Surveillance Surveillance Framework - Page 3

Key Issues (pages 9-10) 1. The regulation of trading in secondary and other markets should prohibit: market manipulation (or attempts at manipulation); misleading conduct; insider trading; and other fraudulent or deceptive conduct, and apply adequate, proportionate, and dissuasive sanctions. 2. The regulator should ensure that there are in place arrangements for the continuous monitoring of trading. These arrangements should trigger inquiry whenever unusual and potentially improper trading occurs. Market authorities should have rules, compliance programs, sanctioning policies and powers to prohibit, detect, prevent and deter abusive practices on their markets, including manipulation (or attempts at manipulation) of the market. 3. Regulation should cover cross-market conduct where, for example, the price of an equity product could be manipulated through the trading of options, warrants or OTC derivatives or other derivative products. The regulator should also work collectively and take any steps that would be appropriate to strengthen its cross-border surveillance capabilities. 4. There must be adequate information sharing between relevant regulatory authorities, sufficient to ensure effective enforcement. 5. Authorities responsible for the supervision of commodity derivatives markets (e.g., either the market, a governmental regulator or an SRO) should have the authority to access information on a routine and non-routine basis that permits them to reconstruct transactions, identify large concentrations of positions, and the overall composition of the market, including the power to access on an “as needed” basis information on the size and beneficial ownership of a trader’s related financial and underlying market positions in order to aggregate positions held under common ownership and control. Is it a preventive or corrective profession? (page 12) Page 2 of 48