27 January 2021 - We are pleased to share the latest edition of ICMA’s newsletter focusing on our FinTech and market electronification work to bring our members up to speed on the 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.
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ICMA FinTech initiatives and workstreams
ICMA compiles FinTech and sustainable finance library
ICMA has compiled a non-exhaustive list of recent publications on the topic of FinTech and sustainable finance, with a focus on bond markets. The FinTech and sustainable finance library intends to complement other ICMA members’ resources and help inform broader discussions on this topic.
The library aims to highlight the current views from academic, market, and official sector studies on the potential of FinTech to further sustainable debt capital markets. Recent literature on this topic tends to focus on the underlying requirement of data, the opportunities presented by digital innovation, and the use of DLT to grow the market. The list will be updated on an ongoing basis as the discussions on the role of FinTech in sustainable bond markets evolve and the impacts become clearer.
The library is available here and includes ICMA’s recent publication on FinTech and sustainable bond markets under the market studies tab.
ICMA publishes updated Electronic Trading Platform (ETP) directory
ICMA has updated its mapping of Electronic Trading Platforms (ETPs) available for cash bonds. The directory provides an overview of capabilities, target markets, and value propositions of 48 technology solutions, up from 41 in the November 2019 publication. Key takeaways:
- The latest review shows increased coverage of order and execution management systems (OMS/EMS), with 11 solutions which assist with the aggregation of records, quotes, and trade orders.
- The mapping includes the regulatory status of each provider where relevant, highlighting for example MTF or OTF status in the EEA or UK, or RMO status in Singapore.
- The directory now features coverage of MIC and LEI codes of providers where relevant.
Please contact us if you would like to flag any new initiatives or if you have any other feedback. The directory and further information is available on ICMA’s website.
Common Domain Model (CDM) for repo and bonds
Over the last few months, ICMA has established a Steering Committee to manage the development of the CDM for repo and bonds and ensure we have the right level of resources. The initial modelling phase is expected to start in the near future, focusing on standard fixed-term repo transactions, including trade execution, clearing and settlement (and outright bond transactions). The duration of the initial phase is approx. 18 weeks, including a showcase event.
Background information, including supporting materials from workshops, a webinar and a presentation at the ERCC AGM in October 2020 can be found on ICMA’s dedicated CDM webpage. Member firms who would like to contribute to this cross-industry initiative are welcome to get in touch.
FinTech regulatory roadmap
ICMA has compiled a roadmap highlighting relevant FinTech regulatory developments coming up over the next few years. The timeline draws upon key milestones presented by regulators and national authorities, and is broken down by national, EU and global initiatives.
This is intended to be a living document. Any feedback or flagging of items to include are very welcome. Please contact us here.
ICMA Quarterly report – First Quarter 2021
ICMA’s Quarterly Report for the First Quarter of 2021 begins with a review of 2020 and outlook for 2021 by ICMA’s Chief Executive, Martin Scheck.
Relevant FinTech articles include FinTech and sustainable bond markets, Digital bonds and the fixed income lifecycle, ICMA FinTech Advisory Committee, FinTech regulatory developments in the fourth quarter, CDM for repos and bonds, ICMA FinTech Forum 2020, and The Philippines: mobile app for retail investors.
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 lifecycle 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:
- 22 January 2021: SGX and Temasek announced their joint venture (JV) to advance digital asset infrastructure in capital markets. The JV will focus on capital markets workflows through smart contracts, ledger and tokenisation technologies.
- 7 January 2021: Deutsche Bank and Singapore fintech STACS announced their collaboration to jointly explore a PoC related to the technological and practical feasibility of digital assets interoperability, liquidity, cross-border connectivity, and smart contract templates, including the support of sustainability-themed digital bonds.
- 10 December 2020: DBS to launch full-service digital exchange, enabling Institutional Investors and Accredited Investors to tap into a fully integrated tokenisation, trading and custody ecosystem for digital assets.
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.
- 26 January 2021: Luxembourg Bill of Law 7637 (“Law of 22 January 2021”) came into effect, following its adoption 21 January 2021 and publication in Luxembourg Official Journal 22 January 2021. The bill includes amendment of (i) law of 5 April 1993 on the financial sector, and (ii) law of 6 April 2013 on dematerialised securities, recognising the possibility of using electronic recording systems (including DLT) for issuance or conversion of dematerialised securities.
- 12 January 2021: HM Government of Gibraltar announced progress made by a working group on the addition of a 10th core principle to Gibraltar Financial Services Commission’s current DLT Regulatory Framework. The working group is responsible for defining the appropriate market standards for exchanges operating in the digital asset space.
- 16 December 2020: German Cabinet passed an official draft bill on the introduction of electronic securities, following previous draft bill of 11 August 2020. The law will allow the use of electronic registration for securities.
- 16 December 2020: H.R.8989 was introduced to US Congress, requiring the SEC to conduct a study on the feasibility, benefits, and costs of using a distributed ledger system in the post-trade clearing and settlement process, and for other purposes.
- 11 December 2020: Swiss Federal Council brought into force, effective from 1 February 2021, the parts of the Adaptation of Federal Law to Developments in Distributed Ledger Technology (DLT bill) that enable ledger-based securities to be introduced. The remaining provisions of the DLT bill are expected to enter into force on 1 August 2021.
14 December 2020: How FinTech is changing capital markets
ICMA speaks to Steve Toland, Founder at TransFICC, an e-trading technology company providing solutions for the fixed income and derivatives markets, who shares his views on how FinTech is creating efficiencies in the capital markets and current trends, including increased automation of work flows and processes. Steve also discusses the effect that the pandemic has had on the FinTech sector and the other challenges it faces, the role of the regulatory framework as well as the expected impact of artificial intelligence and machine learning in the future.
