19 August 2020 - We are pleased to share the third 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
ICMA co-signs a joint association letter on digital future for financial markets
ICMA, along with ISDA, ISLA, LBMA, UK Finance, Association of German Banks (BdB), AFMA and International Islamic Financial Market, have jointly submitted on 29 July 2020 a letter to policy-makers asserting their commitment to defining and promoting the development of a digital future for financial markets. The letter sets out a series of principles and objectives across three core areas – standardization, digitization and distribution – in order to increase efficiencies, reduce complexity and lower costs. You can access the letter here.
Common Domain Model (CDM) for repo and bonds
ICMA held a workshop in July to start developing a repo model in the CDM, followed by another workshop in August to review the draft specifications and technical requirements in collaboration with ISDA and Regnosys.
If you would like to join the working group of sell-sides, buy-sides, trading venues and technology providers, please get in touch. Further information, including supporting materials from the workshops and a webinar can be found here.
ICMA FinTech Advisory Committee (FinAC)
ICMA’s FinTech Advisory Committee (FinAC) held its fourth virtual meeting on 16 July 2020. On the agenda were trends, new initiatives and standardisation in secondary bond markets, and the Barclays White Paper Industry Adoption Scenarios for Authoritative Data Stores using the ISDA Common Domain Model, which was published on 14 July 2020.
A summary note of the meeting will be published in the next Quarterly Report. Further background on the current composition of the FinAC and its mission statement is available on ICMA’s dedicated FinTech webpage.
ICMA to review primary market technology mapping
ICMA has started to review its primary market technology directory and welcomes the inclusion of any new solutions not yet represented. The directory currently lists a total of 30 solutions, including emerging platforms which have conducted live pilots within the issuance process. Please contact us if you would like to flag any new initiatives or if you have any other suggestions.
The directory and further information is available on ICMA’s website.
ICMA FinTech resources
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 processing across the entire life-cycle of bonds, from issuance and trading to settlement, and also to 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:
- 12 August 2020: BondEvalue’s blockchain-based bond exchange, BondbloX, launched with first trade.
The exchange allows for fractional ownership of bonds with minimum ownership of US$1,000.
- 29 July 2020: Bursa Malaysia and Fintech provider Hashstacs announced the development of a Blockchain PoC to facilitate growth of the Labuan Bond Market.
- 28 July 2020: Tel-Aviv Stock Exchange announced the proposed launch of a Central Blockchain Securities Lending Platform for 2 November 2020.
Update to DLT regulatory directory
ICMA’s DLT regulatory directory provides a non-exhaustive overview of recent DLT regulatory guidance and 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.
- 11 August 2020: German Federal Ministry of Finance published a draft law on the introduction of electronic securities, addressing the modernisation of paper-based documentation requirements with the ability to store securities in a digital register such as blockchain.
- 27 July 2020: Luxembourg Government submitted a draft bill n°7637 to Parliament to recognise the possibility of using electronic recording systems (including DLT) for issuance or conversion of dematerialised securities.
- 21 July 2020: Monetary Authority of Singapore (MAS) published its consultation paper on a new Omnibus Act for the financial sector, with ‘Digital Tokens’ (DTs) defined as a digital representation of capital markets products which (i) can be transferred, stored or traded electronically; and (ii) satisfies such other characteristics as MAS may prescribe. Submissions close 20 August 2020.
Members are encouraged to flag relevant consultations and express interest in contributing to potential consultation responses.
6 August 2020: Basel Committee released consultative documents on principles for operational risk and revisions to the principles for the sound management of operational risk. The consultation period ends 6 November 2020.
23 July 2020: European Commission opened feedback for its roadmap on Artificial intelligence – ethical and legal requirements. The consultation period ends 10 September 2020.
23 July 2020: Securities Commission (SC) Malaysia opened feedback on regulatory framework for digital asset wallet providers. The consultation period ends 14 August 2020.
21 July 2020: Monetary Authority of Singapore (MAS) published its consultation paper on a new Omnibus Act for the financial sector.
25 June 2020: IOSCO published its consultation paper on the use of artificial intelligence and machine learning by market intermediaries and asset managers. The consultation period ends 26 October 2020.
11 June 2020: Autorité de Contrôle Prudentiel et de Résolution (ACPR) released its discussion document Governance of Artificial Intelligence in Finance. The consultation period ends 4 September 2020.
