Federation of European Stock Exchanges – Opening remarks: 'Capital Markets Infrastructure Business in a Digital World'

Los Angeles

Good morning and thank you very much to FESE for asking me to speak here today.

I have the great pleasure of introducing the first panel of today’s conference - where will be discussing capital markets infrastructure in today’s digital world.

I am very much looking forward to sharing this panel with some of Europe’s leaders in market infrastructure and to hearing about the challenges and opportunities they foresee as new technology and traditional market practices become increasingly entwined.

I thought that as the only non-industry participant on the panel, I would use this introduction to look at some of the factors that affect policy maker’s approach to this soon to be ‘new normal’.


When it comes to technology in financial markets - policy makers and regulators often find themselves confronted by two seemingly opposing realties.

On the one hand, there is technology as the great disrupter - a new layer of unknown risk possibly contaminating traditional pieces of market infrastructure.

And on the other, technology as the ultimate efficiency. A resource that will bridge fragmented capital markets whilst requiring little political sacrifice and can even democratise financial service positions to the benefit of the consumer.

At an EU level this juxtaposition is exacerbated by the legislative cycle - where we are still working on post crisis legislation alongside newer, more forward looking pieces.

We are making minor technical changes in some instances and creating completely new structures in others.

Within the EU legislature, we move between meetings on Capital Requirements for Banks, where we are still refining our process to one on Virtual Currency and its place in the world - making the first seem outdated and obsolete and the second unknown and full of risk.

And then there are the gaps.

For me personally, as a co -rapporteur on the recovery and resolution of CCPs - it can be jarring to discuss the risk technology brings to the world of clearing knowing that we don’t have an agreement in place on this long overdue piece of work.

Moreover, whilst the G20 Pittsburgh agreement on derivatives clearing and trading may seem a long time ago for many in this room, for many of my colleagues in Brussels the drive towards central clearing and the post trade world is still a relative unknown.

Personally, this suited me fine until the events of two years ago (give or take a day) brought the world of clearing to the front of political debate in European Capitals.

Almost overnight, CCPs and post-trade became political and we saw a shift away from structures that had been previously treated with trust regardless of where they were located in the world - towards a more sceptical view that focused on the concentration of risk.

Much of the debate and resulting draft legislation we have seen since reflects this shift and new political prominence.

So there are changing and conflicting messages that surround this topic.

So what should policy makers do?

Take one highly political but technical topic - clearing - and add one very fashionable topic such as Blockchain - technology -and how do you ensure a reasoned appraisal?

How do we cut through?


To begin with, we need to reinforce the message that governing FESE president delivered last night - that exchanges have been a force for good - before and during the financial crisis and in the ten years since.

One of the themes we will be looking at later in the panels is whether the decline in IPOs and increase in methods like Crowdfund, ICOs and private equity mean that exchanges have lost their value and have been left behind in a natural technology led evolution.

I would strongly argue against this premise. Exchanges are more than capital raisers.

We need to remind ourselves of the transparency exchanges have brought to the market, the resilience they have installed and the level of integration they have driven forward.

We should remind ourselves of the legislative framework that has contributed to these positive factors and the opportunities it has created, some of which are yet to be fully realised by industry.

MiFID, EMIR, SFTR and CSDR are all EU pieces of work that have embraced the transparency model and EMIR in particular has become the gold standard around the world for the treatment of derivatives.

We should look at the progress that has been made by the EU on the global stage - the institutions that have gained global expertise and importance.

Which should serve to remind us also of the global nature of this system, the important role this global cooperation has played in delivering these successes and the role they have yet to play.

This is how I believe policymakers should be approaching the discussion of technology and capital market infrastructure - by grounding the discussion in the value of what we already have - alongside its untapped potential.


Here EU policy makers should look to industry and other jurisdictions from around the globe for both inspiration and reassurance.

Well-known and trusted companies have begun to embrace crypto derivatives. In March of this year for example, in the US we saw Cboe announcing the launch of a crypto complex, as well as plans to develop ETN and ETFs.

In post-trade, the Australian securities exchange is set to replace its registry, settlement and clearing system with Blockchain technology in an effort to cut costs for customers, a development planned hand in hand with the Australian regulators

As I outlined at the beginning of my remarks - policy makers in Brussels are still dealing every day with reviews and reforms to ‘crisis legislation’ and other political and geopolitical concerns.

Whilst EU initiatives like the Fintech action plan are influential in creating a tonal shift, away from uncertainty and negative and towards dealing with uncertainty and complexity through technological solutions - best practice from other jurisdictions can also and should also be a key resource here.


Global cooperation is, and will remain important - as is the need for Europe to ensure they are the forefront of the global competitive arena moving forward.

The commitment on derivatives made in Pittsburg was a global one, for Europe, for the UK, for the US, for all parties. It should remain a global commitment regardless of geopolitical change.

We are here today to discuss how technology can be of benefit to capital markets infrastructure. I sincerely hope that as an investor we can deliver DLT for post-trade, so as to reduce risk and costs for consumers investing in the capital markets.

As new developments in technology seek to reduce barriers, increase efficiency savings and integrate markets, there is no point in pursuing these aims in one area and moving away from them in another.

Europe needs to remain open, open access, open capital and open to using new technologies - not just those introduced by the incumbents.

With these few thoughts ill hand dover to my panellists who I’m, sure will enlighten us on just how they are embracing technology in their business.