With the aid of international rating agencies and global issue managers, corporate entities on their part are raising funds wherever it is priced most cheaply and available with minimal hassle. On the demand side, investors recognize the importance of global liquidity and market diversification. By taking  BIS Review 31/2002  1  advantage of the financial links provided by intermediaries, retail investors have become empowered to actively manage a global portfolio of investments. In this environment, no single national regulator can afford to focus just on activities taking place in its domestic markets. To achieve the objectives of investor protection and systemic stability, cross-border regulatory cooperation is imperative. The Sep 11 incident demonstrates the degree to which financial markets are interwoven and illustrates the need for such collaboration. All of you will recall that the event resulted not just in the closure of US markets for 4 working days, but also justified the temporary closure of several markets in Asia, while delaying trading hours in others. The reality was that regulators the world over found themselves having to assess the situation, update one another, and decide on actions to be taken in their respective markets. Systemic risk has also increased with the trend towards commoditisation, ie volume business at competitive costs. The concentration of volumes into key nodes such as large global custodians represents exposure by market participants to entities located in other jurisdictions. Meanwhile, crossborder capital flows have significantly increased the magnitude by which markets adjust to shocks as evidenced in the Asian crisis.

We hope that the interaction through presentations and panel discussions will provide ample opportunities for participants to share the experiences and challenges in their home markets. To provide a global perspective, we are honoured to have distinguished speakers from the US Securities and Exchange Commission, the UK Financial Services Authority, and the Australian Securities and Investments Commission. The presentations by leading industry practitioners will add an important market dimension. To start off the programme this morning, let me put to you three broad propositions which regulators should reconcile with, in keeping with the demands of global capital markets: (a)  First, the need for cross-jurisdiction regulatory collaboration;  (b)  Second, a growing impetus for international standards; and  (c)  Third, how can regulators and regulations respond and facilitate capital markets’ continued innovation and growth. The need for regulatory collaboration The importance of cross-border regulatory cooperation is evident from the cross-border element in the regulator’s job. Local investors buy financial products overseas while foreign funds own substantial stakes in locally-listed stocks. Capital market intermediaries compete vigorously to add value, servicing global orders. Even markets now seek direct presence, in the form of trading terminals, in different jurisdictions. Increasingly, cross-border operations are no longer conducted predominantly via telephone or fax wires, but by proprietary networks capable of channeling orders and funds across the globe almost instantaneously. Such proprietary systems combined with the reach of the internet has pooled isolated pockets of liquidity into a single global market.