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These are exciting times to be in the capital markets. With recent regulatory changes in Europe – not least MIFID II implementation which took effect at the beginning of this year, and is still being phased in – we are seeing new dynamics emerge, new participants in the market, and changes to established ways of working. When you consider that market participants will need to make further structural adjustments as a result of additional regulatory developments, plus Brexit, it is clear that we are facing a period of enduring change – and no small degree of uncertainty – in the near term.
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. This next phase of implementation will require imposition of a penalty regime through fail fines and mandatory buy-ins, 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, and will continue to do so.
Brexit promises to feature strongly for all market participants throughout the year, requiring all market participants to review, validate and, in many cases, make changes to internal structures, processes and business flows. A 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. Resilient, dynamic, evolving and diverse – common adjectives which have often been used to describe the capital markets, are perhaps never more pertinent than today. Similarly, now, more than ever, ICMA, through its ongoing engagement with regulators, the dissemination of best practice protocols and thought leadership, has a crucial role to play. Not only is this an exciting time to be involved in the capital markets – it’s an exciting time to be part of ICMA.