AFME panellist: Don’t get distracted by DLT
24 May 2018 London
Image: Shutterstock
“There is something sexy going on at the moment, and it is called distributed ledger technology (DLT)” one panellist said at this year’s Association for Financial Markets in Europe (AFME) conference — he warned that the industry should not get distracted by it.
“My vision for five years time is that it will be good to try and encourage commission to stay on the straight and narrow path, and not be distracted by DLT”, he said.
The panellist said this after being asked what were the most pressing European post-trade barriers to be tackled in the coming years and how they would be tackled.
To this question, another panellist replied: “We have to remember that the Capital Markets Union (CMU) was designed to create wealth and jobs. Part of the creation of wealth through creation of efficiency is elimination of cost of compliance, much of this falls into the bracket of
‘a tax on the business.’ As with many of these barriers, you can eliminate operational ones and reduce the cost of doing business.”
The panel, which discussed themes regarding regulatory landscape, CMU and European post-trade (EPT) in a post-Brexit EU, was asked what has changed in their priorities, and what their perspective on the situation is.
Taking a positive approach, one panellist said: “Today we are in a much better place than we were seven or eight years ago. We have structure, a level playing field, and we have a tool to work on the connectivity. The situation is much better than we think.”
“Looking ahead,” the speaker continued, “we want business solutions to drive it. If the regulator has conceived that there is a want for flexibility of solutions and options, and if we are supposed to develop business solutions for them, then we will develop business solutions for them.”
The speaker added: “Solutions have to develop. Regulatory intervention is needed, it is an extremely important aspect, but other than that, other solutions for harmonisation do not need regulatory intervention. There is a lot of work to be done and it is not easy, but we are moving ahead together, and to help our clients for whom we are trying to create sufficient solutions. Rome wasn’t built in a day.”
Taking a slightly less optimistic approach, another speaker said: “I think we have made a bit of progress but the problem is Brexit. What impact is Brexit going to have in the future? Tensions can already be seen within the regulatory community. There are a lot of unknowns at this stage.”
The panellist added: “Collateral is not just about risk, it’s also about capital and therefore it is quite important that it should work quickly and efficiently. Collateral was supposed to be helpful and harmonise things. But it hasn’t been working so well.”
Another panellist said: “There has been progress thanks to regulatory measures that have come in over the past couple of years. Regulatory reporting is not optimal in making CMU work. The regulator needs to make the point of working closely with the industry.”
He added: “Things haven’t worked quite as well as they could but the good thing is that the EU recognises this. If they embrace both regulation technology and financial technology in the right way and look at the standards being asked of people then that will help.”
The panel was then asked to elaborate on the need to work in tandem with regulators. One panellist said: “In terms of regulation we have done the chunk of the work. There are things that need to be fixed, such as issues under the European Market Infrastructure Regulation.”
They added: “Regulators need to tweak things that are currently not working properly. Technology is the fantastic known unknown. It will provide different solutions to different problems. As a service provider, we have to watch the space on whose radar we are on.”
The speaker continued: “We need to be innovative in order to keep up with this race. We are still waiting for the Google of financial services. The first impact will be the transparency, and moving in the direction of further consolidation, we are trying to work on our range of services so that we are attractive and ready.”
“My vision for five years time is that it will be good to try and encourage commission to stay on the straight and narrow path, and not be distracted by DLT”, he said.
The panellist said this after being asked what were the most pressing European post-trade barriers to be tackled in the coming years and how they would be tackled.
To this question, another panellist replied: “We have to remember that the Capital Markets Union (CMU) was designed to create wealth and jobs. Part of the creation of wealth through creation of efficiency is elimination of cost of compliance, much of this falls into the bracket of
‘a tax on the business.’ As with many of these barriers, you can eliminate operational ones and reduce the cost of doing business.”
The panel, which discussed themes regarding regulatory landscape, CMU and European post-trade (EPT) in a post-Brexit EU, was asked what has changed in their priorities, and what their perspective on the situation is.
Taking a positive approach, one panellist said: “Today we are in a much better place than we were seven or eight years ago. We have structure, a level playing field, and we have a tool to work on the connectivity. The situation is much better than we think.”
“Looking ahead,” the speaker continued, “we want business solutions to drive it. If the regulator has conceived that there is a want for flexibility of solutions and options, and if we are supposed to develop business solutions for them, then we will develop business solutions for them.”
The speaker added: “Solutions have to develop. Regulatory intervention is needed, it is an extremely important aspect, but other than that, other solutions for harmonisation do not need regulatory intervention. There is a lot of work to be done and it is not easy, but we are moving ahead together, and to help our clients for whom we are trying to create sufficient solutions. Rome wasn’t built in a day.”
Taking a slightly less optimistic approach, another speaker said: “I think we have made a bit of progress but the problem is Brexit. What impact is Brexit going to have in the future? Tensions can already be seen within the regulatory community. There are a lot of unknowns at this stage.”
The panellist added: “Collateral is not just about risk, it’s also about capital and therefore it is quite important that it should work quickly and efficiently. Collateral was supposed to be helpful and harmonise things. But it hasn’t been working so well.”
Another panellist said: “There has been progress thanks to regulatory measures that have come in over the past couple of years. Regulatory reporting is not optimal in making CMU work. The regulator needs to make the point of working closely with the industry.”
He added: “Things haven’t worked quite as well as they could but the good thing is that the EU recognises this. If they embrace both regulation technology and financial technology in the right way and look at the standards being asked of people then that will help.”
The panel was then asked to elaborate on the need to work in tandem with regulators. One panellist said: “In terms of regulation we have done the chunk of the work. There are things that need to be fixed, such as issues under the European Market Infrastructure Regulation.”
They added: “Regulators need to tweak things that are currently not working properly. Technology is the fantastic known unknown. It will provide different solutions to different problems. As a service provider, we have to watch the space on whose radar we are on.”
The speaker continued: “We need to be innovative in order to keep up with this race. We are still waiting for the Google of financial services. The first impact will be the transparency, and moving in the direction of further consolidation, we are trying to work on our range of services so that we are attractive and ready.”
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