We are pleased to share the second edition of ICMA’s newsletter focusing on our work from a FinTech and market electronification perspective. We intend to bring our members up to speed on our cross-cutting technology initiatives across our key market areas and provide insights into regulatory updates, consultation papers, news and other publications, and upcoming meetings and events.
Please feel free to forward this to colleagues who are welcome to subscribe here by selecting the FinTech box.
ICMA FinTech initiatives and workstreams
Common Domain Model (CDM) for repo and bonds
ICMA is in the process of formalising the collaboration with ISDA and Regnosys to extend the Common Domain Model (CDM) to repos, and by extension, bonds. A working group of sell-sides, buy-sides, trading venues and technology providers has been created to help support the development of the CDM for bond and repo markets. The working group includes front office, middle/back office, IT and legal experts. A series of further workshops have commenced to define the scope of the repo model in the CDM and outline the deliverables, which will serve as a basis for the technical implementation.
Further information, including supporting materials from the workshops and a webinar can be found here. If you would like to be involved in this cross-industry initiative, please get in touch.
ICMA FinTech Advisory Committee (FinAC)
ICMA’s FinTech Advisory Committee (FinAC) held its third virtual meeting on 26 May 2020. Electronification in both primary bond markets and repo markets is evolving rapidly. Building on the discussions in previous meetings on data standards and electronic messaging protocols, FinAC members led a discussion on trends, new initiatives and electronification within each area. The purpose was to share views on latest developments, identify gaps in terms of straight-through-processing (STP) and common standards, as well as potential common threads between primary and repo markets.
A summary note of the meeting can be found here. Further background on the current composition of the FinAC and its mission statement is available on ICMA’s dedicated FinTech webpage.
ICMA FinTech resources
ICMA publishes updated FinTech Mapping Directory
ICMA has updated its mapping directory of technology solutions for repo and cash bond operations. The directory now lists over 160 solutions, compared to 130 solutions last year and 87 solutions when it was first launched in November 2017. The review shows an increased focus on matching, confirmation & allocation (6 additions), collateral lifecycle management, exposure agreements and reconciliation services (4 additions each). Ancillary categories such as workflow & communication have also seen an increase in diverse tools to manage operational and legal processes (8 additions).
The mapping directory does not constitute an exhaustive list of providers in the market. Relevant providers that are not yet covered by the mapping directory and wish to join are very welcome to do so. Please contact us for further details.
Updates to DLT regulatory directory
ICMA’s DLT regulatory directory provides a non-exhaustive overview of recent DLT regulatory guidance, legislative initiatives, as well as related strategy papers and publications in selected jurisdictions across Europe, North America, and Asia-Pacific. Recent updates are listed below.
- 3 July: Swiss Commission commenced the examination of Bill 19.074 "Adaptation of Federal Law to Developments in the Technology of Distributed Electronic Registers" (TRD), following Federal Assembly unanimous support 17 June 2020 on the amendments.
- 19 June: Swiss Federal Council took note of the report on the need to amend tax law with regard to blockchain. The report concluded that no special legislative amendments to tax law are necessary.
New FinTech applications in bond markets
Applications of distributed ledger technology, artificial intelligence/machine learning, big data analytics or cloud computing have significant potential to alter the lifecycle of bonds, from issuance, trading to settlement, and impact the functioning of financial markets. Recent initiatives in ICMA’s listing of new applications in bond markets, which are taken from public sources include:
- 14 July: LedgerEdge, a company formed by R3 founder David Rutter, intends to create a corporate bond trading platform utilising blockchain, AI and cloud technologies, according to news reports.
- 3 June: Japan Exchange Group and Japan Securities Depository Center announced the selection of three use cases in their pilot test project of a DLT information sharing platform.
Members are encouraged to flag relevant consultations and express interest in contributing to potential consultation responses.
25 June: IOSCO published its consultation paper on The use of artificial intelligence and machine learning by market intermediaries and asset managers. Deadline for responses 26 October 2020.
17 June: Italian Ministry of Economic Development published (in Italian) its consultation paper on the use of DLT and blockchain in a number of fields. Deadline for responses 20 July 2020.
11 June: Autorité de Contrôle Prudentiel et de Résolution (ACPR) released its discussion document Governance of Artificial Intelligence in Finance. Deadline for responses 4 September 2020.
