LONDON, April 4 (Reuters) - Global securities watchdog

IOSCO on Thursday proposed detailed guidance on how regulators

should supervise stock exchanges more closely to negate risks

from changes in business practices.

IOSCO, which groups financial regulators from the United

States, Europe, Asia and elsewhere, said that exchanges have

increasingly become publicly listed companies over the past two

decades while remaining self-regulatory in some cases.

Bourses have expanded geographically and diversified into

technology and data services, IOSCO said in the report, citing

partnerships with the likes of Google Cloud and Microsoft as

exchanges have moved well beyond their traditional role of

listing and trading stocks under a mutualised structure.

In Europe, Brexit has contributed to the increased

cross-border operation of exchanges and other types of trading

venues, it added.

"The market evolutions have influenced the way exchanges and

exchange groups are organised, which can potentially create new

conflicts of interest, as well as operational and organisational

interdependencies," IOSCO said.

"These may give rise to potential risks and challenges

concerning the regulatory functions and responsibilities of

exchanges, as well as supervisory issues."

In some exchange groups with multiple boards, directors sit

on several of the boards - a practice known as dual-hatting - to

cut costs and complexity.

However, this practice could impair the ability of board

members to act in the best interest of each exchange they serve,

especially when there are diverging or competing interests

within the exchange group or with shareholders, IOSCO said.

The report proposes six "good practices" for regulators to

assess how exchanges are structured to ensure independence in

the way bourses discharge their regulatory obligations, ensuring

that controls are maintained at the level of each individual

exchange in a group.

Regulators should also ensure adequate monitoring of the

activities of multinational exchange groups operating in their

jurisdiction, it added.