London, 15 June 2017 – The World Federation of Exchanges ("WFE"), which represents more than 200 market infrastructure providers including exchanges and CCPs, has responded to the European Commission's ("Commission") consultation document entitled FinTech: A more competitive and innovative European financial sector.
The WFE's response can be summarised as follows:
- Innovation should be driven by markets enabled by regulation. Any regulatory approach should encourage innovation while ensuring investor protection and security in the financial system.
- FinTech innovation may have global applications in what are increasingly international capital markets; therefore, it is important that authorities in different jurisdictions develop a common approach to ensure a level playing field.
- Existing EU regulations should be sufficient to cover most FinTech applications. Services based on new technology need to abide by the same rules as incumbents to ensure investor protection, and to preserve the integrity and stability of the financial system.
- EU authorities should engage with financial institutions, FinTech firms and end-users to thoroughly understand financial technologies and their applications before regulating (and only if existing frameworks are not appropriate).
- While there has much focus to date on Distributed Ledger Technology (DLT), the WFE believes other technological areas will develop that are at least as important – if not more so – to the exchange and post-trade space. These include: Cloud Computing, Artificial Intelligence (AI), Big Data and Robotics.
- Challenges may arise when unregulated firms lead the development of FinTech solutions related to the core functions of financial markets. This could result in negative consequences for investors and orderly markets.
Nandini Sukumar, Chief Executive Officer, WFE said: "The WFE is encouraged by the Commission's consultation on FinTech. Getting policy right in this area means avoiding the rush to regulate: understanding the technology and its real-world application is crucial. FinTech has the potential to lower costs and enhance services for financial market participants; AI is already being applied on markets to ensure their integrity and detect abusive trading. Authorities should be vigilant when unregulated firms look to take on core market functions, and should coordinate internationally to ensure that European markets remain competitive and robust."
The WFE is hosting its bi-annual technology conference on 25 & 26 July 2017, with Imperial College London. The event aims to spark debate about the latest trends and innovation in technology in the market structure space, such as reg-tech, AI and machine learning. We welcome registrations from Chief Technology Officers, Chief Information Security Officers, Chief Innovation Officers, Chief Digital Officers and Heads of Strategy.
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About the World Federation of Exchanges (WFE):
Established in 1961, the WFE is the global industry association for exchanges and clearing houses. Headquartered in London, it represents over 200 market infrastructure providers, including standalone CCPs that are not part of exchange groups. Of our members, 41% are in Asia-Pacific, 40% in EMEA and 19% in the Americas. WFE exchanges are home to nearly 45,000 listed companies, and the market capitalisation of these entities is over $67.9 trillion; furthermore, around $84.18 trillion (EOB) in trading annually passes through the infrastructures WFE members safeguard (at end 2016).
The WFE is the definitive source for exchange-traded statistics, and publishes over 350 market data indicators. Its statistics database stretches back more than 40 years, and provides information and insight into developments on global exchanges.
The WFE works with standard-setters, policy makers, regulators and government organisations around the world to support and promote the development of fair, transparent, stable and efficient markets. Over recent years the organisation has developed cyber security standards and currently chairs the IOSCO-AMCC working group on DLT. The WFE shares regulatory authorities' goals of ensuring the safety and soundness of the global financial system, which is critical to enhancing investor and consumer confidence, and promoting economic growth.
For more information, please contact:
Head of Communications, World Federation of Exchanges
Phone: +44 20 7151 4137 / +44 7850 287 685