鈥楨xciting time鈥� to be in capital markets, says ICMA chair
05 July 2018 Zurich
Image: Shutterstock
It is an 鈥渆xciting time鈥� to be involved in the capital markets, according to ICMA chair, Mandy DeFilippo.
In her debut foreword as ICMA鈥檚 chair, as part of ICMA鈥檚 Q3 report, DeFillipo cited regulatory changes, the emergence of new market participants and Brexit as key drivers of this excitement.
The report covers the transition to risk-free rates in the international bond market, the risks of international capital market fragmentation and how to survive in a mandatory buy-in world.
Technological developments are creating opportunities to adapt, shape and refine existing operating practices in the capital markets, including in response to new regulation, DeFilippo stated.
She said: 鈥淚n the first six months of implementation, Markets in Financial Instruments Directive II has been instrumental in driving trading on to exchanges, and we expect this trend to continue as the market continues to adjust.鈥�
鈥淎s the year progresses, increasing volumes of transactional data will become publicly available. This should start to generate greater levels of transparency in the market, and thereby have a correspondingly positive effect on secondary market liquidity.鈥�
鈥淎s this matures, so electronification will offer solutions for those liquid markets to perfect flow business and create additional efficiencies鈥�, she added.
Over the longer term, this trend should continue as more products are brought into scope of MiFID II.
鈥淓ven so, there are challenges on the horizon. Central Securities Depository Regulation (CSDR), with its goal of harmonising the legal aspects of securities settlement and the rules of CSDs at an EU-wide level, continues to come online, and we now expect to go live with the settlement discipline component by September 2020.鈥�
DeFilippo observed that this next phase of implementation will require imposition of a penalty regime through fail fines and mandatory buy-ins, as referred to above, which risks deterring market participants from providing liquidity in repo and stock lending.
ICMA has highlighted, through briefing notes and direct engagement, the risks and anticipated impacts of these new rules.
Brexit promises to feature strongly for all market participants throughout the year, according to DeFilippo
This will require all market participants to review, validate and, in many cases, make changes to internal structures, processes and business flows.
DeFilippo concluded: 鈥淎 significant amount of legal, technical and operational work will be required to ensure that all market activity can continue without disruption on the relevant exit date. Many of the technical details surrounding the potential transition are still being negotiated. Without full clarity on certain key aspects, the markets in Europe will be exposed to significant risks.鈥�
CANVA
The report also includes a summary of the 32 practical initiatives undertaken by ICMA in the quarter under review, followed by an examination of the prospectus regulation that is scheduled to come into force on 21 July 2019.
In her debut foreword as ICMA鈥檚 chair, as part of ICMA鈥檚 Q3 report, DeFillipo cited regulatory changes, the emergence of new market participants and Brexit as key drivers of this excitement.
The report covers the transition to risk-free rates in the international bond market, the risks of international capital market fragmentation and how to survive in a mandatory buy-in world.
Technological developments are creating opportunities to adapt, shape and refine existing operating practices in the capital markets, including in response to new regulation, DeFilippo stated.
She said: 鈥淚n the first six months of implementation, Markets in Financial Instruments Directive II has been instrumental in driving trading on to exchanges, and we expect this trend to continue as the market continues to adjust.鈥�
鈥淎s the year progresses, increasing volumes of transactional data will become publicly available. This should start to generate greater levels of transparency in the market, and thereby have a correspondingly positive effect on secondary market liquidity.鈥�
鈥淎s this matures, so electronification will offer solutions for those liquid markets to perfect flow business and create additional efficiencies鈥�, she added.
Over the longer term, this trend should continue as more products are brought into scope of MiFID II.
鈥淓ven so, there are challenges on the horizon. Central Securities Depository Regulation (CSDR), with its goal of harmonising the legal aspects of securities settlement and the rules of CSDs at an EU-wide level, continues to come online, and we now expect to go live with the settlement discipline component by September 2020.鈥�
DeFilippo observed that this next phase of implementation will require imposition of a penalty regime through fail fines and mandatory buy-ins, as referred to above, which risks deterring market participants from providing liquidity in repo and stock lending.
ICMA has highlighted, through briefing notes and direct engagement, the risks and anticipated impacts of these new rules.
Brexit promises to feature strongly for all market participants throughout the year, according to DeFilippo
This will require all market participants to review, validate and, in many cases, make changes to internal structures, processes and business flows.
DeFilippo concluded: 鈥淎 significant amount of legal, technical and operational work will be required to ensure that all market activity can continue without disruption on the relevant exit date. Many of the technical details surrounding the potential transition are still being negotiated. Without full clarity on certain key aspects, the markets in Europe will be exposed to significant risks.鈥�
CANVA
The report also includes a summary of the 32 practical initiatives undertaken by ICMA in the quarter under review, followed by an examination of the prospectus regulation that is scheduled to come into force on 21 July 2019.
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