30 September 2020 - 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

Common Domain Model (CDM) for repo and bonds
 
ICMA, in collaboration with ISDA and Regnosys, is in the process of extending ISDA’s derivative-focused Common Domain Model (CDM) to repo and bonds. Two further workshops were held in July and August to define the scope and draft specifications for a repo model in the Common Domain Model. Moving to the next stage involves translating life cycle events and processes into code.

If you would like to join the working group of sell-sides, buy-sides, trading venues and technology providers, please get in touch. Further information, including supporting materials from the workshops and a webinar can be found here. 

ICMA FinTech Advisory Committee (FinAC)

At the next FinAC meeting, we will consider expanding the committee. ICMA member firms who would like to contribute to the FinAC’s mission are requested to contact us so that we can gauge the level of interest. Further background on the current composition of the FinAC and its mission statement are available on ICMA’s dedicated  FinTech webpage. 

A summary note of the fourth meeting, held on 16 July 2020, will be published in the next ICMA Quarterly Report.
 
ICMA to review primary market technology mapping 

ICMA welcomes the inclusion of new solutions that are not yet represented on its primary market technology directory. The directory currently lists a total of 30 solutions, including emerging platforms which have conducted live pilots within the issuance process. Please contact us if you would like to flag any new initiatives or if you have any other suggestions.
 

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 September 2020: BNP Paribas Securities Services announced its partnership with Digital Asset to design a number of real-time trade and settlement apps using DAML smart contracts.
• 11 September 2020: Bank of Thailand (BOT) successfully launched a new platform leveraging Blockchain Technology for Government Savings Bond issuance. It aims to enhance investors’ buying experience, improve operational efficiency and reduce overall cost.
• 1 September 2020: Singapore Exchange, in collaboration with HSBC and Temasek, completed its first digital bond issuance on SGX’s digital asset issuance, depository and servicing platform, successfully replicating a S$400 million 5.5-year public bond issue and a follow-on S$100 million tap of the same issue by Olam International. 

Update 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.
 

• 24 September 2020: EC communicated legislative proposals, including clarification of ‘financial instruments’ based on DLT, and a pilot regime for market infrastructures for these instruments, as part of its Digital Finance Package.
• 22 September 2020: AMF published a Q&A document of the digital asset service provider (DASP) regime created under the PACTE Law.
• 21 September 2020: Law Commission has begun work to ensure that English law can accommodate both smart contracts and digital assets. This work builds on topics covered by the UK Jurisdiction Taskforce's legal statement, November 2019.
• 10 September 2020: Swiss Council of States approved Bill 19.074 "Adaptation of Federal Law to Developments in the Technology of Distributed Electronic Registers" (TRD), following Federal Assembly unanimous support 17 June 2020. The changes aim to remove obstacles on DLT applications and limit risk of abuse.
• 1 September 2020: H.R.8153 Blockchain Innovation Act was introduced in US House of representatives to direct the Department of Commerce and Federal Trade Commission to conduct a study on the state of blockchain technology and use in consumer protection, and for other purposes.

ICMA podcast

Digital transformation in capital markets
26 August 2020: Chetan Tolia, Head of Digital Business Transformation at UBS Investment Bank, talks to Martin Scheck, ICMA Chief Executive about unlearning the past and relearning to reinvent the business model and create a radical future, and how COVID-19 has forced us all to do this on a wider scale. The momentum building in tokenisation and the role of regulators, major developments in market infrastructure and the challenges of managing change and innovation in a large institution all feature in the discussion.
 

Public consultations

Members are encouraged to flag relevant consultations and express interest in contributing to potential consultation responses.

6 August 2020: Basel Committee released consultative documents on principles for operational risk and revisions to the principles for the sound management of operational risk. The consultation period ends 6 November 2020. 

25 June 2020: IOSCO published its consultation paper on the use of artificial intelligence and machine learning by market intermediaries and asset managers. The consultation period ends 26 October 2020. 

28 May 2020: IOSCO published its consultation on outsourcing principles to ensure operational resilience. The consultation period ends 1 October 2020.
 
9 March 2020: FCA Call for Input - Accessing and using wholesale data. The consultation period has been extended to 7 January 2021.
 

Relevant publications and news items

24 September 2020: EC published its Digital Finance Package, including a Digital Finance Strategy and propositions for new legislation on crypto-assets and a pilot regime for market infrastructures using DLT. 