3 June: ESMA published its consultation paper on Draft Guidelines on Outsourcing to Cloud Service Providers. Deadline for responses 1 September 2020.
28 May: IOSCO consults on outsourcing principles to ensure operational resilience. The consultation period ends 1 October 2020.
9 March: FCA Call for Input - Accessing and using wholesale data. Deadline for responses 1 October 2020.
Relevant publications and news items
13 July: MAS and Temasek jointly released a report, Project Ubin Phase 5: Enabling Broad Ecosystem Opportunities, to mark the successful conclusion of the fifth and final phase of Project Ubin.
10 July: ICMA Quarterly Report: Third Quarter 2020.
7 July: AMF released its position paper on Building a European Digital Strategy in Financial Services with detailed proposals in response to recent EC consultations.
3 July: ECB published its discussion paper Financial intermediation and technology: What’s old, what’s new?
1 July: Central Bank of the UAE (CBUAE) and Abu Dhabi Global Market (ADGM) announced invitations to apply for FinTech Abu Dhabi 2020 Innovation Challenge, focusing on SME financing needs and RegTech compliance solutions.
June: Bank of Canada released several Staff Analytical Notes on CBCD, including Privacy in CBDC technology, Designing a CBDC for universal access, Security of a CBDC and insights on CBDC adoption and usage
30 June: BIS Innovation Hub announced the expansion to new locations in Europe and North America.
30 June: ASX consults on CHESS replacement implementation timetable, with a proposed go-live of April 2022.
29 June: ECB released its Occasional Paper Series on Digitalisation and the euro area and EU economies.
25 June: EU Blockchain Observatory and Forum published its 2018-2020 Conclusions and Reflections report.
24 June: BIS released a special chapter on Central banks and payments in the digital era as part of its BIS Annual Economic Report.
22 June: US Federal Reserve released its paper on Global Demand for Basket-Backed Stablecoins.
22 June: FCA prepares for phased move to new data collection platform RegData.
19 June: ICMA podcast: Electronic trading, performance during the crisis and future developments. Martin Scheck, ICMA Chief Executive and Christophe Roupie, CEO of EMEA and APAC, at MarketAxess, discuss the adoption of electronic trading platforms and how they have coped during the COVID-19 crisis, including liquidity provision and the use of different trading protocols.
18 June: Bank of Thailand announced its prototype development project of Central Bank Digital Currency (CBDC), building upon knowledge from Project Inthanon.
15 June: Cambridge Centre for Alternative Finance (CCAF), in partnership with the World Bank Group and the World Economic Forum, released its Global Covid-19 FinTech Market Rapid Assessment Survey.
15 June: Bank of Korea launched (in Korean) a legal advisory panel for central bank digital currency.
11 June: Canadian Securities Regulators signed FinTech Co-operation agreement with the Financial Supervisory Commission of Taiwan.
11 June: US Securities and Exchange Commission’s Strategic Hub for Innovation and Financial Technology (FinHub) announced the launch of virtual peer-to-peer meet-ups (P2Ps).
8 June: Monetary Authority of Singapore (MAS) launched its S$1.75 Million FinTech Innovation Challenge for a COVID-resilient and greener financial sector.
6 June: Autorité de Contrôle Prudentiel et de Résolution (ACPR) and the New York State Department of Financial Services (NYSDFS) announced their Memorandum of Understanding to ease the operation of Fintech companies across the two jurisdictions.
5 June: Securities and Exchange Board of India (SEBI) introduced its Regulatory Sandbox framework, allowing SEBI regulated entities to experiment with FinTech solutions within capital markets.
4 June: Office of the Comptroller of the Currency (OCC) requested comments on its proposal to update activities and operations rules and its rules on digital activities, including how DLT, AI and ML among other technologies are used or could be used in banking and their potential implications.
2 June: Bank of England’s Post-Trade Technology Market Practitioner Panel published its report on The Future of Post-Trade.
Summary of ICMA FinTech Resources
Primary markets technology mapping directory
Electronic Trading Platform (ETP) mapping directory
Repo Trading Technology Directory
FinTech mapping directory for repo and cash bonds
Distributed Ledger Technology (DLT) Regulatory Directory
New FinTech applications in bond markets