First, there is the review of the Markets in Financial Instrument Directive (MiFID), on which a proposal is expected to be released by the European Commission this autumn, will represent a key step in the right direction. Amending the MiFID should enable the EU regulatory framework to keep pace with financial innovation while responding to the G20 commitments to deal with less regulated and more opaque parts of the financial system. Second, it is key that transparency is enhanced across the board: with regard to markets, institutions and products. Lack of information contributes to the mispricing of risks, mistrust among market participants can turn situations into downturns. In order to build confidence and contribute towards the stability of markets it is important that financial innovation and technological advances contribute to the ability of financial markets to sustainably provide financial services to the real economy. We need to establish a harmonised framework that enables coordinated action, increases transparency and reduces the risks posed by these market practices. Moreover, we need to better identify, monitor and assess the potential threat to market stability posed by High Frequency Trading. The IOSCO consultation on Regulatory Issues Raised by the Impact of Technological Changes on Market Integrity, carried out in response to a G20 Leaders request during the Seoul Summit in 2010, recalls that “the benefits from technological advances should not  BIS central bankers’ speeches  3  overshadow the risks that these innovations pose to the efficiency and integrity of markets.

In complementing the sukuk market as a source for fund raising, also being explored are other funding channels to assist small and medium enterprises, new growth industries and entrepreneurs that have limited access to the sukuk market. A multi-bank investment platform is now being developed for the effective matching of funds from potential investors with targeted industries and ventures in the real sector. Foreign Islamic financial institutions and investors also stand to benefit from this platform, with the offering of multi-currency financing options for foreign projects. The platform facilitates Islamic banks to perform  2  BIS central bankers’ speeches  investment intermediation functions. It enhances further the intermediation role of the Islamic banking institutions to also function as an investment intermediary. In an increasingly internationalised global financial marketplace that has generated significant cross-border flows, one of the requirements as we advance forward is the need for more tradeable cross-border Islamic financial instruments that can cater to the different profiling of investors’ risk appetites. The issuance of the short-term sukuk by the International Islamic Liquidity Management Corporation (IILM) is a breakthrough in innovation towards increasing cross-border liquidity flows that could potentially enhance financial stability and the efficient functioning of the Islamic financial markets. Let me conclude my remarks. There is clear indication of the growing relevance and importance of the sukuk market, with the growing interest from both emerging and developed jurisdictions and the strategic approaches taken to diversify the funding sources through the sukuk market.