reporting of OTC data from their members. In some cases, exchanges noted that they already have the necessary provisions for monitoring risks from relevant OTC markets and the tools in place to mitigate such risks through regular surveillance, position limit management, accountability, and reporting levels. With recent significant updates to the OTC derivatives data reporting requirements across many jurisdictions, there is a concern that any additional reporting requirements to exchanges would necessitate further technological improvements and connections, which could be costly to market participants. Instead, the exchanges favour a needs-based approach, where OTC data can be requested from their members in response to specific triggers or emerging risks. One exchange, however, was strongly in favour of mandatory, routine OTC reporting for certain commodity derivatives markets where related OTC markets may pose a significant risk to those markets. The exchange highlighted the need for improvements in the level of detail provided in the OTC data. This would help with the early identification of risks, as current data can be incomplete. Some exchanges noted that their existing powers to obtain data are sufficient, but they do not extend to clients beyond direct participants, highlighting enforcement limitations in the collection of OTC-related data. Exchanges were generally in support of maintaining discretion to request data in specific instances. Exchanges stressed that interventions in OTC markets should remain the responsibility of regulators. Several exchanges, however, provided the caveat that without clear regulatory mandates, relying solely on exchange rules may leave oversight gaps. Certain exchanges highlighted challenges related to data confidentiality and anonymization, competitive sensitivity, and the legal complexities of cross- jurisdictional data access. As a result, exchanges may be unable to identify the position holder for certain positions. This makes it difficult to aggregate client positions across different members, which can obscure OTC-related risks and potentially give regulators a false sense of transparency. In summary, the exchanges identified the following needs: • A flexible regulatory approach tailored to the specific market dynamics and associated risks. This is critical to the heterogenous nature of the commodity markets which can impact the relevance and type of OTC data needed.

• Better jurisdictional harmonization, especially regarding definitions of relevant or related OTC contracts and data standards, to facilitate cross- border data sharing and reduce fragmentation. • Optimization of current regulatory reporting regimes, with a focus on enhanced collaboration between regulators and industry participants rather than introducing additional or duplicative reporting requirements. Emphasis should be placed on improving the usability and standardization of existing data sets. b. Market participants' perspective For market participants, there was a broad consensus against mandatory or systematic reporting of OTC positions to exchanges, and other types of trading venues. Instead, market participants highlighted their preference for a trigger- based or ad hoc model, where OTC data is requested only when directly relevant to exchange-traded positions or when specific risks arise (when there might be a tangible risk to market integrity). Some of the concerns raised by market participants include substantial costs associated with additional reporting obligations given that market participants already have significant OTC trade reporting obligations under global trade reporting rules. Any increase in obligations could deter participation in OTC or exchange-traded markets, reduce hedging options, and ultimately lower market liquidity. Like exchanges, they note that any intervention should be carried out by regulatory authorities. Market participants noted that exchanges have an inherent conflict of interest due to their commercial nature and therefore should have limited enforcement and intervention powers with respect to OTC markets. For example, if an exchange requested that a participant reduce its overall position, this request would likely be focussed on reductions in the OTC position. This raises a concern that exchanges could use such practices to reinforce their market dominance and potentially stifle competition. Some market participants also raised concerns about whether exchanges would be able to effectively make use of large volumes of data that they might receive under a mandatory and systematic reporting obligation. Market participants also highlighted strong concerns over confidentiality, data privacy, and potential competition law issues, especially where exchanges - which are generally commercial, for-profit entities - have access to commercially sensitive data that could be misused for purposes unrelated to maintenance of market integrity. The reporting of OTC data may also conflict with jurisdictional confidentiality laws or require client consent, which is often not feasible. Some participants stressed that bilateral OTC contracts are governed by bespoke agreements that may not permit sharing data with third parties like exchanges. Some participants also highlighted that, in certain

jurisdictions, even explicit permission from a counterparty may not be sufficient to overcome the above-mentioned privacy obligations. Overall, market participants expressed preference for exchanges and regulators to use a targeted, risk-based framework where data requests are focussed on critical contracts or based on specific market integrity risks, rather than routine collection of data. c. Other noteworthy comments There were also other comments from roundtable participants urging IOSCO to use this work as an opportunity to: • review how the current data is being used, to leverage or improve the existing data reporting systems, and increase collaboration to access available information collectively rather than layering on new requirements; • create a level playing field across jurisdictions while creating no unintended consequences to market infrastructures; • establish greater clarity and consistency regarding the definition of commodity derivatives across relevant jurisdictions; and, • create clear warning mechanisms that would warrant intervention in OTC markets and ensure only relevant information is shared. Lastly, IOSCO was encouraged to examine the practical challenges of position reporting by market participants (including beneficial owners), particularly in cases where certain OTC positions relate to multiple exchange traded contracts traded on different exchanges.

1. Key areas for

consideration and analysis

Areas for consideration

Based on stakeholder feedback, the following outlines key areas for consideration by market authorities and market participants, including IOSCO perspectives, and potential mitigants.

