Embracing technology

Technology has become a dominant theme for financial markets and ICMA members, following the general cross-industry trend to digitisation.Technological developments in the last few years were originally focused on secondary markets, then increasingly on repo and collateral management, but more recently have extended to primary markets.Regulation has led not only to an increase in electronictrading, but it has also driven market participants to develop technology that helps capture information to meet regulatory requirements and make better use of data.

FinTech has given rise to technological buzzwords and new product developments from blockchain to artificial intelligence, machine learning, cloud computing and billion-dollar issuance of initial coin offerings (ICOs).

All this shows that our industry is at a crossroads and will change materially over the coming years.

This evolution will require increased integration of technology into human work processes. As much as it is a challenge, it is also an opportunity for our industry to increase service quality, define best practices, and take advantage of innovation to support wellfunctioning and resilient markets for the future.

For ICMA, FinTech and market electronification are cross-cutting priorities, affecting our broad and growing membership of issuers, intermediaries, asset

managers and investors, infrastructure providers and others. Over the last few years we have undertaken substantive work in this area across the whole lifecycle of bonds with our members.

In secondary markets ICMA’s focus has been on electronic trading and evolving market structure. A mapping directory of electronic trading platforms was first published in 2015 to create greater transparency and was revised in June 2018. In repo and collateral markets, the ERCC Ops FinTech working group conducted a comprehensive mapping exercise of technology solutions in 2017. At the latest update in July 2018, it included over 110 solutions for repo and cash bond operations. This number is likely to increase further as we continue to prepare for the implementation of the reporting regime of the Securities Financing Transactions (SFT) Regulation by 2020, which will drive further electronification.

While technology has until recently been deployed to a lesser extent in primary markets, we are now seeing emerging trends towards process electronification, but also tokenisation of debt instruments based on distributed ledger technology. An ICMA roundtable discussion in May highlighted the need to enhance efficiency and deliver straight-throughprocessing, underpinned by common standards for communication, data exchange, and end-to-end connectivity.

To help educate our members, the ICMA Future Leaders have created a useful FinTech glossary, first published in May and further expanded in September. We have been monitoring regulatory approaches to these technological developments and have published a paper which gives an overview of recent initiatives in 26 jurisdictions.

Looking ahead, and in light of the potential impact of technological advances on international debt capital markets, we created an ICMA Board sub-group on technology at the beginning of the year, with a view to joining up our FinTech-related workstreams, raising awareness of technology trends, and engaging in constructive discussions with market participants, technology providers and regulators, as the market continues to evolve. Our view is that it is vital to “keep our finger on the pulse” of product innovation and process development in compliance with the changing regulatory environment.

Defining common standards and best practices, through this collaborative approach, will be key to supporting well-functioning markets and helping to avoid market fragmentation.