25 August 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.
Please feel free to forward this to colleagues who are welcome to subscribe here (click on the FinTech box).
ICMA FinTech initiatives and workstreams
ICMA, ISDA and ISLA sign MoU on the Common Domain Model, laying the foundations for a digital future for financial markets
On 2 August 2021 ICMA, ISDA and ISLA signed a Memorandum of Understanding (MoU) to strengthen collaboration between them on the future development of the Common Domain Model (CDM), the single, common digital representation of trade events and actions across the lifecycle of financial products. This cross-industry initiative marks an important step in the Associations’ commitment to defining and promoting the development of a digital future for financial markets, as set out in a joint letter a year ago.
The MoU establishes a framework for closer collaboration between the three Associations, providing a path for joint governance and setting out arrangements in relation to the open-source components of the CDM and associated intellectual property for market-specific components. The MoU is intended to unlock further synergies in the development of the CDM across financial markets, creating efficiencies for market participants and setting digital standards which will enable the use of innovative technologies in future.
See the full press release here.
Common Domain Model (CDM) for repo and bonds
On 21 July 2021, ICMA held a virtual event providing a round-up of its CDM project for repo and bonds, including demonstrations of the CDM in action, as well as a panel discussion with members of ICMA’s CDM Steering Committee on key take-ways from the project, the path to implementation and next steps.
The recording of the CDM event is available here. Individual CDM demonstrations from the event can also be found here:
An introduction to Rosetta by REGnosys (5 mins)
CDM in action – execution, clearing and settlement of a repo transaction by FINXIS LLC (8 mins)
Download the presentations by ICMA’s Gabriel Callsen and REGnosys.
The virtual event marked the conclusion of the initial phase of the CDM project for repo and bonds. The CDM for repo and bonds can be accessed here (Note: New users are required to register).
Next steps: ICMA has launched a survey amongst the ERCC community to determine next steps in relation to the CDM from a repo perspective.
ICMA response, regarding bearer bonds, to UK Law Commission consultation paper Digital assets: electronic trade documents
ICMA published its response to the UK law Commission’s consultation paper on Digital assets: electronic trade documents.
FinTech Directory for repo and cash bonds
ICMA is conducting a review of the Operations FinTech directory for repo and cash bonds. The directory currently lists over 180 solutions across 10 categories including collateral management, corporate actions, and intraday liquidity monitoring, amongst others.
Repo Trading Technology Directory
ICMA is conducting a review of the Repo trading technology directory. The directory currently lists 18 electronic trading venues and other technology solutions such as order and execution management systems.
Members are encouraged to flag any new solutions that are not yet covered by the directories. Solution providers are invited to send updated details and flag new offerings. Please contact us for further details.
ICMA FinTech resources
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:
- 2 August 2021: UK FCA announced its regulatory sandbox will remain open to applicants year-round, in addition to the publication of cohort 7 participants.
- 2 August 2021: The European Commission is expected to prepare a legislative proposal by the end of 2021 on potential amendments to CSDR to help CSDs in the deployment of DLT, following ESMA’s report on Use of FinTech by CSD's.
- 14 July 2021: ECB announced it will commence a project to investigate a digital euro. The project will conclude mid-2023.
Any feedback or flagging of items to include are very welcome. Please contact us.
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:
- 13 August 2021: Securities and Exchange Board of India (SEBI) published its circular requiring depositories to create, host, maintain, and disseminate a system for security and covenant monitoring for non-convertible securities using distributed ledger technology. The system shall come into effect 1 April 2022.
- 22 July 2021: Central Bank of Colombia announced the launch (announcement in Spanish) of a pilot bond issuance, in collaboration with IDB Group and Banco Davivienda, to be negotiated and settled in blockchain technology through the use of smart contracts.
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.
- 17 August 2021: Arab Monetary Fund (AMF) published the Arab Regional Fintech Working Group’s policy guide on Strategies for adopting DLT/ Blockchain Technologies in Arab Countries.
- 5 August 2021: European Parliament Committee on Economic and Monetary Affairs published its report on the EU Commission’s proposed pilot regime for market infrastructures based on DLT, setting out amendments to the draft act. The report was adopted 13 July 2021.
- 5 August 2021: German Federal Ministry of Finance published its joint draft bill with the Federal Ministry of Justice and Consumer Protection for an ordinance on electronic securities registers (eWpRV). The ordinance specifies requirements for the management of electronic securities registers according to the electronic securities Act (eWpG) which entered into force 10 June 2021. Comments can be submitted until 14 September 2021.
- 2 August 2021: ESMA published its report to the European Commission on Use of FinTech by CSD's, including Section 5 on regulatory clarification or amendments to allow for the deployment of DLT.