1. Lack of visibility of beneficial ownership, hindering aggregation of
   positions under common ownership and control Jurisdictional and contractual limitations can prevent relevant Market Authorities from aggregating positions held by a single client - a single position holder - across multiple exchange members. In the absence of a regulatory requirement, some participants report that they are required to anonymise client data due to data privacy or secrecy laws, or as a result of contractual obligations. This anonymization creates significant challenges in identifying potentially risky OTC positions, as it prevents relevant Market Authorities from recognising positions held under common ownership or control. Without visibility of the beneficial owner, positions cannot be aggregated across members, potentially obscuring concentration risks that could affect market integrity or give rise to systemic issues. In some cases, even where no legal barriers exist, anonymization may still occur due to the absence of a regulatory mandate to collect or share client-level OTC position data. These limitations restrict the data that can be collected, shared, or used - undermining surveillance capabilities and reducing the ability of Market Authorities to detect and respond to emerging risks.

2. Regulatory scope gaps in the definition of commodity derivatives
   Certain OTC contracts (e.g., certain physically settled OTC contracts) may fall outside the scope of securities regulators. These gaps could hinder complete market risk assessments without appropriate sharing of information across various types of regulators.

3. Conflicts of interest
   Balancing regulatory responsibilities - such as monitoring markets using participants' OTC position data - with commercial interests raises questions about how exchanges use this data.

4. Timeliness of data collection and risk response
   Delays in receiving or sharing data may allow risks to crystallise before action can be taken. Timely access to data is crucial to prevent threats to market integrity.

5. Cross market data use and aggregation
   It is unclear how data across markets, both exchanges and OTC, can be effectively shared and aggregated to detect cross-market risks. Comparing or identifying overlaps between OTC contracts and exchange-traded contracts is particularly challenging, which makes it difficult to form a complete view of market risk. Unlike exchange-traded derivatives, where central counterparties provide a consolidated view of positions, data for OTC markets is more fragmented. Trade repositories play an important role in collecting OTC data and providing it to regulators; however, the data is not always promptly available. This can hinder timely assessment of market conditions and often requires regulators to take additional steps to aggregate it with exchange-traded data to obtain a comprehensive view for surveillance purposes. In cases where exchanges are responsible for monitoring positions and maintaining orderly markets for exchange-traded commodity derivatives, they may not have timely access to OTC data, which limits their ability to gain a comprehensive view of the overall market. While relevant Market Authorities can track changes in data submissions to validate consistency over time, this may still be insufficient to ensure that all relevant risks are being captured or to identify gaps in how positions are being reported.

Analysis

Scope IOSCO recognises that several factors, such as the underlying physical market activity, prices reported by Price Reporting Agencies, and related derivatives traded on other exchanges, can influence the orderly pricing and settlement of commodity derivatives contracts. However, consistent with the IOSCO Board's mandate, the primary focus of this review is on supporting access to relevant OTC position data. This stems from the important role that OTC data can play in comprehensively understanding market-wide exposures and identifying potential integrity risks. The London Metal Exchange (LME) nickel market suspension showed how quickly risks in commodity markets can rapidly spread to the broader financial system. Large positions, whether for speculative purposes or to hedge commercial risks, can threaten market integrity, particularly when regulators or exchanges lack full visibility over those positions. The event highlighted that when a participant's positions, including in relevant OTC markets, are distributed across multiple counterparties, it may not be possible to identify positions under common ownership and control and fully assess associated risks. There is broad support for a risk-sensitive approach to collecting OTC position data. IOSCO recognises that commodity markets are heterogeneous and that the relevance and type of OTC derivatives data will vary by commodity product. IOSCO's Principles highlight that certain commodity derivatives contracts are more susceptible to the risk of market abuse or disorderly trading, and these conditions can have the greatest negative impact on commodity markets and their users. For such contracts, a regulatory framework featuring enhanced OTC position reporting and oversight may be justified to identify and manage risks to market integrity. One way to address industry views that further OTC data and reporting requirements would lead to increased costs and operational burden, is for any enhancements in reporting to be, where relevant, focussed on these "critical or significant" derivatives contracts. Critical or significant contracts are those where the risk from abusive practices or disorderly trading carries the greatest potential negative impact and threat to market integrity. Robust position management controls are essential for identifying and mitigating these risks effectively. Focusing on key contracts in this way is consistent with approaches adopted in several international jurisdictions, such as the US, EU, and the UK, where the commodity derivatives regulatory frameworks incorporate such high-impact contracts, known as "core referenced future contracts", "critical or significant contracts", and "critical contracts" respectively.

The IOSCO Principles identify several factors that jurisdictions may use to assess a commodity derivatives contract's vulnerability to abusive practices or manipulation, helping to identify which contracts may be considered critical or significant. These factors include:

