The notion of ‘inclusivity for all’ was high on the agenda for this year’s Inaugural ISITC Europe Market Innovation Summit, hosted at the Grange Tower Bridge Hotel in London on 24 January.
“Our main aim is inclusivity and to present everyone in meeting groups”, according to a representative of the European Central Bank (ECB) when asked how the UK will be included in collateral and corporate actions discussions after Brexit.
The representative said after the UK leaves the EU in March, as is expected, colleagues active in the UK will “always be presented in meeting groups and kept informed about all issues.”
In his presentation, ‘A view from Europe’, the speaker added at the moment, the ECB has established a task force specifically for securities and collateral and tri-party systems, though he stated data management still needs to be looked at, which he indicated would be based on the ISO 20022 model. The speaker also stated the Eurosystem Taskforce is pursuing harmonisation of Eurosystem’s collateral management, to which he said the bank would be enhancing collateral mobility and it should be a joint market effort.
The ECB is also working on a governance arrangement for TARGET2-Securities (T2S) and convincing those in the industry the model is good for the market.
The ECB representative discussed ECB’s report released in September 2017, which revealed harmonisation achievements have been made—in technology especially. Though he added, more than a year on from that report, there is still a need for interoperability and new technologies should apply in a common language.
Staying on the theme of technology and innovation, a Conservative Member of Parliament (MEP) stated: “The fear continues around innovation and the changes it will bring”.
The MEP stated that this fear and resistance to change comes from a misunderstood notion that regulation stands in competition with innovation. The MEP affirmed that this notion was false and innovation should be harnessed through regulatory frameworks.
He went on to say that many innovation start-ups begin their business only after asking for regulation for certainty—so as not to fall foul of the law.
He explained that there should be a focus on embracing young people with skills suitable for the financial sector as the financial sector evolves. In particular, the MEP affirmed coding needs to become more prominent and better taught within the education system.
One audience member challenged the MEP stating that most politicians don’t believe distributed ledger technology actually exists and added: “Politicians need to realise it’s here.”
The MEP also discussed Brexit and was confident London would still remain a global financial sector after the UK leaves the EU.
The MEP was optimistic that the UK will continue to trade with the rest of the world. He said: “The UK remains the number one country for investment in technology and a highly desirable location for business. The EU will be fearful once we have gone. Having a Norway model could be a short term solution, but we’d become a permanent rule taker, the rules may not be in our interest. The Norway solution is not sustainable in the long-term.”
A representative from CCLA also gave an outlook of Brexit and personal view of current trends, especially the impact of ethical, environmental and governance factors on the industry. In his presentation, he discussed the history of economics and the introduction of world trade.
In the afternoon, a panel discussing MiFID II asked the audience of approximately 150 if they believed MiFID II had been beneficial to their business a year after its implementation, to which approximately only 10 percent said ‘yes’.
One panellist said that before its introduction, primary exchanges central order books consumed 50 percent of overall business in Europe and he indicated that since January 2018, when the regulation was implemented, the level “hasn’t changed that much. There’s been a decline of seven percent of businesses that traded in public markets, so in this instance, you could argue primary markets have done ok”.
Another panellist said that MiFID I “opened the door for competition”, whereas, MiFID II is all about transparency, and he deemed that the market has not achieved that level of transparency yet. The panel then mostly agreed that regulation that drives technology doesn’t always put the industry in a “positive place”.
One panellist affirmed: “We are all confronted with the cost of regulation, none of us can deny the amount of reporting needs to be used better. We are seeing a change in financial services—the pricing and costing are becoming the flow model of industries across the world.”
Other highlights of the day included a presentation from ISITC’s North American chairman who discussed the organisation’s accomplishments for 2018, which included the creation of a margin and collateral working group and the update of its name and logo, among other achievements. She also invited delegates to the ISITC’s biggest event of 2019, the Annual Securities Operations Forum, commencing in Boston on 24 March.
The last panel of the day discussed whether new technologies could facilitate the agile use of enterprise data.
Panellists deliberated about the current state of data within the industry. One speaker deemed the industry “hasn’t seen a change in the last 35 years concerning data and many businesses still rely on just one Excel sheet to run their entire business.”
Another said: “Data has always been a problem, how you deal with it has always been a problem. People have used MiFID II to add data lakes. Some in the industry have shoe-horned it in and made it a more complicated condition that’s acceptable to them.”
The panellist decided and agreed on point of a conclusion that data is not being looked at holistically enough within the financial industry.
