The purpose of the ISG is to provide a global network for the sharing of information and the coordination of regulatory efforts among exchanges trading securities and other products to address potential intermarket manipulation and trading abuses. The ISG plays a crucial role in information sharing among markets that trade securities, options on securities, security futures products, futures and options on broad-based security indexes, as well as futures and options on other asset classes such as currencies, interest rates, energy, base metals and precious metals.
The ISG also provides a forum for Self-Regulatory Organisations, and market regulators for discussing common regulatory concerns, thus enhancing members’ ability to efficiently fulfil their regulatory responsibilities.
In effect, the ISG is an information-sharing cooperative governed by a written Agreement. The ISG is not subject to any regulatory oversight, and as such does not file rule changes with the Commodity Futures Trading Commission ("CFTC") or the Securities and Exchange Commission ("SEC") or seek approval from any outside entity when it considers requests from securities or derivative exchanges to become a member of the ISG.
Background and History
The ISG was created in 1981 by the major U.S. securities exchanges in response to the growing need among those marketplaces to share information regarding securities related products and the need to conduct routine market surveillance. The proliferation of related products and derivative instruments created the need for a system of formalized, consistent procedures for the exchange of information across different jurisdictions. In 1990, an Affiliate category of ISG membership was created to allow futures exchanges and non-U.S. organizations admission into the ISG to facilitate further information sharing. In 2008 the Agreement and structure of the ISG was modernized to eliminate the distinction between Full and Affiliate members and reflect the growing international character of the organization. Today the ISG has grown to include North American, Australian, Asian, Middle Eastern, South Asian and European exchanges, all of which have a common interest in ensuring that the securities and derivative marketplaces are regulated effectively and efficiently.
Membership in the ISG carries with it a commitment to share information required for regulatory purposes with other members. In connection with the routine sharing of information, the ISG has defined certain types of violations which can occur across markets. The ISG Agreement provides that shared information must be kept strictly confidential and used only for regulatory purposes. Such information is shared on an as-needed basis and only upon request. In addition, U.S. securities participants, via the facilities of the Securities Industry Automation Corporation ("SIAC") and The Options Clearing Corporation ("OCC"), routinely share trading information electronically.
Generally, the ISG meets at least twice each year. Meetings, hosted by member organizations, are open only to representatives of members, with guests invited from prospective members, SIAC representatives, and appropriate governmental authorities such as the CFTC, SEC, the UK Financial Services Authority, and, on occasion, organizations such as the International Organization of Securities Commissions. Senior market surveillance or market regulation personnel represent member organizations at the meetings. The meetings themselves are the means by which each of the Subgroups presents content and/or discussion items that are relevant to the Subgroup as well as to the wider ISG Membership. The venue for the meetings rotates between North America and Europe/Asia, with ISG Members volunteering to host.
The ISG Portal serves as the scheduler for meetings, maintains contact lists distributes information to the membership that includes, but is not limited to information relating to Meeting.
The ISG has seven Standing subgroups; Membership, Technology, Derivatives, Surveillance Practices, Forum and Events, US Members and Regulatory & Market Structure Trends. Each Standing subgroup has a Chair and Deputy Chair that are elected by the full ISG membership on a rotating basis for two year terms. An Executive Committee is comprised of the Chair and Deputy Chair of each of the Standing subgroups in addition to the ISG Chair and the ISG Deputy Chair, though the ISG Chair and Deputy Chair are non-voting members of the Executive Committee. From time to time, and at the discretion of the ISG Chair, Special subgroups may be formed to address specific issues of importance to the Group. Special subgroups may be permanent or have a limited life depending on the subject. Special subgroups are headed by a representative of a member and are appointed by the ISG Chair. Meetings of subgroups, whether standing or special, may be independent of regular ISG meetings and may take place either at a location directed by the subgroup chairperson or virtually during the interval between ISG meetings. Ordinarily, Standing subgroups also meet on the day preceding a full ISG meeting.
The Executive Committee meets monthly to discuss items including budget, membership applications, and upcoming events as appropriate.
Membership in the ISG is open to all appropriately authorised market operators in IOSCO-recognised jurisdictions that trade products and have rules and regulations designed to detect and deter possible abuses in their marketplaces. Members of the ISG must have the ability to share regulatory information and otherwise cooperate with other ISG Members in connection with regulatory matters affecting their markets. Applications for membership are subject to the approval of the Executive Committee.
Benefits of Membership
Becoming a Member of the ISG provides access to a global network of market surveillance practitioners, with experience spanning a wide range of products and regulatory regimes. As well as sharing case histories ISG Members are able to share experience of surveillance technologies, rule-making, investigative procedures and processes, as well as enforcement practices. This sharing of information provides ISG Members with the ability to assess their own rules, policies, procedures and processes against their peers. This allows them the opportunity to ensure that similar approaches are taken globally for common trading abuses. In addition, the personal contacts and networking opportunities that the ISG provides allows ISG Members to discuss market developments, and the impact they have on market integrity, in an open and collaborative environment. The ISG operates on a cost-recovery basis, with membership fees reflecting primarily the costs of maintaining the ISG Portal and costs associated with the semi-annual meetings.