• Settlement method and price reference reliability: Contracts that require physical delivery are more exposed when the deliverable supply is small relative to the size of positions, especially as the contract nears expiry. Cash-settled contracts are also at risk if the reference price is based on an illiquid physical market - for example, where a small number of participants and low trading volume make the price easy to manipulate. Thus, the size and liquidity of the underlying physical market must also be considered. • Market size and liquidity: When the derivatives market is similar in scale - or larger - than the physical commodity market, the potential for manipulation increases. • Nature of the underlying commodity and its importance to end-users: Derivatives on essential commodities (such as agricultural products) can disproportionately impact end-users if prices are distorted, due to the commodity's significance in economic and social contexts. • Market depth and concentration: High concentration in either physical or derivatives markets - especially when one or two participants dominate - heightens the risk of manipulation. Crucially, positions in exchange-traded contracts that are closely related to one another should be taken into account in the context of a jurisdiction's commodity derivatives regulatory framework. Market participants might leverage related contracts to influence the pricing and settlement of relevant critical or significant contracts. Therefore, to prevent regulatory arbitrage and maintain meaningful protections, it's important to include relevant associated/related derivatives under the position reporting framework, as appropriate. This includes the collection and aggregation of both exchange- traded and related OTC positions under common ownership and control, where such OTC positions directly relate to the position holder's activity on the exchange. IOSCO acknowledges the practical challenges of reporting in cases where OTC positions relate to multiple exchange-traded contracts across different exchanges. However, the focus of this work is not on broader OTC data collection. Rather it is to identify ways in which Market Authorities can obtain better information regarding positions specifically connected to exchange trading activity of a position holder. Inclusion of such contracts in the aggregation of positions under common ownership or control supports the

identification of large or dominant positions that may pose risks to market integrity.

Factors to consider in identifying OTC data needs The basis on which enhanced OTC position data is required should be proportionate to the level of associated risk to market integrity and reflect the specific characteristics of the commodity derivatives market. IOSCO endorses a risk sensitive framework for OTC position reporting that allows relevant Market Authorities to determine when such data is needed, based on the nature of the market and the potential risks involved. IOSCO aims to clarify how regulatory frameworks should enable differentiation across different commodity derivatives markets, allowing oversight and data requirements to be tailored according to each market's specific characteristics. This approach ensures proportionality to the risk that OTC activity may pose to the particular commodity derivatives market. Exchanges confirmed in the roundtables that they currently have the ability to request OTC position data when needed, based on regulatory authority or their own rulebooks. However, enforcement gaps remain as their powers do not necessarily extend to clients beyond direct participants. This limits their capacity to gather full OTC position data. Other challenges include potential refusal of market participants to provide the requested data, and exchanges not fully utilizing their ability to either request information or enforce those requests in practice. To address this, IOSCO considers that the regulatory framework in each jurisdiction should enable relevant Market Authorities to ascertain relevant OTC position data in order to identify positions under common ownership and control when considered by the relevant Market Authority to be necessary to ensure market integrity. This is particularly important for key contracts. This should be done in a manner that reflects the characteristics of the market - whether on a routine basis or in response to specific events or market intelligence (non-routinely) - in line with Principle 12. Appropriate access is essential for regulators or exchanges to effectively assess risks that may threaten the orderly trading of these contracts. While some stakeholders favour an event-based or ad-hoc approach - where OTC data is requested only when it appears directly relevant to exchange- traded positions or when specific risks are identified - this approach can make risk identification dependent on information that is not yet available, which can undermine effective risk assessment. Without prior visibility into OTC positions,

it may be difficult to assess whether a tangible risk to market integrity even exists. In certain markets, a Market Authority (either the regulator or the exchange) may deem routine OTC reporting necessary to monitor spillover risks from relevant OTC markets to maintain orderly trading conditions for relevant exchange traded contracts, for example, critical or significant contracts. The following factors will help relevant Market Authorities determine the extent of appropriate reporting of OTC derivatives data that would enable effective monitoring and oversight of relevant commodity markets, which may be critical or significant contracts:

• Interdependence between exchange-traded and OTC markets: This factor would be applied by assessing the degree of connection between A high degree the OTC market and the relevant exchange traded market. of interdependence means that activity in one market may influence the other, even if no immediate harm is observed. For example, risks originating in OTC trades - such as those from large or concentrated positions, or stress events - could affect the orderly functioning of the exchange traded market. In practice, this might involve assessing how pricing, liquidity, or participant behaviour in the OTC and exchange-traded markets are linked. Where strong linkages exist, relevant Market Authorities may require more frequent access to OTC position data to understand market dynamics, support effective monitoring and identify emerging risk. • Size and liquidity of the OTC derivatives market: A large or opaque OTC market can mask aggregate exposures and concentration risks that impact overall market integrity. • Potential impact on the orderly functioning of the exchange traded market: This factor focuses on whether specific OTC positions pose a material risk to the stability or integrity of the exchange-traded market. In practice, this could involve evaluating whether OTC activity could lead to price distortions, manipulation, disorderly trading, or market conduct issues. If such risks are identified, ongoing monitoring of OTC positions may be required to help maintain orderly and fair markets. • Effectiveness of existing regulatory framework and controls: If an exchange's position limits, surveillance or risk management systems - including their approach to requesting data - are insufficient to detect and

manage OTC-linked threats, it may be necessary to adjust the types of data requested and/or strengthen how those requests are enforced.

