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Global Task Force on Financial Integrity
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In February 1995 Barings PLC, an international financial institution with a 200-year history, collapsed as a result of substantial trading losses incurred by a Barings employee. These losses were caused in large part by a lack of adequate internal controls over the employee's proprietary trading activities, including those conducted in exchange-traded futures and options.
The Barings failure did not result in losses to other market participants and, in many respects, the situation underscored the fundamental strength and soundness of the global futures and options regulatory, trading and clearing systems. Nevertheless, the events surrounding the Barings failure prompted market participants to consider certain national and cross-border issues related to the structure and operation of the international markets for exchange-traded and/or cleared futures and options. The most significant of these issues included the mechanisms that exist for the protection of participants' assets, the internal controls and risk management procedures employed by exchanges/clearinghouses, brokers/intermediaries and customers, and the communication of information regarding the activities of market participants by exchanges/clearinghouses and regulatory authorities. The Futures Industry Association Global Task Force on Financial Integrity was organized in March 1995 to address these issues. The Task Force includes representatives of major international exchanges/clearinghouses, brokers/intermediaries (including futures commission merchants and other brokers), and customers from 17 jurisdictions. In June 1995, the Task Force released a comprehensive set of recommendations to improve the financial integrity of the international futures industry. Financial Integrity Recommendations: For Futures and Options Markets and Market Participants (PDF) For printer-friendly versions of individual sections of the publication, link to the following:
In a parallel action, regulatory agencies from 14 jurisdictions signed a declaration of cooperation and supervision covering international futures markets on March 15, 1996. The authorities also welcomed a complementary memorandum of understanding and agreement by 49 futures exchanges and clearing organizations. Both documents constitute multilateral mechanisms for the sharing of information on a bilateral basis among market authorities consistent with their legal and contractual obligations.
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