Uniform and commonly applicable standards lower the cost of acquisition and analysis of information and reinforce the financial system stability. The most significant standards include, inter alia, the following: •  the principles of effective banking supervision, drawn up by the Basel Committee on Banking Supervision (BCBS),  •  international accounting standards, over 100 countries have adopted or based their own accounting standards on the International Accounting Standards (IAS) or the International Financial Reporting Standards (IFRS),  •  master agreements on executing transactions on the interbank market ― ISDA, ISMA,  •  statistical methodologies elaborated by, inter alia, the IMF, the BIS, and the WB that ensure compliance of the data gathered with the statistical guidelines and their international comparability,  •  the principles of best practice, elaborated by professional associations of financiers. The development of the modern financial market infrastructure has also covered regulatory changes (e.g. the bankruptcy law) and the establishment of modern transactional systems, payment systems, settlement systems, risk management systems, and information services – such as Reuters or Bloomberg. Stock exchanges and brokers have created modern trading platforms which enable  3  Hannoun H. “Internalisation of financial services: implications and challenges for central banks”, speech at the 41 Conference of the South East Asian Central Banks (SEACEN), Brunei Darussalam, 4 March, 2006. BIS Review 60/2006  st  7  prompt offer-matching, executing transactions and straight through processing. Development of the infrastructure has removed barriers to further market globalization.

A dynamic growth of the derivatives market is the result of an increase in the cross-border flows in the financial markets. Between 1995 and 2004, the turnover on the global derivatives market grew nearly two-fold, whereas during the same period the activity on all exchange-traded derivatives grew almost three-fold (Chart 7). Chart 7: Average daily net turnover in global derivatives market, 1995-2004  USD billion 5 000 4 500 4 000 3 500 3 000 2 500 2 000 1 382 1 221 1 500 959 688 1 000 265 500 151 0 1995 1998 OTC FX derivatives market Exchange-traded derivatives  4 657  2 180 1 292 853  1025  489  2001 2004 OTC interest rate derivatives market  Source: BIS. BIS Review 60/2006  5  Reasons for globalization of financial markets The key factors that brought about the aforementioned changes in capital flows and in the structure of the global financial market comprise the following: •  liberalization of national financial markets and the related growing competition among financial institutions,  •  technological progress in IT and telecommunications,  •  faster flow of information and its standardisation,  •  globalization of national economies in their various aspects (commerce, institutions, ownership structure, capital and knowledge). The liberalization of national financial markets has eliminated restrictions in the operations of both domestic and foreign financial entities. Regulations regarding the range of services performed by the banks and other financial institutions have been changed.