Which related OTC derivatives contracts should be covered by position reporting Certain industry stakeholders have called for IOSCO to promote greater harmonisation in the definitions of relevant or related OTC contracts. They noted that inconsistencies across jurisdictions have led to gaps in position reporting data. Related to this, concerns were raised around how economically equivalent OTC contracts (EEOTCs) are defined. For example, while the UK is moving away from this concept as part of its commodity derivatives regulatory reform, in both the UK and EU, EEOTCs must be nearly identical to exchange- traded contracts to fall within scope of relevant requirements, including position reporting . This narrow definition captures only a limited range of contracts and may allow market participants to structure transactions in ways that avoid regulatory obligations. In connection with this, stakeholders also called for improvements to the definition of what constitutes a financial OTC commodity derivative. They argued that inconsistent definitions can create opportunities for regulatory arbitrage, reduce transparency, and limit Market Authorities' ability to effectively monitor and manage risks. In some jurisdictions, definitions may also take into account the intent or purpose of a transaction (e.g. whether it is for commercial or investment purposes), which can further contribute to inconsistencies in how contracts are classified, captured, or reported. It was suggested that when OTC position reporting applies, it should align with the same underlying commodity as the relevant exchange-traded contract. IOSCO acknowledges that the underlying is an important consideration. However, implementing a single, consistent definition across relevant jurisdictions presents challenges, given differences in regulatory and supervisory frameworks. In the context of this consultation, it is important to provide guidance that supports Market Authorities in determining the types of OTC derivatives contracts that should be subject to position reporting, where applicable. Greater clarity would help ensure that the protections intended by the IOSCO Principles are not undermined and maintains necessary visibility into OTC positions in a proportionate way. This, in turn, enables relevant Market Authorities to effectively identify and manage emerging risks to maintain market integrity for relevant exchange traded contracts. Rather than prescribing a fixed definition of a relevant or related financial OTC commodity derivative that should, where applicable, fall within scope of position reporting

requirement linked to an exchange-traded contract, IOSCO supports a principles-based approach that outlines the key criteria on which the concept of related OTC derivatives contracts should be based:

• Capable of materially influencing the pricing or settlement conditions of the relevant exchange contract(s), which may be critical or significant contracts (or relevant associated/related contracts). • Providing comparable economic exposure to relevant exchange contract(s), which may be critical or significant contracts (or relevant associated/related contracts) - such that excluding them could undermine the objectives/protections that the regulatory regime provides. Contracts that fall outside the scope but meet these criteria could allow participants to sidestep reporting obligations, which could lead to an accumulation of positions that affect market functioning or pose prudential risk to the financial system.

Use of existing data and regulatory collaboration Stakeholders strongly recommended making better use of existing datasets and strengthening collaboration among relevant authorities - for example, between regulators across borders and between those supervising financial markets and those supervising the underlying physical markets - particularly in times of market stress or geopolitical events that negatively impact commodity markets. It was also suggested that a centralised data collection mechanism would help to improve data quality, reduce reporting errors, and support regulators in detecting market abuse and systemic risk. Where concerns arise over positions held by non-domestic entities or cross- border exposures, stakeholders believe regulators should engage directly with other regulators to obtain the necessary data rather than oblige exchanges to do so. IOSCO acknowledges that the Review already includes several recommendations that align directly with these suggestions. IOSCO recommended that:

• Regulators and exchanges consider improvements in their information sharing, with a particular focus on market developments in the OTC area. • Regulators and exchanges consider how to enhance communications (e.g., whether cooperative arrangements could be pursued) between

financial market regulators and other regulatory bodies (such as commodity-specific regulators) to reduce information gaps. • IOSCO members should enhance the mechanisms in place for open communication (both between exchanges and regulators, and among regulators) during times of crises. • IOSCO jurisdictions should continue to leverage and enter into multilateral Memoranda of Understanding regarding the exchange of information across jurisdictions. IOSCO also acknowledges that regulatory and supervisory frameworks differ across jurisdictions. In some cases, where exchanges are primarily responsible for overseeing exchange-traded commodity derivatives markets, it may be important for them to have a comprehensive view of the overall market for certain exchange-traded markets, to understand potential spillover risks to the relevant markets they operate. While regulators may have access to OTC data, confidentiality restrictions may prevent them from sharing the data with exchanges, including in time-sensitive situations. Moreover, exchanges typically maintain closer market-level oversight and enforcement responsibilities. To effectively monitor trading behaviour, detect market abuse, and maintain orderly markets, exchanges may require timely access to both exchange traded and OTC data - responsibilities that regulators with less direct oversight would be less nimble to undertake.

Response to concerns raised by market participants Participants highlighted several concerns with enhanced reporting of OTC data, as follows:

1. High operational and compliance costs, which could discourage participation in OTC or exchange-traded markets, reduce hedging options, and ultimately lower market liquidity in key contracts. IOSCO acknowledges the concern raised, and to help address this have suggested a proportionate, risk-sensitive approach. The approach focuses on relevant exchange traded contracts, for example critical or significant contracts, and recognises that the extent of OTC position reporting may vary, depending on what is required to effectively monitor and oversee the relevant exchange- traded markets. A Market Authority may determine, where appropriate, that

more frequent OTC position reporting is necessary to ensure effective monitoring and maintain orderly markets. IOSCO considers that under certain circumstances greater oversight and surveillance can help support liquidity as it has for the LME. The LME introduced regular reporting of related OTC positions for some of its physical delivery markets in July 2022. We recognise that the introduction of these reporting requirements was a response to the nickel suspension, and the overall benefits of such enhancements will depend on the characteristics of the specific market and the market conditions. However, this serves as a positive example of the potential benefits that greater transparency and oversight can bring.