22 September 2020: ECB Crypto-Assets Task Force released its paper on Stablecoins: Implications for monetary policy, financial stability, market infrastructure and payments, and banking supervision in the euro area. 

21 September 2020: IOSCO published its final report on conflicts of interest and associated conduct risks during the debt capital raising process, including summary of blockchain related consultation responses. 

15 September 2020: Central Bank of the Bahamas to roll out small-scale operations of its CBDC (‘Sand Dollar’), according to media reports. 

14 September 2020: EU Parliament published its report Digital finance: Emerging risks in crypto-assets – Regulatory and supervisory challenges in the area of financial services, institutions and markets.  

14 September 2020: Nigerian SEC published a Statement on Digital Assets and their Classification and Treatment, confirming digital assets will be treated within existing SEC Rules and Regulations. 

11 September 2020: EC published its report: European enterprise survey on the use of technologies based on artificial intelligence.

11 September 2020: Finance Ministers of Germany, France, Italy, Spain and the Netherlands published a joint statement on asset-backed crypto-assets (so called “Stablecoins”). 

7 September 2020: ASX’s data science platform, ASX DataSphere, opened to third parties looking to partner with ASX to help solve their data challenges. The catalogue of datasets spans fixed income, interest rate, derivatives, equities, and benchmarks. ASX are already working with customers to build data products within the fixed income space.

4 September 2020: MAS published its response on the parliamentary question to the pilot launch and live adoption of a blockchain-based multi-currency payments network prototype following the conclusion of Project Ubin. 

3 September 2020: Senate Select Committee published its interim report outlining key components of Australia’s FinTech and RegTech sectors with respect to national competitiveness including tax, regulation, access to capital, skills and talent, and culture.

2 September 2020: Saudi Arabian Monetary Authority launched its Joint Research Program to facilitate further engagement in research of mutual interest between participants of different expertise. 

1 September 2020: BIS released its Working Paper: Data vs Collateral, highlighting implications of the use of big tech credit on collateral in credit markets. 

1 September 2020: Thailand’s Securities and Exchange Commission (SEC) and the UK Government signed a Memorandum of Understanding to establish a financial services partnership in areas including the development of FinTech to facilitate greater access to finance and business opportunity for Thai FinTech industry; and sustainable finance.

27 August 2020: BIS Financial Stability Institute published its paper Regulating fintech financing: digital banks and fintech platforms. 

27 August 2020: ECB published the ESCB/European banking supervision response to the European Commission’s public consultation on a new digital finance strategy for Europe/FinTech action plan. 

27 August 2020: Taiwan FSC published its Roadmap for FinTech Development (in Chinese), aiming to improve efficiency, accessibility, usability and quality of digital financial services.

26 August 2020: UNSG’s Task Force on Digital Financing of the Sustainable Development Goals published its report on harnessing digitalisation to finance a sustainable future. 

25 August 2020: ASIC issued guidance for the Enhanced regulatory sandbox for commencement 1 September 2020.

25 August 2020: The US National Institute of Standards and Technology released its draft paper: Four Principles of Explainable Artificial Intelligence

24 August 2020: BIS released its Working Paper: Rise of the central bank digital currencies: drivers, approaches and technologies.

24 August 2020: Securities Commission Malaysia and Indonesia’s Financial Services Authority Otoritas Jasa Keuangan announced their fintech cooperation agreement. 

21 August 2020: The Hong Kong Institute for Monetary and Financial Research released its Applied Research report: Artificial Intelligence in Banking: The Changing Landscape in Compliance and Supervision. 

21 August 2020: RBA’s Payment Systems Board update stated it will continue to research the technological and policy implications of a wholesale form of digital currency or e-AUD, although noting there was not a strong public-policy case for issuance. 

20 August 2020: Banco Central do Brasil announced (in Portuguese) formation of a working group to discuss the issuing of central bank digital currency in Brazil. 

20 August 2020: Korean FSC announced recent progress in its financial regulatory sandbox operations, with regulatory improvements made to eight specific areas, five in the process of revision and fourteen more recognised as necessary for reform.
 

Summary of ICMA FinTech Resources

Primary markets technology mapping directory
Electronic Trading Platform (ETP) mapping directory
Repo Trading Technology Directory
FinTech mapping directory for repo and cash bonds 
Distributed Ledger Technology (DLT) Regulatory Directory
New FinTech applications in bond markets
FinTech Glossary
ICMA Podcast