Primary Market Financial Technology - Livestreamed
This new ICMA Education course is designed to provide participants with an accessible review of the role of technology in the primary markets, both now and in the future. Registrations are now open for live sessions in June.
Members are encouraged to flag relevant consultations and express interest in contributing to potential consultation responses.
7 January 2021: UK HM Treasury published its consultation on the government’s approach to cryptoasset regulation, with a focus on stablecoins; and call for evidence on investment and wholesale uses. The consultation closes 21 March 2021.
23 December 2020: US SEC issued a statement and request for comment regarding the custody of Digital Asset Securities by Special Purpose Broker-Dealers. The statement and request for comment are published on the Commission’s website and will become effective 60 days after publication in the Federal Register.
Relevant publications and news items
26 January 2021: OECD published its report on regulatory approaches to the tokenisation of assets. The report also identifies some key regulatory issues in tokenised assets and markets that policymakers should be aware of and/or which may warrant attention by policymakers.
22 January 2021: BIS Innovation Hub (BISIH) published its annual work programme, including 6 key focus areas of suptech and regtech; next-generation financial market infrastructures; central bank digital currencies; open finance; green finance; and cyber security. BISIH also launched its Innovation Network to support its priorities, share knowledge about technology projects and discuss innovative answers to problem statements relevant to central banks.
21 January 2021: New York State Department of Financial Services announced details on its first Tech Sprint, focusing on Digital Regulatory Reporting in the virtual currency industry.
20 January 2021: ASIC published its report summarising the regtech initiatives and events held during the 2019–20 financial year. The report outlines that regtech is particularly useful for identifying and, in some cases, assessing indicators of concerning conduct or activities by financial businesses.
20 January 2021: FSB published its 2021 work programme, highlighting it’s roadmap on enhancing cross-border payments and further actions relating to previously published Global Stablecoin (GSC) arrangements.
19 January 2021: EC and ECB released their joint statement on their cooperation on a digital euro. Following the conclusion of the public consultation on 12 January 2021 and a period of preparatory work, the ECB will consider whether to start a digital euro project towards mid-2021.
13 January 2021: ECB concluded its consultation on a digital euro, with record level of public feedback. Initial analysis indicates privacy ranks highest among requested features of a potential digital euro.
12 January 2021: EC responded to an EU Parliament questions on the proposed MiCA regulation, noting a potential future EU-issued CBDC would be out of scope.
12 January 2021: US Federal Reserve published Governor Brainard’s speech - Supporting Responsible Use of AI and Equitable Outcomes in Financial Services.
6 January 2021: FCA announced the application window for cohort 7 of its regulatory sandbox closed 31 December 2020, and applications would open again later in 2021.
4 January 2021: US Office of the Comptroller of the Currency (OCC) published a letter clarifying national banks’ and federal savings associations’ authority to participate in independent node verification networks (INVN) and use stablecoins to conduct payment activities and other bank-permissible functions.
1 January 2021: Fengtai District People’s Government of Beijing Municipality announced (in Chinese) PBOC’s CBDC pilot programme has been extended to Beijing.
23 December 2020: US Treasury President’s Working Group on Financial Markets released a statement on key regulatory and supervisory issues relevant to certain stablecoins.
23 December 2020: US Federal Reserve published its paper on tokens and accounts in the context of digital currencies, seeking to inventory the different ways common terms are being used by different people to reference different concepts.
23 December 2020: China Securities Regulatory Commission (CSRC) updated the Securities Trading Exchange Protocol and published the Electronic Information Interface for Capital Market Over-the-counter Products.
22 December 2020: EU Parliament adopted non-binding resolution with recommendations to the Commission on Digital Finance: emerging risks in crypto-assets - regulatory and supervisory challenges in the area of financial services, institutions and markets, following provisional adoption 8 October 2020.
18 December 2020: ESMA published cloud outsourcing guidelines to help firms identify, address and monitor the risks arising from cloud outsourcing arrangements.
16 December 2020: The Association of National Numbering Agencies announced 15 additional jurisdictions have been added to the open-source relationship files provided through the certified ISIN-to-LEI mapping service. The initiative undertaken by ANNA and GLEIF maps ISINs to their corresponding LEIs.
16 December 2020: Hong Kong SFC announced its first licence granted to a virtual asset trading platform. The platform will only serve professional investors under the close supervision of the SFC and will be subject to tailor-made requirements similar to those which apply to securities brokers and automated trading venues.
16 December 2020: Bank Negara Malaysia (BNM) and the Securities Commission Malaysia (SC) jointly published their response on "Policy confusion over cryptocurrencies". The response re-iterated the previous joint statement on digital asset regulation in Malaysia, and SC’s Guidelines on Digital Assets published October 2020.
16 December 2020: RBI announced opening of Second Cohort under the Regulatory Sandbox with ‘Cross Border Payments’ as its theme. RBI also revised its enabling framework to reduce net worth requirement and include Partnership firms and LLPs to participate.
11 December 2020: PBOC, CBIRC, CSRC and SAFE jointly published a Roadmap for Implementing Global LEI (2020-2022), to facilitate cross-border trade and financial transactions.
10 December 2020: GLEIF announced it will be advancing Global LEI System to create a fully digitized LEI service, capable of enabling instant and automated identity verification between counterparties operating across all industry sectors, globally.
7 December 2020: Singapore launched a SGD12 million Singapore Blockchain Innovation Programme to further strengthen its blockchain ecosystem.
7 December 2020: The Singapore Blockchain Ecosystem Report 2020 was published at the Singapore FinTech Festival.
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
FinTech regulatory roadmap
FinTech and sustainable finance library
ICMA Media Library