Memorandum Of Understanding

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A memorandum of understanding (MOU) is a legal agreement between two parties that carries less weight than a formal contract but more than an informal agreement, and outlines the parties' rights and responsibilities under the memorandum. MOUs are commonly used in international agreements and the term is sometimes used as a synonym for "letter of intent".

First step

While an MOU does not have the same legal standing as a formal contract, it is often used as the first stage of the contract process, since it is legally enforceable if one of the parties fails to meet its obligations. MOUs are commonly used in international public law on place of treaties, since their terms can be kept confidential, don't require ratification and can be modified without lengthy negotiations.

In the U.S. financial services industry, an MOU negotiated between an institution and its regulator or supervisor indicates that the bank, while not admitting any wrongdoing, will refrain from a practice deemed unsound by the regulator and take future action to correct the practice.

Exchange MOUs

Many financial industry exchanges have signed MOUs with other exchanges in an effort to position themselves for a more global environment. These agreements between exchanges provide the opportunity to develop products that will benefit market users and enhance resources to educate individuals on the specific services of each exchange. Non-exchange MOUs have been agreed upon for the sharing of information and partnership opportunities.

CME Group

• CME and Osaka Securities Exchange signed an MOU on Sept. 3, 2008.

CBOE

• CBOE and Taiwan Futures Exchange entered into a memorandum of understanding on Sept. 6, 2007.

• CBOE and the Shenzhen Stock Exchange signed a memorandum of understanding on November 1, 2005.

ISE

• The International Securities Exchange signed a memorandum with the Osaka Securities Exchange on Feb. 24, 2008 to establish a relationship and take the first step toward coordinating efforts for the launch of a new, jointly owned trading platform.

NASDAQ

• NASDAQ and the Tel-Aviv Stock Exchange signed an MOU on Nov. 26, 2007 to formalize a relationship between the two markets.

Singapore Exchange

• Singapore Exchange Limited (SGX) and Karachi Stock Exchange (KSE) signed an MOU on October 22, 2008 to collaborate for the benefit of the financial services industries in Singapore and Pakistan. The MOU aims to foster a closer relationship between both exchanges. This includes sharing best practices regarding each exchange’s products as well as the operation and governance of their respective markets.
• Singapore Exchange Limited (SGX) AND FUJIAN PROVINCIAL GOVERNMENT SIGN LISTING MOU
  The MOU aims to further promote the listings of Fujian enterprises on SGX.

Regulatory MOUs

• The Securities and Exchange Commission and the Commodities Futures Trading Commission signed a memorandum of understanding on March 11, 2008 to coordinate their efforts in areas of common regulatory interest in order to foster market innovation, fair competition and to promote efficiency in regulatory oversight.

• The Securities and Exchange Commission, the Commodities Futures Trading Commission and the Bank of England signed a memorandum of understanding,on Oct. 28, 1997 to set forth a cooperative approach to sharing supervisory information. It is the first formal agreement among US and UK Securities, futures and banking regulators. The MOU was signed by SEC Chairman Arthur Levitt, CFTC Commissioner Barbara Holum, the Bank of England Governor, Eddie George and by Howard Davies who is the Chairman of the UK's Financial Services Authority.

• The Securities and Exchange Commission and the College of Euronext Regulators, which includes; The Netherlands, France, Belgium, Portugal, the United Kingdom and the United States, entered a memorandum of understanding, in January of 2007, when Euronext combined with the New York Stock Exchange in order to create the new group, NYSE Euronext. The MOU expresses each parties willingness to cooperate with each other in the interest in fulfulling their respective regulatory mandates particulary in the area of investor confidence and systemic stability.

Broker/Dealer MOUs

• Reliance Money, the largestbrokerage house in India, signed a memorandum of understanding with OptionsXpress to provide access, custody and execution services for their customers looking to trade in the U.S. markets.