21 April 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
Common Domain Model (CDM) for repo and bonds
ICMA’s CDM Steering Committee and REGnosys have held regular meetings since the beginning of March to model repo and bonds in the CDM. The main focus to date has been to develop a conceptual repo model that is aligned with the GMRA and ERCC Best Practice Guide in the European Repo Market.
In practical terms, this entails mapping out and categorising the processes and data elements in a repo such as sale and repurchase of securities, transfer of cash, initiation and termination dates, pricing (ie the repo rate) and associated data points and values. The conceptual model will then be translated into a logical model, with conditions and validation rules.
The CDM is intended to be developed as a cross-industry model, building on previous ISDA and ISLA work. ICMA is closely coordinating with ISLA who is working with REGnosys on a CDM implementation for securities lending. The aim is to ensure consistency and benefit from synergies, where possible, between repo and securities lending.
A recording for the ERCC AGM on 30 March and further information can be found on CDM webpage. Member firms who would like to contribute to this cross-industry initiative are welcome to get in touch.
ECB FinTech Taskforce publishes report on use of DLT in post-trade processes
On 12 April 2021, the ECB published its report on the use of DLT in post-trade processes, to which ICMA contributed through the Advisory Groups on Market Infrastructures for Securities and Collateral and for Payments (jointly the FinTech Taskforce). The report seeks to establish a common understanding among European stakeholders of the progress that the industry has made to date in implementing DLT in line with the current regulatory system.
Tokenisation and Central Bank Digital Currency – the impact on bond markets
On 29 March 2021, ICMA hosted a virtual event focusing on the tokenisation of financial assets and Central Bank Digital Currencies (CBDCs) with presentations from SIX Digital Exchange, BIS Innovation Hub and the Monetary Authority of Singapore. The event aligns with ICMA’s increased focus on understanding the impact of tokenisation as a significant market development. The recording of the event is available on the ICMA Media Library.
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:
- 15 April 2021: Societe Generale issued a structured product (autocall EMTN, 5m) as a Security Token directly registered on the Tezos public blockchain.
- 13 April 2021: European Investment Bank (EIB) hired Goldman Sachs Group Inc., Banco Santander SA and Societe Generale AG to explore a so-called digital bond in euros, which would be registered and settled using blockchain, according to media reports.
- 24 March 2021: Deutsche Börse, Deutsche Bundesbank and Germany’s Finance Agency tested DLT-based securities settlement in central bank money, including the issuance and secondary market transactions of a 10-year Bund.
ICMA has recently updated the Primary markets technology directory (now 39 solutions) and Electronic Trading Platform directory (now 50 solutions), following the inclusion of additional responses. The technology directories do not constitute an exhaustive list of providers in the market. Relevant providers that are not yet covered by the directories and wish to join are very welcome to do so.
FinTech regulatory roadmap
ICMA continues to update its FinTech regulatory roadmap, highlighting relevant 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. Recent updates to the roadmap include:
- 5 April 2021: Bank of Japan announced the commencement of Phase 1 PoC experimentation on CBDC. Phase 1 will run through to March 2022.
- 23 March 2021: Ministry of Treasury and Finance published its economic reforms action plan (in Turkish), including the Central Bank of Turkey to create the economic, technological and legal infrastructure of digital money; and the Ministry of Treasury and Finance to prepare a Fintech Strategy Document, by 31 Dec 2021.
Any feedback or flagging of items to include are very welcome. Please contact us here.
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.
- 29 March 2021: Canadian Securities Administrators (CSA) and Investment Industry Regulatory Organization of Canada (IIROC) released a joint notice on guidance on how securities legislation applies to Crypto-Asset Trading Platforms. The notice also outlines interim approaches that may be available to foster innovation and provide flexibility, while ensuring appropriate operations.
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.
2 April 2021: Bank of Thailand launched its consultation on its proposed approach to the development and issuance of a retail CBDC. Responses are due by 15 June 2021.
29 March 2021: The Federal Reserve Board, Consumer Financial Protection Bureau (CFPB), Federal Deposit Insurance Corporation (FDIC), National Credit Union Administration (NCUA) and Office of the Comptroller of the Currency (OCC) announced their Request for Information (RFI) to better understand the use of AI, including machine learning, by financial institutions. The comment deadline is 1 June 2021.
