27 May 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
New ICMA industry guide to definitions and best practice for bond pricing distribution
This new Guide to best practice to definitions for bond pricing distribution aims to set out standards and definitions agreed on by a representative group of industry participants, which we hope will be adopted by the market as the basis of further innovation and automation.
Pre-trade information on bond pricing is currently non-standardised and often misunderstood. The term ‘axe’ is used in fixed income trading to represent a sell-side advertising buy or sell bond interests. These are traditionally tied in some form to the sell-side’s book but can also be driven by client orders and even a trader’s market view or valuation.
The guide to best practice will be updated throughout 2021 and thereafter, reviewed semi-annually. For more on this topic, see ICMA’s podcast A buyside view - bond pricing distribution today or contact email@example.com for additional information.
Common Domain Model (CDM) for repo and bonds
In the latest meetings, ICMA’s CDM Steering Committee together with REGnosys focused on modelling settlement and clearing in the CDM for repo and bonds. Based on anonymised sample test transactions shared by SteerCo members, REGnosys furthermore undertook a mapping of FIX messages to CDM to demonstrate how a repo transaction is represented in the CDM, providing a single, consistent view. Definitions in the CDM for repo and bonds are aligned with the GMRA and ERCC Best Practice Guide in the European Repo Market.
Save the date: Looking ahead, ICMA will be holding a virtual event on 21 July 2021 to showcase the implementation of the CDM for repo and bonds and its benefits. Further information will be communicated in due course.
ICMA’s CDM webpage contains links to presentations and podcasts related to the CDM, amongst other resources. ICMA member firms who would like to contribute to this initiative are encouraged to get in touch.
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:
- 28 April 2021: European Investment Bank (EIB) announced the issuance of a 100m 2-year digital bond, deploying this distributed ledger technology for the registration and settlement of digital bonds.
- 28 April 2021: DBS, J.P. Morgan and Temasek announced plans to develop a platform to reduce current frictions and latency for cross-border payments, trade transactions and foreign exchange settlements through a newly-established technology company – Partior.
ICMA has recently updated the Electronic Trading Platform directory (now 53 solutions), and FinTech mapping directory for repo and cash bond operations (now 177 solutions) following the inclusion of additional solutions. 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:
- 7 May 2021: FCA and BoE are expected to publish the final AIPPF paper Q4 2021, as outlined in the recently updated regulatory initiatives grid.
- 6 May 2021: BIS Innovation Hub and the Bank of Italy, within the Italian G20 Presidency, launched the G20 TechSprint 2021 Initiative, an international contest to search for innovative solutions to resolve operational problems in green and sustainable finance. Winners for each problem statement are to be announced in October 2021.
- 30 April 2021: UK Law Commission intends to publish proposals for law reforms related to the accommodation of smart contracts & digital assets, following respective consultations, in late 2021.
- 27 April 2021: FCA and City of London announced, within its recent pilot evaluation report, plans to run a second phase of the digital sandbox in late 2021.
Any feedback or flagging of items to include are very welcome. Please contact us.
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.
- 6 May 2021: German Parliament adopted the Electronic Securities Act (eWpG), allowing for electronic bearer bonds to be issued and registered at a centralised or decentralised electronic securities register. See previously published draft law here (in German).
- 23 April 2021: AMF published its revised guidance on rules applicable to digital asset service providers, requiring registration to those providing services outlined in Article L54-10-2, 1°- 4° of the French Monetary and Financial Code.
- 22 Apr 2021: UK Jurisdiction Taskforce of LawtechUK published its Digital Dispute Resolution Rules designed to enable faster and more cost effective resolutions to legal disputes relating to novel digital technology such as crypto assets, smart contracts, and blockchain applications, and foster confidence amongst businesses in the adoption of these technologies.
Members are encouraged to flag relevant consultations and express interest in contributing to potential consultation responses.
25 May 2021: ESMA published its call for evidence on digital finance, following the EU Commission’s digital finance package and the request to the European Supervisory Authorities to provide technical advice on necessary adaptations to the existing legislative framework with a view to embrace digital finance in the EU. The consultation period end 1 August 2021.
30 April 2021: UK’s Law Commission published its call for evidence on digital assets, seeking information on how digital assets are used, treated and dealt with by market participants and about how the law might accommodate digital assets now and in the future. The call for evidence closes 30 July 2021.
26 April 2021: EU Commission’s proposal for a Regulation laying down harmonised rules on artificial intelligence (Artificial Intelligence Act) is open for feedback. Feedback will be shared with the EU Parliament and Council with the aim of feeding into the legislative debate. The consultation period ends 19 July 2021.
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.
Relevant publications and news items
19 May 2021: BIS published its working paper on the digitalisation of money, discussing the key questions and economic implications of digital currencies.
