Mechanisms Used by Trading Venues to Manage Extreme Volatility and Preserve Orderly Trading
Extreme volatility can negatively impact securities markets and related asset classes across different jurisdictions. Such events have led many regulatory authorities to review and assess the consequences of extreme volatility events and to determine appropriate policy responses.
The importance of implementing volatility control mechanisms is recognized by trading venues and regulatory authorities globally. These mechanisms support the goal of ensuring that markets are “fair, efficient and transparent”. As a result, IOSCO sets out eight recommendations related to volatility control mechanisms, regulatory oversight and information to regulators, dissemination of information to market participants and the public, and communication between trading venues.