There need to be overall improvements across the board to address issues of exchange outages, agreed panellists at this year’s FIX EMEA Trading Conference.
On the panel, entitled ‘Regulation in 2023’, speakers discussed the most pressing issues this year and offered potential actions that both regulators and the market could take to address them.
The high and unprecedented volatility seen in 2022 was ‘sobering,’ remarked Jamie Whitehorn, head of market interventions for trading venues at the Financial Conduct Authority (FCA), and demonstrated the need for transparency and consolidated tape across the industry. In order to weather future storms, resilience needs to be “baked in by design,” he said, ensuring that systems can be flexible in the face of stress.
He added that markets need to remain open wherever possible, and that regulators need to identify where intervention may be needed within systems and must have the power to intervene if required.
A significant issue of 2022 for the Australian markets was cyber incidents, reported Greg Yanco, executive director of markets at the Australian Securities and Investments Commission (ASIC). There is a growing need to understand the systemic impact that such incidents can have, he said, with organisations turning to third-party providers to improve their operational resilience.
Exchange outages were mentioned by all three speakers, with Yanco stressing that “when outages occur, preparation and communication will get you through.” There needs to be an improvement in the communications between exchanges and across markets to efficiently handle what Whitehorn stated is “a fact of life.” No matter the level of resiliency that exchanges achieve, outages are an inevitability, he argued.
Phillipe Guillot, managing director of the data and markets directorate at the AMF, said that “the industry wants predictability.” Establishing set times for exchanges to close and operations to roll onto an alternative exchange could help to ease difficulties, he suggested.
ESG regulation has been an important topic in recent years, with the panel’s moderator commenting that while the remit that regulators are expected to cover is always growing, the resources and capacity that they have are not increasing in tandem. Yanco stated that ASIC’s focus is around greenwashing.
Crypto and ESG goals are often at odds, with Guillot reporting that the new marketer requires “a lot of work” around its ESG regulations. He added that bonds and commodities markets also need further regulatory development.
In regard to T+1, Yanco affirmed that ASIC is not yet considering making a move to the shorter settlement cycle. Rather, the focus is on the ageing clearing and settlement system for equities. He stated that although the current system is reliable, it needs to remain so until a new system is developed.
From a UK perspective, Whitehorn emphasised the FCA’s interest in efficiency through technology and consciousness of the fact that the structure will have to be brought into the global market. He added that there is a strong dialogue between the FCA and the Securities and Exchange Commission in the US on this topic.
Closing the panel, Guillot stressed the importance of a robust system to support T+1, with increased buy-ins and fines required for successful implementation. He commented that the move will come at significant cost to firms, but concluded that this is necessary to improve resilience in light of increased risk.