- 1 August 2021: The remaining elements of the Swiss DLT Act entered into force, alongside the associated blanket ordinance. These elements allow for innovative DLT trading facilities and increase legal certainty in the event of bankruptcy.
- 27 July 2021: Bank of Thailand published its Guideline for Blockchain Technology Adoption in Financial Services, consisting of four sections: (i) Blockchain Business Applications, (ii) Blockchain Governance, (iii) IT Risk Management, and (iv) Legal Risk Management.
Members are encouraged to flag relevant consultations and express interest in contributing to potential consultation responses.
Until 24 September 2021: On 1 June 2021, UK’s HM Treasury launched its consultation on a review of wholesale markets, including questions on how UK authorities could enable firms to take advantage of technological innovation in capital markets.
Until 10 September 2021: On 10 June 2021, Basel Committee launched its consultation on preliminary proposals for the prudential treatment of banks' cryptoasset exposures.
Relevant publications and news items
24 August 2021: BIS Innovation Hub Hong Kong and HKMA announced they have joined forces with the technology industry on Project Genesis to build a prototype digital infrastructure that enables green investments, improves transparency on the use of proceeds, and thereby helps meet regional and global environmental and sustainability goals.
11 August 2021: OECD published its report on Artificial Intelligence, Machine Learning and Big Data in Finance - Opportunities, Challenges and Implications for Policy Makers.
11 August 2021: Bank of Ghana announced it had partnered with Giesecke+Devrient (G+D) to pilot a general purpose Central Bank Digital Currency (retail CBDC) in Ghana, West Africa. G+D is providing the technology and developing the solution adapted to Ghana’s requirements, which will be tested in a trial phase with banks, payment service providers, merchants, consumers and other relevant stakeholders.
5 August 2021: BIS Committee on Payments and Market Infrastructures (CPMI) published its work programme for 2021-22, including further analysis of multilateral payment platforms, stablecoin arrangements and an international dimension of CBDCs
3 August 2021: BIS Financial Stability Institute published its paper on Humans keeping AI in check – emerging regulatory expectations in the financial sector.
3 August 2021: Dutch Central Bank (DNB) published its report on Innovation and regulation: opportunities and obstacles, looking at the regulatory framework in relation to innovation.
2 August 2021: BIS published its bulletin on Regulating big techs in finance.
30 July 2021: Securities and Markets Stakeholder Group Advice to ESMA in response to the European Commission's request to EBA, EIOPA and ESMA for technical advice on digital finance and related issues.
30 July 2021: Philippines SEC announced the launch of its new PhiliFintech Innovation Office (PIO) and will focus on the regulation of the use of FinTech.
30 July 2021: ECB published its working paper on A unified framework for CBDC design: remuneration, collateral haircuts and quantity constraints.
29 July 2021: IMF published its paper on The Rise of Public and Private Digital Money – A Strategy to Continue Delivering on the IMF’s Mandate.
28 July 2021: BIS Innovation Hub Singapore and MAS published their proposal for enhancing global real-time retail payments network connectivity with Project Nexus blueprint.
28 July 2021: The Digital Asset Market Structure and Investor Protection Act was introduced to US Congress. The Act would create statutory definitions for digital assets and digital asset securities and provide the SEC with authority over digital asset securities and the CFTC with authority over digital assets, among other items.
20 July 2021: FCA announced it will run a Sustainability TechSprint aimed at promoting new solutions and proof of concepts to challenges faced by regulators in the area of ESG data and disclosure.
17 July 2021: Italian Legislative Decree governing the operations and powers of the FinTech Committee entered into force, setting out conditions and procedures for carrying out the experimentation in Italy of FinTech activities in the areas of banking, finance, and insurance.
16 July 2021: PBOC published its whitepaper on the Progress of Research and Development of E-CNY in China. The paper clarifies the PBOC’s position, objectives, design considerations, and recent work on digital fiat currency (E-CNY) testing and development, among other items.
14 July 2021: BIS published its paper on FinTech and the digital transformation of financial services: implications for market structure and public policy.
8 July 2021: FSC Korea introduced Guideline on the Use of Artificial Intelligence in Financial Services.
23 July 2021: Secondary corporate bond markets in the US and Europe
ICMA’s Liz Callaghan discusses trends in corporate bond markets in the USA and in Europe with BondCliq CEO Chris White and Gabriele Frediani who heads business development for Bondcliq in Europe, highlighting similarities and the differences between the two markets. They also reflect on the need for a balanced approach for pre-trade transparency and data ownership and the lessons learned from Covid regarding market mechanics.
Check the ICMA Media Library for more webinars and podcasts.
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
CSDR-SD Technology Directory
New FinTech applications in bond markets
FinTech regulatory roadmap
Impact Reporting Database Service Mapping (Databases tab)
FinTech and sustainable finance library
ICMA Media Library