1. Confidentiality and data sharing constraints in OTC trading agreements and jurisdictional laws may prohibit direct participants from sharing beneficial ownership information with third parties, including relevant Market Authorities. These contractual or legal barriers make disclosure of OTC positions difficult or infeasible, especially where consent mechanisms are lacking or not permitted by regulation. Furthermore, data privacy and potential competition law issues arise from the handling of sensitive OTC data given that exchanges are generally commercial entities. IOSCO acknowledges these limitations, noting that similar restrictions can affect the reporting of exchange-traded transactions required for purposes such as market abuse monitoring or systemic risk assessment under different regimes. IOSCO proposes that relevant Market Authorities should adopt procedures for obtaining information regarding beneficial ownership, where any failure to disclose must be based on legitimate regulatory or legal obligations rather than deliberate non-disclosure. Where beneficial ownership information is withheld, IOSCO recommends that relevant Market Authorities ensure appropriate measures are in place. For example, this could involve closer oversight of the activities that exchange members are responsible for, and/or the establishment of transparent controls with clearly defined consequences. These may include measures such as the use of position limits, clear definitions of rulebook breaches, or access restrictions, aimed at mitigating risks associated with a lack of visibility. Exchange members should also, to the extent possible, clearly communicate to clients the actions that may be taken if required information is unavailable or unjustifiably withheld. On the handling of sensitive OTC data, most exchanges already have the ability to request and obtain OTC position data from participants when necessary. In several jurisdictions - most notably the US and UK - provisions are in place regarding the safeguarding and segregation of any sensitive data that exchanges receive. IOSCO emphasises that stringent information safeguards must accompany the collection of OTC data. Specifically, exchanges should

only use such information for their market oversight and regulatory functions and must not repurpose it for commercial or unrelated activities.

1. Deterred by enhanced reporting, firms may avoid trading on certain
   exchanges or markets, potentially reducing the competitiveness of those exchanges. IOSCO acknowledges this risk but argues that enhancing market visibility through OTC data reporting strengthens overall market integrity - potentially attracting liquidity by boosting market confidence and participation in derivatives markets. The absence of transparency poses greater systemic risks, and consistent implementation across jurisdictions, where relevant, helps create a level playing field. By improving oversight and enabling timely intervention, better data access supports both market resilience and fair competition. This further reinforces the importance of adopting global standards for good practices across jurisdictions.

2. Various other mechanisms are already in place to help avoid the
   accumulation of large positions, such as, mandated position limits, exchange- set limits, circuit breakers and the ability by exchanges to ask for OTC data related to contracts traded on their venues on an ad-hoc basis. IOSCO acknowledges these existing controls and, as noted above, takes them into account when assessing the need for OTC position reporting on a more frequent basis. The effectiveness of these mechanisms, including their ability to identify and manage large positions, is a key factor for relevant Market Authorities in determining the basis and appropriate frequency of OTC data collection. This approach ensures that any new reporting obligations are proportionate and complement existing safeguards.

3. Concerns about the tangible benefits of more frequent OTC position
   reporting, particularly regarding how regulators and exchanges are currently utilising the data that they already receive and whether it meaningfully enhances market oversight. Enhanced OTC position data is important for identifying and managing hidden exposures. Without such reporting, significant risks can accumulate unnoticed, limiting Market Authorities' ability to detect market stress or systemic vulnerabilities. Historical episodes related to certain commodity markets have demonstrated that unmonitored OTC positions can lead to widespread financial instability, even when each individual trade appears harmless. There are risks to overall financial stability associated with failing to identify and manage these unseen risks - risks that far outweigh the cost of implementing appropriate reporting measures.

In the UK, under its commodity derivatives regulatory reform, exchanges will be required to utilise data they have access to - including OTC position data - to conduct and report market risk analysis to the Financial Conduct Authority (FCA). These reports will identify risks and potential spillover effects related to OTC markets, analyse how those risks could impact relevant markets, and outline how those risks are being managed. The FCA considers that this approach will improve the usability of data collected and support its active use in strengthening market oversight and stability. It also enables the FCA to obtain a cross-market view of risks.

Prudential risk to the financial system Oliver Wyman conducted an independent review of the nickel market events in early March 2022 , commissioned by the LME. This review revealed that several 4 of the largest beneficial owners held positions across multiple members - one owner had positions split across up to twelve separate members. On average, the largest ten short positions were distributed among five different members. Among these ten positions, two were entirely on-exchange, five had both OTC and on-exchange exposure (with on average 52% being OTC) and three were exclusively OTC. It was also noted that beneficial owners held the majority of their positions through OTC contracts, often split across multiple counterparties, illustrating a fragmented structure that limited market visibility. While this report focuses on the implementation of the relevant IOSCO Principles - which do not apply to central counterparties - the fact that OTC positions are dispersed across multiple counterparties has prudential implications. These proposals should therefore be regarded as complementary to, not a replacement for, the proper application of IOSCO's Principles for Financial Market Infrastructures . 5

