Market Regulation

A “regulated market” or “organized market” as defined by Directive 2004/39/EC means the multilateral system managed or operated by a market operator and which brings together or facilitates the bringing together of multiple third-party buying or/and selling interests in financial instruments – in the system and in accordance with its non-discretionary rules – in a way that results in a contract, in respect of the financial instruments admitted to trading under its rules or/and systems, and which is authorised by member state and functions regularly in accordance with the provisions of respective legislation of member states that are enacted in compliance with Directive 2004/39/EC.

In a regulated market, a government body exerts a level of control, providing in this way obvious protection for consumers. Effective surveillance is required to ensure that firms adhere to regulatory standards and rules. Information and surveillance are crucial components for effective international regulation.

Federal and state governments have a myriad of agencies in place that regulate and oversee financial markets and companies. These agencies each have a specific range of duties and responsibilities that enable them to act independently of each other while they work to accomplish similar objectives.

For instance, the European Securities and Markets Authority (ESMA) has as mission to enhance the protection of investors and reinforce stable and well functioning financial markets in the European Union. As an independent institution ESMA achieves this mission by building a single rule book for EU financial markets and ensuring its consistent application and supervision across the EU.
Moreover, The European Banking Authority (EBA) an independent EU Authority works to ensure effective and consistent prudential regulation and supervision across the European banking sector. Its overall objectives are to maintain financial stability in the EU and to safeguard the integrity, efficiency and orderly functioning of the banking sector.

In the US, the Federal Reserve Board (FRB) is one of the most recognized of all the regulatory bodies. As such, the “Fed” often gets blamed for economic downfalls or heralded for stimulating the economy. It is responsible for influencing money, liquidity and overall credit conditions. Its main tool for implementing monetary policy is its open market operations, which control the purchase and sale of U.S. Treasury securities and federal agency securities. Purchases and sales can change the quantity of reserves or influence the federal funds rate – the interest rate at which depository institutions lend balances to other depository institutions overnight. The board also supervises and regulates the banking system to provide overall stability to the financial system. The Federal Open Market Committee (FOMC) determines the actions of the Fed.

Furthermore, the International Organization of Securities Commissions (IOSCO), established in 1983, is the acknowledged international body that brings together the world’s securities regulators and is recognized as the global standard setter for the securities sector. IOSCO develops, implements, and promotes adherence to internationally recognized standards for securities regulation, and is working intensively with the G20 and the Financial Stability Board (FSB) on the global regulatory reform agenda.

Also, the mission of the Bank for International Settlements (BIS) is to serve central banks in their pursuit of monetary and financial stability, to foster international cooperation in those areas and to act as a bank for central banks. These measures aim to improve the banking sector’s ability to absorb shocks arising from financial and economic stress, whatever the source, improve risk management and governance and to strengthen banks’ transparency and disclosures.

However, each country has its own regulatory body which is responsible for the implementation of legislation and rules which ensure the legitimate business operation.
For instance in Cyprus, the Cyprus Securities and Exchange Commissions (CySec) is responsible for the supervision of the investment services market and transactions in transferable securities carried out in the Republic of Cyprus, whether in the UK, it is the FCA (Financial Conduct Authority) that regulates firms and financial advisers so that markets and financial systems remain sound, stable and resilient. They also encourage transparent pricing and help firms put the interests of their customers and the integrity of the market at the core of what they do.

Regarding the lawyers’ regulatory bodies some indicative associations are the Solicitors Regulation Authority for the UK, the Cyprus Bar Association and the American Bar Association for the US.
Accurate and relevant information to the public, investors, creditors, and regulators is the very foundation of an efficient market and effective regulatory system. The International Accounting Standards Board (IASB) and the International Organization of Securities Commissions (IOSCO) have made significant progress in reforming international accounting standards.
Some other audit regulators are for example, the Institute of Certified Public Accountants of Cyprus, the Association of Chartered Certified Accountants, the Institute of Internal Auditors and so on.

All of these agencies and associations seek to regulate and protect those who participate in the respective industries they govern. They impose requirements, restrictions and conditions, setting standards in relation to any activity, and securing compliance, or enforcement in the field of their interest.
Detailed list of the regulatory bodies can be found at the Regulators Zone.