Recently, the Open Government Partnership posted an open letter to UN Secretary General Ban Ki Moon regarding Open Government and the post-2015 Development Framework. The letter applauds the report of the UN’s High Level Panel of Eminent Persons (HLPEP) on the Post 2015 Development Agenda, and strongly encourages the Secretary General and the UN to stress transparency, participation and accountability in the next round of global development goals.
While the OGP letter was aimed at policy making well beyond the financial markets, the point that their letter stresses applies equally well to policy makers at an apex financial regulator, and to market operators. The existence of Big Data, and the ease with which it can be analyzed and understood has changed the calculus between service providers and end users. End users expect to be able to see and understand what goes on beneath the surface, and to evaluate for themselves the risks and benefits of participation. They also expect the provider to be accountable for its actions.
What does this mean to a market operator? It means that in order to attract market participants, the operator must be comfortable with transparency – that is, the operator should offer clear rules and guidance in how the market works; have clear processes for changing the rules of the game; and give participants tools with which to evaluate the market for efficiency and efficacy. It also means that operators must be responsive to participants. After all, especially in an emerging market, participants are volunteers – they don’t need to come into your marketplace at all. If you want them to, you need to make sure they understand what they’re getting into, and that you’ll treat them fairly if they do come.
The same is true for apex regulators. Regulators must be the policeman on the beat, to be sure, but they are also providing a service – an orderly and predictable market based on honesty and fair play; rules and rulemaking processes that are easy to understand and follow; and a commitment to nurturing new ideas or products proposed by a market operator or participant rather than just reflexively saying “no.” Being a service provider – in other words, being customer focused – without being too pliant is a difficult balance for a regulator to pull off. But a regulator who can be transparent, and holds itself accountable to its various constituents, will have credibility when it needs to make the unpopular decisions. These will, over the long haul, lead to increased participation.
And that’s good for everybody.
MarketReg Advisors 