19 May 2021: Australian Senate’s Select Committee published its third issues paper on its enquiry into the country’s opportunities for FinTech and RegTech and barriers, among other items. This follows the Committee’s second interim report publication on 28 April 2021.
13 May 2021: UK Government published its Ethics, Transparency and Accountability Framework for Automated Decision-Making.
11 May 2021: European Data Protection Supervisor (EDPS) published its opinion on the EU Commission’s proposed regulation on digital operational resilience (DORA).
11 May 2021: The Bank of Israel published its consultation introducing the potential issuance of a digital shekel.
11 May 2021: Central Bank of Bahrain announced its collaboration with Bank ABC and J.P. Morgan in a pilot scheme to introduce instantaneous cross border payments using digital currency.
10 May 2021: MAS published its response to a parliamentary question on the implementation progress of Project Ubin.
7 May 2021: FCA and BoE published the regulatory initiatives grid, covering planned work over the next two years, including workstream deliverables for Accessing and using wholesale data, the Artificial Intelligence Public-Private Forum, and a discussion paper on CBDC and stablecoins, among others.
6 May 2021: BIS Innovation Hub and the Bank of Italy, within the Italian G20 Presidency, launched the G20 TechSprint 2021 Initiative, an international contest to search for innovative solutions to resolve operational problems in green and sustainable finance. Winners for each problem statement are to be announced in October 2021.
6 May 2021: MAS announced the launch of its Global FinTech Hackcelerator to unlock the potential of FinTech in accelerating the development of green finance in Singapore and the region.
5 May 2021: Bank of Georgia announced it is considering launching a publicly available Central Bank Digital Currency (CBDC) as part of its Digital Gel project which is inviting digital currency innovators explore CBDC adoption.
30 April 2021: MAS announced its new Regulatory Technology (RegTech) grant scheme and an enhancement of the Digital Acceleration Grant (DAG) scheme to accelerate technology adoption in the financial sector.
28 April 2021: Australian Senate’s Select Committee published its second interim report on its enquiry into the country’s opportunities for FinTech and RegTech and barriers, among other items.
28 April 2021: A study by academics on Digital Sustainability and its Implications for Finance and Climate Change was published in MAS’s April 2021 Macroeconomic Review.
27 April 2021: European Data Protection Supervisor (EDPS) issued its opinion on the European Commission’s proposed pilot regime for market infrastructures based on DLT.
27 April 2021: FCA and City of London published an evaluation report on the Digital Sandbox pilot. A second phase of the sandbox focusing on sustainable finance will be launched later in 2021.
26 April 2021: UK’s House of Commons Library published its briefing paper on a guide to financial technology.
22 April 2021: Norway’s central bank Norges Bank announced it will test technical solutions for CBDC over the next two years.
22 April 2021: The Netherland’s central bank DNB published its working paper outlining results from recent research conducted on a digital euro.
21 April 2021: European Commission published its statement on proposed new rules and actions relating to AI. The Commission’s proposal includes a legal framework on AI (Artificial Intelligence Act) and a Coordinated Plan outlining the necessary policy changes and investment at Member States level.
20 April 2021: US Congress passed the Eliminate Barriers to Innovation Act of 2021 to establish an SEC and CFTC Working Group on Digital Assets. The group will deliver a report including analysis of the legal and regulatory framework and provide recommendations for the creation, maintenance, and improvement of primary and secondary markets in digital assets, among others.
20 April 2021: Korean FSC announced officials from the FSC, FSS and Korea Fintech Center will hold information sessions on the regulatory sandbox program from April to June, to explain additional benefits granted by the revised Special Act on Support for Financial Innovation which will go into effect from 21 July 2021.
A buyside view - bond pricing distribution today
ICMA’s Liz Callaghan talks to Ricky Goddard, Head of trading at Schroders, about current bond pricing and axe distribution practices in the EU bond markets and the challenges that the market faces today.
FinTech innovation revolutionising capital markets
Stephane Malrait, Head of Market Structure and Innovation for financial markets at ING, talks to ICMA’s Martin Scheck about how finance is catching up with other industries in using data combined with AI to enhance services to clients.
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. Covering topics such as digital bookbuilding, digital assets, AI, machine learning and how banks talk to tech to name a few, the course has been developed by Duncan Philips, and features presentations by guest speakers in the primary market fintech space including Alan Schmoll (CEO, Pave); Gavin Youll (CFO, Nivaura), Brett Chappell (Managing Partner, Sherpa Edge) and Tiago Pina (Senior Software Engineer, Cosaic). This will be an interactive course with plenty of opportunities to engage with some of the key figures in FinTech, and we highly recommend booking early to avoid missing out!
The inaugural livestreamed course will be delivered over six sessions on June 16, 17, 18, 23, 24 and 25 from 10am-13:30pm CEST.
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