Fintech in International Capital Markets
FinTech in International Capital Markets by Gabriel Callsen and Rowan Varrall
Common Domain Model for repo and bonds ICMA is cooperating with ISDA, ISLA and Regnosys to extend the Common Domain Model (CDM) to include repo and, by extension, outright bond transactions. The CDM provides a common, digital representation of securities lifecycle events in the form of code. The aim is to generate industry-wide efficiency gains, by enhancing standardisation, reducing the need for reconciliation, and facilitating interoperability across firms and platforms. Member firms have actively contributed to this cross-industry initiative by providing guidance and test data through regular ICMA CDM Steering Committee (SteerCo) meetings. SteerCo members include Allen & Overy, Barclays, BNY Mellon, Credit Suisse, Eurex Clearing, Euroclear, GLMX, Goldman Sachs, IHS Markit, Intesa Sanpaolo, JPMorgan, LCH, Murex, Swift, Tradeweb, and UBS. The initial focus of the group has been to model a standard fixed-term repo, with a single ISIN as collateral, which is the most commonly transacted repo structure. Lifecycle events in the initial phase comprise trade execution, clearing and settlement. Modelling work has also included the mapping and ingestion of FIX 4.4 messages to CDM. Additionally, a bond transaction has been modelled so that the fundamental data points required for settlement can be represented in the CDM. To demonstrate the usable CDM model for repo and bonds, ICMA will be hosting an event on 21 July 2021. Further details and registration are available here. Further information on the CDM for repo and bonds can be found on ICMA’s CDM webpage. Contacts: Gabriel Callsen and Rowan Varrall gabriel.callsen@icmagroup.org rowan.varrall@icmagroup.org
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ICMA FinTech Advisory Committee ICMA’s FinTech Advisory Committee (FinAC) held its second meeting of the year on 26 March 2021. On the agenda were presentations on trends and new initiatives in capital markets in Asia-Pacific, including the electronification of the interbank bond market in China, the Central Bank Digital Currency in China and the m-CBDC project, by the Hong Kong Exchange. The Chinese fixed income market is characterised by vertical integration, for historical reasons, requiring all OTC transaction to be registered on a single platform which is linked to domestic clearing and settlement systems. As a result, bond markets resemble equity markets, which facilitated the creation of Bond Connect. e-Prime, a new primary market platform for book building, pricing and allocation, linking to China’s CFETS system has been launched recently, amongst other initiatives. China’s onshore CBDC pilot is aimed at retail clients to counter the usage of payment solutions by large BigTech firms, including WeChat and Alibaba, and reduce the potential of systemic risk. The m-CBDC Bridge project on the other hand is a cross-border wholesale payments model to promote further RMB internationalisation. The objectives are to provide fast and efficient processing of FX transactions, lower transactions costs, and enable traceability. Seven proofs of concept will be tested in the forthcoming months, including new wealth management products and bond issuance and settlement which are expected to be implemented by 2022. The BIS published further information on 8 April 2021, which can be found here. Further information on the FinAC and its mission statement is available on ICMA’s dedicated FinTech webpage. The full list of FinAC members can be found here. Contacts: Gabriel Callsen and Rowan Varrall gabriel.callsen@icmagroup.org rowan.varrall@icmagroup.org
