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`Market regulators must share technology'

Special Correspondent

Chidambaram suggests harmonising of regulations

— Photo: Paul Noronha

AVERTING SYSTEMIC RISKS: Finance Minister P. Chidambaram (right), with Jane Diplock, Chairperson, IOSCO Executive Committee, and M. Damodaran, Chairman, SEBI, at a conference in Mumbai on Wednesday.

MUMBAI: Finance Minister P. Chidambaram on Wednesday asked capital market regulators to share technology and best practices, establish standards for effective surveillance of international securities transactions and provide mutual assistance to promote the integrity of markets to achieve well-regulated capital markets globally.

"I strongly believe that the failure to share is at the root of the divide between well regulated markets and poorly regulated markets,'' Mr. Chidambaram said while inaugurating the 32nd annual conference of the International Organisation of Securities Commissions here. "The divide can be sharp because there are wide differences in the use of technology and in market practices. It is in our collective interest that those who posses technology share that technology with participants in other markets,'' he added. While regulators see only one global market, investors, issuers and intermediaries see the benefit of internationalisation. "With the investor in Country A, the broker in country B, the exchange in country C and the issuer in country D, the legal basis for a contract may become complex.''

Compliance cost

According to the Finance Minister, harmonising the market regulations would greatly simplify the problems and reduce the compliance costs for participants. Similarly harmonisation of accounting standards would reduce the cost of investing and increase international investments.

"Given the differences in legal systems and regulatory traditions, such harmonisation may be difficult, but there will be gain to everyone if it can be ensured that international investors enjoy at least the same, if not better, rights and guarantees as local investors do and are assured of non-discriminatory treatment,'' he said.

While business is borderless, regulation is not and there is a growing mismatch between the limited authority of national regulators and the global reach of financial intermediaries. Mr. Chidambaram said, "This increases the chances of systemic risks in one country spilling over to other countries. Regulators need to co-operate more frequently than ever before and that too at multiple levels and across countries.''

On hedge funds, Mr. Chidambaram said on the sidelines of the conference, "If the hedge funds wish to come to India and if SEBI is comfortable in allowing them then I am sure SEBI will put in place appropriate regulations under which the hedge funds can operate in the country.''

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