International Capital Market Features

Monitoring these themes, identifying where and how they are impacting is a dynamic activity that will evolve and change over time, and it is an important focus of our work to effectively monitor, articulate and share this information with members. Issuing thought leadership around these themes will be critical, and we have initiated discussions with potential partner firms who do this kind of work.

Expanding our work on digital bonds is an important priority for the coming months and years, and we are currently working with our members to understand what we should do next to support this important area of innovation. We recently launched the DLT Bond FAQs (which can be seen here), which were a useful initial set of coordinated, consolidated definitions to help demystify what a “DLT bond” is, and to attempt to answer many misconceptions around them. This is a “living” document and will continue to evolve. We have also recently run five dedicated (small) roundtables with issuers, investors, law firms, underwriters and market infrastructure providers to discuss “what next” for ICMA in this important area of our work. Findings will be shared with the broader DLT Bonds Working Group in the first instance, then with our FinTech Advisory Committee, and ultimately with the ICMA Board. More to come in future ICMA Quarterly Reports. There seems to already be strong support for us to develop a standard global model (or framework) to support this evolution as the current activity is quite varied and fragmented.

Driving the adoption of the two models we have built, which will effectively underpin standardisation, simplification and streamlining of the industry, is an important area of focus for us. The Common Domain Model (CDM) and the Bond Data Taxonomy (BDT) were issued recently to our membership:

• The Common Domain Model (CDM) for repo and bonds was created in conjunction with ISDA and ISLA and was released to the broader community via FINOS – the FinTech Open Source Foundation - earlier this year in order that the market begins to more broadly adopt and test it. Phase 1 was completed in July 2021, and focused on trade execution, clearing and settlement of fixed-term repos. Phase 2 was completed in January this year, and extended the product model and event model to cover open term and floating rate repurchase agreements, and the associated lifecycle events.

• The Bond Data Taxonomy (BDT – formerly known as the Common Data Dictionary, or CDD) was launched earlier this month to our membership. It provides an agreed language to promote automation and reduce the risk of fragmentation across the issuance process standardising key economic terms of a vanilla bond (eg nominal amounts, denominations, currencies, prices, net proceeds, interest, and interest payment related information), key dates (eg pricing, settlement, issue dates) among other information (eg whether bearer or registered, status of the note, relevant parties, ratings). It includes machine-readable definitions of key fields, expected values, and relevant ISO elements, as well as examples and a user guide.

Reporting and tracking clear “use cases” for these models as these emerge will be key, and we will report more on this in future editions of the ICMA Quarterly Report.

Our continuing work with regulators, central banks, and all relevant member firms around the world to effectively support relevant consultations and market wide experimentation activities to progress the testing of new technologies and innovations is also a key priority for the team:

• The UK FMI Sandbox is the UK’s version of the EU DLT pilot regime. It is hoped that it will be more flexible than the EU regime. Following an informal consultation response, ICMA ran a roundtable for members (with HM Treasury, FCA and the Bank of England attending) in November 2022 to provide early feedback into the process. The formal consultation period is expected to come into force imminently, with full implementation predicted to be in H2 2023. We will actively support the consultation process to ensure the industry is effectively represented and the sandbox is fit for purpose for our members.

• The EU DLT Pilot Regime came into force on 23 March 2023. ICMA will continue to actively support this important experimentation activity. The regime will run for three years (until March 2026), at which point it may end, or be extended another three years until 2029. Termination conditions are being discussed as participants apply, via their National Competent Authorities (NCAs), whereby they are also discussing amendments to individual regulations – which are then discussed with ESMA.

• Work also continues in Asia Pacific driven by various market participants, including the HKMA and the MAS on regional testing activities.

More and more we are seeing the community coming together to drive innovation. We are effectively linking these activities between the regions, sharing lessons learned, approaches taken etc.

Deepened engagement with our FinTech, Big Tech, Data and Market Infrastructure vendor communities (current and potential future ICMA members) is important. The space is crowded, with over 330 solutions in the market across the trade lifecycle that we are actively tracking (on a Global basis). It is our intention to run an ICMA Global FinTech event in London in Q4 2023. This will be akin to the Global FinTech Forum which was last held pre-COVID in 2019. We hope that this will give a true platform to the industry’s solution vendor firms enabling them to effectively network with, and demonstrate their products to, the DCM business community.

Later in the year we will also be launching two FinTech and Digitalisation specific education courses: Introduction to Digital Assets and Primary Market Financial Technology. We hope to have these available in Q4.

Contact: Georgina Jarratt georgina.jarratt@icmagoup.org