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FinTech and market electronification
Technology is reshaping the way financial markets operate. FinTech, a term broadly used to describe innovation in financial services enabled by technology has attracted much attention among market participants, regulators and policy-makers alike.

ICMA’s engagement spans (i) primary markets, (ii) secondary markets, and (iii) repo and collateral markets, with a focus on market electronification ie the use of technology across the securities lifecycle. While the level of adoption of technology solutions varies in each of those areas, the advent of cutting edge technologies such as distributed ledger technology or artificial intelligence has the potential to impact market practice and market structure significantly.

FinTech and market electronification are addressed through ICMA’s various committees, working groups and work streams as well as through bilateral discussions with member firms and technology providers. ICMA seeks to mainstream relevant FinTech developments and market electronification through all of its initiatives, activities, and fora.

 
Primary markets:

The Primary Market Practices Committee (PMPC) gathers the heads and senior members of the syndicate desks of ICMA member banks active in lead-managing syndicated bond issues in Europe. A dedicated subgroup on Primary Market Automation was set up in 2015 to address FinTech developments beyond general PMPC deliberation on an ad hoc basis.

The Euro Commercial Paper (ECP) Committee comprises the heads and senior members of the ECP teams of those ICMA member banks who are the main dealers in the ECP market.

The Corporate Issuer Forum (CIF) gathers senior representatives of major corporate issuers and focuses on discussing market practice and regulatory topics related to the debt capital markets.

The Financial Institution Issuer Forum (FIIF) gathers the heads or senior members of the capital raising, funding and treasury departments of ICMA member firms active in capital markets issuance in Europe.


Secondary markets:

Under the umbrella of the Secondary Market Practices Committee (SMPC), the Electronic Trading Council (ETC) has been set up comprising buy-side heads of trading desks, sell-side senior traders or heads of market structure and/or electronic trading and senior representatives from trading venues and technology providers.


Repo and collateral markets:


The ERCC Ops FinTech Working Group was set up in 2016 by members of the Operations Group (Ops) of the ICMA European Repo and Collateral Council. 

 
Cross-cutting:

The Asset Management and Investors Council (AMIC) is a forum which brings together senior members of ICMA’s buy-side constituency.




Contact:

Gabriel Callsen
Associate, Market Practice and Regulatory Policy
Direct line: +44 20 7213 0334
EMAIL | DOWNLOAD BUSINESS CARD

Publications:

April 2018
ICMA’s engagement on FinTech and market electronification
FinTech regulatory developments

October 2017
Market electronification and FinTech

July 2017
ICMA’s engagement on market electronification and FinTech
FinTech: Government bonds in Kenya

April 2017
An introductory Q&A on blockchain technology


Resources:

ETP Mapping Directory: In light of the shift towards electronification, ICMA conducted a mapping exercise of electronic trading platforms (ETPs) and information networks. This initiative resulted in the ETP Mapping Directory, a single source of information on currently over 30 infrastructure providers, which is updated on a regular basis and covers all cash bond classes.

ICMA Ops FinTech mapping directory: ICMA’s ERCC Ops FinTech Working Group (WG) has published a mapping directory of over 100 technology solutions available for repo and cash bond operations. The directory is divided into 10 categories including collateral management, exposure agreements and reconciliations. It provides information on how each solution can be used, for example at which stage of the trade lifecycle, whether for cleared or uncleared transactions and where the solution sits within the IT infrastructure. The directory is intended to be a living document and will be updated on a regular basis.

FinTech Glossary: An initiative of the ICMA Future Leaders to provide greater clarity around FinTech acronyms and terms.




Contact:

Gabriel Callsen
Associate, Market Practice and Regulatory Policy
Direct line: +44 20 7213 0334
EMAIL | DOWNLOAD BUSINESS CARD

Distributed Ledger Technology (DLT), often referred to as Blockchain, has stirred a lot of interest and enthusiasm across the financial industry. Although discussions are still at a very early stage, DLT is believed to have the potential to substantially change the way financial markets are operating today, promising important cost savings and efficiency gains in particular in the post-trade space. Regulators and law makers around the world, concerned with the regulatory implications of the technology, are increasingly joining the debate. This webpage aims to provide an overview of the most important contributions, focusing on key early regulatory initiatives in this space but also referencing some of the most important industry initiatives and selected other research on DLT. The aim is not to offer a comprehensive list of available sources on DLT but to limit the overview to the key initiatives. The list will be updated on an ongoing basis as the discussions on DLT are evolving and the impacts are becoming more clear.




Official sources

ESMA: Discussion Paper on Report on The Distributed Ledger Technology Applied to Securities Markets (January 2017) following a Discussion Paper (published on 2 June 2016 for consultation). This follows up on an earlier Call for evidence on Investment using virtual currency or distributed ledger technology (published on 22 April 2015) and the responses received to that consultation.

European Parliament: ECON Draft Report on FinTech: the influence of technology on the future of the financial sector - 2016/2243(INI) (published on 27 January 2017); ECON report on virtual currencies (adopted by the ECON Committee on 26 April 2016)

ECB: Occasional paper series: Distributed ledger technologies in securities post-trading Revolution or evolution? (22 April 2016); and related speech by ECB Executive Board member Yves Mersch: Distributed ledger technology – panacea or flash in the pan? (25 April 2016)


UK Government Office for Science: Distributed ledger technology: Blackett review (January 2016)

BIS (Committee on Payments and Market Infrastructures): Reports on Distributed ledger technology in payment, clearing and settlement – An analytical framework (February 2017), and Digital Currencies (23 November 2015)

FINRA: Distributed Ledger Technology: Implications of Blockchain for the Securities Industry (January 2017)

IOSCO: Research Report on Financial Technologies (February 2017)




Selected other research

SWIFT Institute: The Impact and Potential of Blockchain on the Securities Transaction Lifecycle (9 May 2016)




Some key industry initiatives

A multitude of industry initiatives are under way to develop use cases on DLT, among which several important collaborative cross-industry initiatives, including:

Post Trade Distributed Ledger group (PTDL): PTDL is a London-based industry group that aims to provide a forum where financial institutions can explore and share ideas about how DLT can transform the post-trade space. The membership is diverse and includes nearly 40 financial institutions and prominent market infrastructures.

Hyperledger Project: The Hyperledger initiative was launched in December 2015. The project is led by the Linux Foundation and involves both major financial institutions and large technology firms. The idea is to provide an environment to identify and address important features for a cross-industry open standard for distributed ledgers. Members include well-known blockchain start-ups such as the R3 Consortium (see below) and Digital Asset Holdings (DAH).

R3 Consortium: R3 is a New York based start-up which leads a consortium partnership with over 40 of the world's largest banks. It aims to provide a forum for the creation of common standards for the use of DLT in finance and create blockchain applications. Unlike the other two initiatives, R3 is a commercial venture.

A more detailed overview of industry initiatives is available here (financial news).




Contacts:

Alexander Westphal
Director, Market Practice and Regulatory Policy, Secretary to the ICMA European Repo and Collateral Council (ERCC)
Direct line: +44 20 7213 0333
EMAIL | DOWNLOAD BUSINESS CARD

Gabriel Callsen
Associate, Market Practice and Regulatory Policy
Direct line: +44 20 7213 0334
EMAIL | DOWNLOAD BUSINESS CARD