3 June 2020: ESMA published its consultation paper on Draft Guidelines on Outsourcing to Cloud Service Providers. The consultation period ends 1 September 2020.
28 May 2020: IOSCO published its consultation on outsourcing principles to ensure operational resilience. The consultation period ends 1 October 2020.
9 March 2020: FCA Call for Input - Accessing and using wholesale data. The consultation period ends 1 October 2020.
Relevant publications and news items
13 August 2020: US Federal Reserve highlighted its research and experimentation undertaken to enhance its understanding of the opportunities and risks associated with central bank digital currencies, in addition to Governor Brainard’s speech indicating the Federal Reserve of Boston’s collaboration with MIT to build and test a hypothetical digital currency for central bank uses.
13 August 2020: MAS announced commitment of S$250 Million to accelerate innovation and technology adoption in financial sector.
13 August 2020: US Federal Reserve highlighted its research and experimentation undertaken to enhance its understanding of the opportunities and risks associated with central bank digital currencies.
10 August 2020: Saudi G20 Presidency and BIS Innovation Hub published its update on the progress made in the G20 TechSprint initiative.
6 August 2020: Thai SEC to allow more types of businesses to participate in regulatory sandbox, covering all capital market activities.
6 August 2020: Reserve Bank of India (RBI) to set up Innovation Hub as a centre for ideation and incubation of new capabilities which can be leveraged to create innovative and viable financial products and services.
5 August 2020: ASX consultation closed on DLT-based CHESS replacement timetable, with early results showing over 90% of CHESS users could meet the proposed go-live date of April 2022.
4 August 2020: MAS, National Research Foundation (NRF) and National University of Singapore (NUS) to set up new Asian Institute of Digital Finance (AIDF) to spearhead FinTech education and research.
4 August 2020: Malaysia Digital Economy Corporation (MDEC) in collaboration with Bank Negara Malaysia launched its Fintech Booster programme to further support the growth and development of fintech companies in Malaysia.
August 2020: Institute for Monetary and Economic Studies, Bank of Japan, released a research paper: Disagreement between Human and Machine Predictions.
31 July 2020: Korean Financial Services Commission announced the launch of its regulatory sandbox website and renewal of its fintech information portal (in Korean).
30 July 2020: The UK’s Information Commissioner’s Office launched its guidance on AI and data protection.
30 July 2020: US SEC released solicitation to procure a distributed ledger technology (DLT) smart contract analysis tool.
24 July 2020: BIS-FSI published FSI Brief No.9 Covid-19: Boon and bane for digital payments and financial inclusion.
24 July 2020: OECD released its report on Examples of AI National Policies for the G20 Digital Economy Task Force.
24 July 2020: BIS Irving Fisher Committee Working Group released its report Towards monitoring financial innovation in central bank statistics.
24 July 2020: Eastern Caribbean Central Bank (ECCB) announced its intention to launch the EC Digital Currency (cash) pilot within all 8 member countries.
23 July 2020: Korean Financial Services Commission announced plans to promote digital finance focusing on improving regulations for the industry and strengthening data security to ensure stability in the financial system, among other items.
23 July 2020: Korean Financial Services Commission added four more ‘innovative financial services’ to its regulatory sandbox.
22 July 2020: G20 published Ministerial Declaration following meeting of Digital Economy Ministers, including an emphasis on Trustworthy Artificial Intelligence and effective use of data for digitalisation.
22 July 2020: Bank of Korea established (in Korean) a Digital Innovation Office to research and establish government policy on new technologies such as AI and Big Data.
22 July 2020: Malta Financial Services Authority announced the launch of its fintech regulatory sandbox.
20 July 2020: Banque de France announced 8 final candidates selected from the call for applications to experiment the use of central bank digital currency for interbank settlements.
20 July 2020: HM Treasury announced launch of review into the UK’s financial technology industry to identify opportunities to support further growth in the sector.
17 July 2020: European Commission published a summary report following its open public consultation on the White Paper on Artificial Intelligence.
17 July 2020: Bank of Jamaica has formally invited interested CBDC providers to develop and test potential CBDC solutions in its recently established Fintech Regulatory Sandbox.
16 July 2020: Thai SEC introduced its first Capital Market Digital Strategic Plan 2020 – 2022 to promote development of market innovations.
16 July 2020: Korean Financial Services Commission launched its working group to draw up plans for promoting AI in financial services.
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