The purpose of the ISG is to provide a framework for the sharing of information and the coordination of regulatory efforts among exchanges trading securities and related products to address potential intermarket manipulations and trading abuses. The ISG plays a crucial role in information sharing among markets that trade securities, options on securities, security futures products, and futures and options on broad-based security indexes. The ISG also provides a forum for discussing common regulatory concerns, thus enhancing members ability to efficiently fulfill their regulatory responsibilities.
In effect, the ISG is an information-sharing cooperative governed by a written Agreement. The ISG is not subject to regulatory oversight, nor does it 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.
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. All U.S. national securities exchanges and national securities associations are members of the ISG. In addition, major U.S. futures exchanges as well as non-U.S. exchanges and associations that trade securities and related products are also members.
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 in both domestic and international locations, are open only to representatives of members, 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.
The ISG has seven Standing subgroups; Membership, Technology, Derivatives, Surveillance Practices, Forum and Events, US Members and Non-US Members. Standing subgroup Chairpersons are elected by the full ISG membership on a rotating basis for two year terms. An Executive Committee is comprised of the Chairpersons of each of the Standing subgroups in addition to the ISG Chair and the ISG Deputy Chair, though the ISG Chair Deputy Chair are non-voting members of the Executive Committee. From time to time, and at the discretion of the ISG Chairman, 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 Chairman. 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 telephonically during the interval between ISG meetings. Ordinarily, Standing subgroups also meet on the day preceding a full ISG meeting.
Membership in the ISG is open to all recognized market centers that trade products and have rules and regulations designed to detect and deter possible abuses in their marketplaces. Participants in the ISG must have the ability to share regulatory information and otherwise cooperate with other ISG participants in connection with regulatory matters affecting their markets.