World Federation of Exchanges Releases Report “Promoting Strong Markets: DeFi/CeFi, Crypto Platforms and Exchanges”
London, September 28, 2023 – The World Federation of Exchanges (WFE), the global body for exchanges and central counterparty clearinghouses (CCPs), today sets out six principles to promote robust markets in cryptocurrency trading in a new report.
The report, drawing on the collective experience of regulated market infrastructures as trusted guardians of public markets, makes six recommendations in light of the issues that continue to plague the nascent cryptocurrency industry, which has suffered several controversies and crashes. High profile.
By applying regulatory principles that have been tested through established and trusted market infrastructures, governments and regulators can help the cryptocurrency trading sector grow, while protecting investors and ensuring orderly, fair and transparent markets. .
The WFE analysis also found that while decentralized finance can bring innovation to financial products, crypto trading platforms (CTPs) are often not as decentralized as they appear at first glance, which presents some risks.
The WFE recommends that governments and regulators require CTP to meet the high standards that all market participants expect and deserve. The recommendations are:
- Segregate market infrastructure functions within a CTP where appropriate, such as limiting CTPs that trade their own portfolio or are in potential conflict with their clients;
- Operate orderly markets by implementing systems and controls for broader risks, such as abusive trading, to protect the integrity of price formation;
- Have sufficient financial resources to deal with expected operational stress events;
- Facilitate compliance with best execution requirements;
- Increase the robustness of listing standards;
- Have adequate governance and management requirements.
In the short term, the WFE recommends that CTPs disclose their regulatory status and not describe themselves as exchanges until they are properly regulated and meet the standards listed above. All infrastructure providers in the regulated market comply with the standards mentioned above.
Nandini Sukumar, CEO of WFE, said: “The exchange industry continues to believe in the promise of cryptocurrency and digital asset trading and is working with all stakeholders to develop market structure and standards to the level necessary to facilitate growth and confidence in these markets. These six key principles should be a checklist for any CTP that is serious about meeting the standards expected of a credible markets operator. Adhering to the rules will not only protect markets, but will allow the sector to grow.”
Richard Metcalfe, Head of Regulatory Affairs at WFE, said: “Governments and regulators helped shape the spirit of today's market infrastructure so that it operates in the reliable way it does today. The same logic must be applied to CTPs, whether centralized or not, to avoid the significant risks and realities that we have seen that can and do damage investor confidence.”
The full document can be read. here.
About the World Federation of Exchanges (WFE)
Established in 1961, the WFE is the global industry association for exchanges and clearinghouses. Headquartered in London, it represents more than 250 market infrastructure providers, including independent CCPs that are not part of exchange groups. Of our members, 34% are in Asia-Pacific, 45% in EMEA and 21% in the Americas. WFE's 90 member CCPs and clearing services collectively ensure that risk takers provide some $1.3 trillion (equivalent) of resources to support their positions, in the form of initial margin and default fund requirements. The WFE exchanges, along with other exchanges that feed our database, are home to more than 50,000 publicly traded companies, and the market capitalization of these entities exceeds $100 trillion; around $140 trillion (EOB) in trade passes through WFE members annually (by the end of 2022).
The WFE is the definitive source of exchange-traded statistics and publishes over 350 market data indicators. Its free statistics database dates back more than 40 years and provides information and insights into the evolution of global exchanges. The WFE works with standard setters, policymakers, regulators and government organizations around the world to support and promote the development of fair, transparent, stable and efficient markets. The WFE shares the objectives of regulatory authorities to ensure the safety and soundness of the global financial system.
With extensive experience in developing and enforcing high standards of conduct, the WFE and its members support an orderly, safe, fair and transparent environment for investors; for companies raising capital; and for all those who deal with financial risk. We seek results that maximize the common good, consumer confidence and economic growth. And we engage with policymakers and regulators in an open and collaborative way, reflecting the central public role that exchanges and CCPs play in a globally integrated financial system.
Website: www.world-exchanges.org
Twitter: @TheWFE