OTC market intervention Stakeholders emphasised that OTC market regulatory intervention or enforcement should remain the responsibility of the regulator, not the exchange. Exchanges, being commercial entities, may face an inherent conflict Oliver Wyman's Independent Review of Events in the Nickel Market in March 2022, 4 January 2023 Available at: Independent nickel market review | London Metal Exchange CPMI-IOSCO's Principles for Financial Market Infrastructures, 2012, available at: 5 https://www.bis.org/cpmi/publ/d101a.pdf.

of interest, if they were empowered to ask participants to reduce OTC positions, they could naturally favour exchange-traded positions. Market participants also believe exchanges possess sufficient tools within their existing market surveillance and position management frameworks, and that additional enforcement authority over OTC trades is neither necessary nor desirable. Some stakeholders strongly encourage enhanced collaboration between supervisory bodies so that data can be shared appropriately, as in some jurisdiction's exchanges are closer to day-to-day market movements than regulators. IOSCO acknowledges that the Review included recommendations related to preventing and addressing disorderly markets, including urging members to balance risk management and price discovery when applying market control measures, and to enhance mechanisms for open communication (both between exchanges and regulators, and between regulators) particularly during times of crisis. As mentioned above, large OTC positions held across multiple counterparties may have prudential implications in the context of central counterparties. While the IOSCO Principles apply to Market Authorities, they are relevant to central counterparties. Market control measures may be put in place that provide other or alternative mitigants when risks are identified. For example, in the UK, the new regulatory framework requires arrangements that facilitate the flow of information between exchanges and central counterparties when they are part of the same group. This is to enhance the central counterparty's ability to monitor client position concentrations, identify risks relevant to its operations, and act in accordance with its existing requirements. Regulatory approaches such as the UK's serve as an example of how jurisdictions can take steps to improve risk transparency and are consistent with Principle 15. As noted, in the IOSCO Principles, it is important that Market Authorities not only have the necessary powers available but also use them when appropriate. Most importantly, Market Authorities should consistently apply their surveillance capabilities to detect emerging disorderly conditions and respond promptly, with relevant OTC position information playing a key role in supporting effective surveillance. In terms of intervention in OTC markets, IOSCO emphasises three key elements:

1. Who should intervene: To prevent or address disorderly markets to ensure market integrity or stability, in circumstances where other tools or actions have been unsuccessful in mitigating risks or will not be sufficient to effectively mitigate risks, relevant Market Authorities may determine that there is a need to intervene in OTC

markets. Subject to relevant applicable laws and regulations, IOSCO considers that the primary responsibility for intervening in OTC markets lies with regulators, given their responsibilities to protect market integrity, ensure financial stability, and oversee activity across markets. Their broad oversight makes them best placed to assess emerging risks and, as necessary, take appropriate action under relevant securities and other applicable laws. However, effective intervention requires regulators to be close to the day-to- day operations of the market to be able to prevent emerging risks, which is not the case in all jurisdictions. While exchanges play a central role in listed markets, IOSCO is not aware of any jurisdiction where exchanges are explicitly empowered to intervene in OTC activity. As such, there should be close ongoing relationships between exchanges and regulators to enable exchanges to effectively share relevant market information. The scope of exchanges' position management controls may be set out in the relevant jurisdiction's regulatory framework, which could also include specific provisions regarding its powers to intervene. In addition, exchanges may act in accordance with their own rulebooks to take appropriate measures when necessary.

1. When should intervention occur: Regulators should be prepared to intervene in OTC markets:

• Proactively, when monitoring and/or surveillance processes and/or systems detect growing risks that could pose a threat to market integrity and are unlikely to be addressed by other measures. Such risks might be identified through thresholds, triggers, indicators that signal the need for action, or through relevant information received from exchanges. • Reactively, when other tools have failed to mitigate escalating risks, such as following unsuccessful requests to reduce open positions, to liquidate or transfer open positions, to provide additional margin, or to suspend or curtail trading on the market. • During crises, when market functioning is disrupted and swift action is necessary to restore order and confidence. IOSCO considers it important that regulators explicitly outline, to the extent possible, the conditions under which they may intervene in OTC markets - whether through regulations, guidance, legislation, or other relevant internal processes or policy documents - to help reduce uncertainty.

1. How should intervention take place: Intervention in OTC markets should involve a combination of:

• Enhanced surveillance and monitoring to identify and monitor large or concentrated OTC positions. • Timely and open communication between exchanges, regulators, and, where feasible, central counterparties, to coordinate views and responses. • Information-sharing arrangements, including between domestic agencies and through multilateral Memoranda of Understanding (MoUs) to enable cross-border cooperation. • Development by Market Authorities of crisis response frameworks or action plans, to clarify roles, escalation steps, and coordination points during market stress. • Position management tools, where applicable, to limit or unwind destabilising exposures. Maintaining the integrity and stability of financial markets requires clear roles, timely action, and coordinated intervention mechanisms. While regulators are best positioned to lead these interventions, exchanges and central counterparties also have a role in supporting market oversight through data sharing and internal controls. IOSCO encourages jurisdictions to develop transparent intervention policies, improve information flows, and adopt flexible response mechanisms, particularly in anticipation of market disruptions. Building such frameworks will enhance the resilience of relevant exchange traded markets, for example critical or significant markets, and help preserve trust in their functioning during both normal and stressed conditions.

