ICMA responds to joint Bank of England and FCA consultation on a Digital Securities Sandbox


29 May 2024 The International Capital Market Association (ICMA) today submits its response to the Bank of England’s and FCA’s proposal to implement and operate the Digital Securities Sandbox (hereafter referred to as “Sandbox” for ease of reference).

ICMA’s response reflects the views of a subset of its DLT Bonds Working Group, notably issuers, banks, investors, market infrastructures and law firms across the international debt capital markets.

 Key points:

  • ICMA members welcome the opportunity to provide feedback on the “Sandbox” and support innovation in capital markets.
  • Whilst ICMA members are in principle supportive of the draft Guidance on the operation of the Digital Securities Sandbox, we recommend (a) adopting a more flexible approach to applying limits for live transactions on a firm-by-firm basis (b) enabling Sandbox participants to scale on a continuous basis, and (c) expanding the scope of securities to non-sterling currencies within the Sandbox. This is considered key to ensure commercial viability for Sandbox entrants.
  • A more tailored approach for Sandbox entrants that are regulated would be beneficial, allowing firms to bypass requirements provided they are already met outside the Sandbox.
  • Final, or “end-state” rules should be reviewed and adjusted dependent on learnings from the Sandbox.
  • Should an alternative framework for non-systemically relevant CSD’s be established, ICMA members recommend calibrating Sandbox rules accordingly for systemically relevant and non-systemically relevant participants.
  • Activity inside the Sandbox should not preclude same or similar activity from taking place outside the Sandbox subject to different structuring choices.
  • We encourage close coordination between regulators, with regard to permanent legislative changes made by HMT and firms graduating out of the Sandbox in order to avoid undue delays or cliff-edge risks.
  • Notwithstanding legal and regulatory aspects, common standards such as ICMA’s Bond Data Taxonomy play a critical role in avoiding market fragmentation and fostering interoperability.

ICMA’s detailed response can be found here.

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