29 March 2021: Dubai Financial Services Authority (DFSA) announced its consultation paper on the regulation of security tokens. The proposals address concerns and issues relating to the use of DLT and similar technologies, among others. The deadline is 29 April 2021.
Relevant publications and news items
19 April 2021: Bank of England and HM Treasury announced the joint creation of a Central Bank Digital Currency (CBDC) Taskforce to coordinate the exploration of a potential UK CBDC.
19 April 2021: UK HM Treasury announced new plans to boost UK fintech and financial services, including (i) a new FCA ‘scale box’ and Centre for Finance, Innovation and Technology, (ii) the launch of a second phase of the Digital Sandbox, focusing on sustainability and climate change-related challenges, (iii) a new sandbox to explore the use of DLT to improve financial market infrastructure, among others. This follows the Kalifa review of UK FinTech, published 26 February 2021.
14 April 2021: ECB published the results of the public consultation on a digital euro.
13 April 2021: Korea’s FSC approved the revision to the Special Act on Support for Financial Innovation to make improvements to the financial regulatory sandbox program and support ‘innovative financial service’ providers.
12 April 2021: ECB’s Advisory Groups on Market Infrastructures for Securities and Collateral and for Payments published its report on the use of DLT in post-trade processes.
9 April 2021: Bank of England published its Quarterly Bulletin 2021 Q1, including a topical article on Delivering data standards and transforming data collection in financial services.
9 April 2021: UK’s House of Commons Library published its briefing paper on CBDCs.
8 April 2021: The Green Fintech Network published its action plan for a future-proof combination of digital technology and a sustainable financial sector. The network includes start-ups and experts in green fintech and supported the Swiss State Secretariat for International Finance SIF.
8 April 2021: Bank of Russia published its Digital Ruble Concept, following a previous consultation paper ‘A Digital Ruble’.
7 April 2021: G20 Finance Ministers and Central Bank Governors published their communique on upcoming commitments and focus, including the reiteration of the group’s views on global stablecoins.
7 April 2021: BIS Financial Stability Institute published its paper on Supervising cryptoassets for anti-money laundering.
6 April 2021: Sweden’s Riksbank published it’s report on lessons learned from phase 1 of the e-krona pilot project and next steps.
5 April 2021: MAS published Chairman Shanmugaratnam’s response to a parliamentary question on the size and growth of the cryptoasset market, and the regulation of cryptoasset exchanges in Singapore.
5 April 2021: Comisión Nacional del Mercado de Valores (CNMV) published its consultation (in Spanish) on the advertisement of cryptoassets. Responses closed 16 April 2021.
5 April 2021: Bank of Japan announced the commencement of its Proof of Concept Phase 1 in testing core functions and features required for CBDC. Phase 1 testing will conclude in March 2022.
1 April 2021: The Digital Currency Research Institute of the People's Bank of China announced (in Chinese) successful cross-border testing of the Digital Yuan.
31 March 2021: Bank Negara Malaysia published a feature article on evaluating Malaysia’s need for Central Bank Digital Currency in its Annual Report 2020.
31 March 2021: Eastern Caribbean Central Bank (ECCB) launched its retail CBDC pilot, ‘DCash’. DCash will initially be piloted in Antigua and Barbuda, Grenada, Saint Christopher (St Kitts) and Nevis and Saint Lucia.
26 March 2021: Bank of Japan announced the commencement of Phase 1 of its Proof of Concept work on CBDCs. This follows the establishment of its Liaison and Coordination Committee on CBDC to share details and provide updates with industry stakeholders.
25 March 2021: HKMA announced the launch of its Global Regtech Challenge, with the aim of further growing the local Regtech ecosystem.
23 March 2021: The UK Treasury Committee published the Bank of England’s response to its call for evidence on the Future of Financial Services.
19 March 2021: HKMA published its Regtech Watch Issue No.6, focusing on how new technologies can help banks manage risks associated with their treasury activities, including operational risk, legal risk, liquidity risk and market risk.
19 March 2021: Bank of Thailand set out regulatory guidelines for Baht-backed stablecoins and other forms of stablecoins.
Summary of ICMA FinTech Resources
Primary markets technology directory
Electronic Trading Platform (ETP) directory
Repo Trading Technology Directory
FinTech 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