1. Proposed good practices

Introduction

Building on the considerations and analysis in the previous chapter - informed by industry feedback - IOSCO has outlined its proposed good practices for implementing Principles 12, 15, and 16. IOSCO has also included questions to gather views on these proposed practices.

Proposed good practices

Collection and aggregation of information about OTC and exchange

as may be appropriate, provisions that enable regulators or exchanges, as appropriate, to obtain relevant OTC derivatives data at the level of the beneficial owner. This good practice is predicated on each jurisdiction's commodity derivatives framework being tailored to the specific characteristics of their commodity derivatives markets. 2.

1. Relevant Market Authorities should set out in their regulatory frameworks, derivatives markets, such as:

• in respect of a contract identified by the relevant Market Authority as critical or significant in line with good practice 3; • in response to market intelligence; • in the context of specific events, such as unexpected changes in The provisions should be designed to be deployed when necessary to assess risks to the orderly trading conditions of the commodity prices or volatility; • upon notification of missed margin calls by a participant; and/or • other predefined triggers or thresholds. OTC derivatives data - including the basis and frequency of its collection should be obtained in a manner that reflects commodity derivatives market. 3. IOSCO encourages relevant pertinent to their regulatory frameworks, critical or significant contracts that are more susceptible to the risk of

the characteristics of the 31 Market Authorities to identify, to the extent market abuse or disorderly trading, and/or which can have the greatest negative impact on trading activity

commodity markets and their users on the basis of criteria, such as: a. Settlement method and price reference reliability. b. Market size and liquidity. c. Nature of the underlying commodity and its importance to end-users. . If relevant to a Market Authority's d. Market depth and concentration. rules, the Market Authority should identify critical or significant contracts 4. Where appropriate, t sufficiently related exchange- exchange, as well as relevant OTC positions. applicable in a jurisdiction. Contracts may be deemed sufficiently related if they meet one or both of the following criteria: a. They provide comparable economic exposure to exchange contract(s), which may be a critical or significant contract, he relevant Market Authority should identify and based on their observable and transparent characteristics that enable aggregate positions held under common ownership and control across comparability. For instance, traded contracts traded on the same related underlying assets an d /o r exhibit closely related price This practice could apply in behaviour (i.e. exhibit price responses in a consistent way to the same the monitoring and assessment of critical or significant contracts, if market risks). This visibility helps ensure effective monitoring capabilities to support a comprehensive understanding of risks in the overall market; or b. In the case of exchange-traded contracts, they are considered the relevant capable of influencing where they reference the same or closely contract. In the case of related OTC contracts, they are considered capable of materially influencing relevant exchange- significant contract. In both cases, this determination is based on an observable and the pricing or settlement of the relevant that have a direct or indirect effect on the price or settlement of the exchange traded contract(s), which may be a critical or significant relevant exchange-traded contract, recognising that for related OTC contracts such influence should be material. By way of illustration, the pricing or settlement of the positions in related c traded contract(s), which may be a critical or underlying commodity as positions in the relevant exchange traded contract. Likewise, the settlement price of assessment of transparent characteristics of the related contract 32 ontracts may have a similar effect on the an option on the relevant

exchange traded contract would typically be considered directly linked to the settlement price of that contract. 5. Market Authorities necessary, the basis on which OTC derivatives data is reported to them

• including the type, frequency, and scope of data collected - particularly when there is a significant change in market risk. This is to ensure that regulatory framework, has adequate monitoring capabilities. 6. Where applicable, t Authorities determine the basis and frequency for collecting OTC should review at an appropriate frequency, as position data to ensure the effective monitoring and oversight of relevant exchange traded contracts, which may be critical or significant contracts: a. The interdependence between exchange-traded and relevant OTC the Market Authority, whether regulator or exchange, depending on the markets - specifically, the extent to which the OTC market is linked to the relevant exchange traded market through factors such as pricing he following factors will help relevant Market behaviour. b. Size and liquidity of the OTC derivatives market. c. The potential impact example, t concerns) may have on the orderly functioning of the market of the relevant exchange traded/critical or significant contract. relationships, liquidity dynamics, and shared participants or trading d. Effectiveness of the existing regulatory framework and controls in place. 7. Relevant Market Authorities should adopt their procedures for obtaining that trading in the relevant OTC market (for hrough price distortions, manipulation, or market conduct must be legitimately based on regulatory or legal obligations, legal impediments in other jurisdictions, rather than deliberate non- disclosure. Where beneficial ownership information is withheld, IOSCO recommends that relevant Market Authorities implement appropriate measures, such as enhanced oversight of activities relevant exchange members, implementation of position limits restrictions or other consequences as set out in regulations or rulebooks. information regarding beneficial ownership, where any failure to disclose members, should be made aware of potential such as if required information is not provided or not justifiably refused (this could be done using the exchange rulebook, regulatory framework or both). 8. Relevant Market Authorities should ensure any collection and carried out by maintenance of OTC derivatives data is subject to stringent safeguards. , access Specifically, where exchanges receive such information, they should use To the extent possible, beneficial owners, who are not exchange actions that may be taken 33

it solely for their market oversight and regulatory functions and must not

repurpose the data or any related analysis for commercial or unrelated activities. Preventing or addressing disorderly markets in the context of relevant

effective powers to intervene in commodity derivatives markets, including relevant OTC markets, ensure the efficiency of the markets. 10. R

to effectively mitigate risks.

