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Intermediaries such as stockbrokers and banks are ubiquitous in global securities markets, playing essential roles in markets, including trading, settling trades, and post-settlement holding of securities. This essay focuses in particular on the roles of intermediaries in securities holding systems. It proposes an IOSCO-led “soft-law-to-hard-law” approach to the development of Global Standards for reforms to these holding systems. States would be expected to adopt “hard law” reforms through statutory and regulatory adjustments to securities holding systems. The reforms would embrace not only important standards of a functional and regulatory nature, but also holistic standards relating to the private law, insolvency law, and the technical aspects of infrastructures for securities holding systems. The Global Standards would not propose model text or even doctrinal rules, but would establish the baseline results that holding systems should achieve, such as the elimination of intermediary risk.

As the principal organization for the coordination and cooperation among securities market regulators, and with a track record of producing excellent and important studies and reports, IOSCO is singularly well suited to lead the development of Global Standards. One challenge would be to confront the need for reforms to the private law. Another challenge would relate reforms of the holding infrastructures (e.g., increased transparency in holding systems). But the ongoing and increasing role of Fintech in the financial markets means that securities (and other) regulators must face these challenges in any event. Possibly the most difficult challenges would arise from within the securities industry. One could expect resistance from market participants who wish to preserve their positions and roles in the securities markets and their current and future business plans. But this is a principal reason that regulators (through IOSCO in particular) should play a leading role in the process.


International trade, soft law, IOSCO, intermediated securities, securities holding systems, financial infrastructure, financial architecture, intermediary risk, private law, global standards, Fintech

Publication Title

Michigan Journal of International Law

Publication Citation

40 Mich. J. Int'l L. 531 (2019)