1. Regulators, pursuant to the laws of their jurisdictions, should have 11. Exchanges should have strong and adequate powers to take action in
   relation to derivatives traded on their regulated markets. They should use to prevent or address disorderly markets and to to assess whether action is necessary. Such action could include, for example, the ability egulators should be prepared to intervene in OTC markets to prevent or address disorderly conditions in circumstances where other tools or exchange-traded position if considered necessary actions have been unsuccessful in mitigating risks or will not be sufficient market conditions before risks crystallise. Where appropriate, exchanges provide liquidity back into the market - for instance, by agreeing to buy or sell a specified amount at a set price - a dominant market position. all available information, including any OTC position reports they receive, 12. Exchanges may need to apply additional controls or measures beyond to require a participant to reduce or close out an regulatory minimums to fulfil their obligation to maintain orderly markets to prevent disorderly in accordance with their own rulebooks. They are expected to use their effectively. This could include, where appropriate, may also have the authority to require a participant to temporarily establishing information- counterparties. If an exchange uses its rulebook to impose OTC-related to help mitigate the impact of controls or measures, it shoul constraints. The rulebook should include clear and transparent information about when such an conflicts of interest are appropriately managed, by a segregated independent team, with a well-documented rationale. 13. Intervention in OTC markets may be necessary: full range of position management tools to manage market risks measures such as sharing agreements with relevant central a. Proactively, when surveillance detects growing risks actions are likely to be insufficient; d consider any legal or competition intervention may occur. To ensure decisions could be taken 34 and other Upon request, they should be able to disclose the basis for their collection and use of OTC data. OTC markets

2. threats; or
   is necessary to restore order and confidence. 14. Regulators should, to the extent possible, define legislation, guidance, or through policy documents clear conditions or triggers preparedness and reduce uncertainty. 15. Market Authorities should use a combination of tools to assess whether action is necessary and determine the appropriate type of action, including: a. Enhanced surveillance of large or concentrated OTC positions; b. regulators, and, where feasible, central counterparties; c. Effective information-sharing arrangements, including cross-border mechanisms (e.g. MoUs); d. roles, escalation steps, and coordination points during market stress. e. destabilising exposures. Reactively, when existing tools have failed to mitigate escalating During crises, when market functioning is disrupted and swift action 16. policies, improve information flows, and adopt flexible response mechanisms within their regulatory frameworks in their regulation, other relevant internal processes or the resilience of relevant exchange traded markets and/or for intervention to improve significant markets and help preserve trust in their orderly functioning during both normal and stressed conditions. 17. Relevant Market A timely, and secure communication - regulators, and among regulators - stress or crisis. IOSCO encourages jurisdictions to develop transparent intervention regulators may need to obtain targeted information from exchanges on , particularly in Timely communication and coordination between exchanges, anticipation of market disruptions. Building such frameworks will enhance critical or

35 uthorities should strengthen mechanisms for open, Development of crisis response frameworks or action plans, to clarify both between exchanges and particularly during periods of market As a baseline to support good practices 15 and 16, Position management tools, where applicable, to limit or unwind Information sharing and cooperation in the context of relevant OTC a time sensitive basis. markets

Questions for Consultation

Question 1: Do you agree with the key aspects and scope of the proposed good practices outlined in this Consultation Report? Please share any specific comment on any of the proposed good practices. Question 2: Are there any further key good practices considered? Question 3: Under what conditions - frequency - should Market Authorities collect reported to them? What criteria should be used to determine the need for regular or ad-hoc reporting of OTC position data for effective monitoring and oversight of relevant exchange traded contracts? Question 4: Do you have suggestions for Market Authorities'improved use that could be of existing data pipelines for purposes of ensuring market integrity? Question 5: such as relevant triggers, scope and OTC position data to be and an exchange-traded market? • At what level would such a measure be considered significant enough to indicate that activity in the OTC market can affect the orderly trading of the relevant exchange-traded market? • constitutes a significant impact in this context? What metrics or indicators do you consider appropriate for assessing the degree of interconnectedness between a related OTC market Question 6: What types of information could help Market Authorities identify the beneficial owners of positions? Question 7: Do you foresee any challenges for Market Authorities in identifying, and obtaining data on, the underlying beneficial owners, and, if so, how could these be mitigated? Would it be helpful for us to provide further guidance on what Question 8: In what circumstances may it be necessary for regulators to negative, might this cause? Question 9: What kind of cross-border cooperation necessary or beneficial to coordinate data collection, both generally and of OTC positions of underlying beneficiary owners? Question 10: be relevant to OTC execution venues, such as intervene in OTC markets, and what potential impact, both positive and

do you think is 36 How do you contemplate that this consultation report may also swap execution facilities, multilateral trading facilities and organised trading facilities?