The World Federation of Exchanges (“WFE”), the global industry group for exchanges and CCPs, has today responded to the Global Financial Innovation Network (GFIN) Consultation Document.
On 7 August 2018, the Financial Conduct Authority (FCA) announced the internationalisation of its regulatory sandbox via the GFIN – a collaboration with 11 financial regulators and related organisations. This builds on the FCA’s proposal earlier this year to create a ‘global sandbox’, a proposal that WFE responded to in March 2018 by welcoming the FCA’s initiative to consult the market on broadening the geographic reach of its existing regulatory sandbox, and by reiterating its support for a globally coherent approach to FinTech.
Today’s response by the WFE to the GFIN consultation can be summarised as follows:
- The WFE supports the proposed GFIN Mission Statement and the three proposed functions: a network of regulators; joint policy work and regulatory trials; and cross-border trials.
- The WFE applauds the GFIN’s objective of continuing to explore the idea of a ‘global sandbox’, along with investigating ways in which regulators can work together to balance the benefits of innovation with existing policy objectives.
- Regulatory sandboxes and innovation hubs have proven to be a useful tool for the FinTech industry by allowing businesses to test the use of innovative products, services and applications, promoting responsible innovation without jeopardising investor protection.
- The WFE welcomes the plan to extend the GFIN initiatives globally, to ensure that collaboration and exchange of information occurs between industry (whether regulated, or not) and regulator.
- The WFE advocates international guidelines and principles, to promote global consistency. This is particularly needed in the areas of Artificial Intelligence, Machine Learning, Digital Ledger Technology, Cloud Infrastructure, crypto-assets and initial coin offerings (ICOs).
- In order to avoid market fragmentation or even a contradictory policy framework, the WFE agrees with involving global standard setting bodies as part of the GFIN. Moreover, in the face of rapid advances in technology, it is especially important to encourage collaboration at the international regulatory level and develop a common approach and understanding. Internationally agreed frameworks and co-operation will in turn support enhanced efficiency in the form of deference between regulatory bodies.
Nandini Sukumar, CEO, WFE said: “The WFE welcomes the scope and purpose of the GFIN. Given the significant changes the financial industry is undergoing because of technological innovation, regulators need to take a balanced approach. To ensure long-term financial stability while facilitating innovation and scalability, it is important to foster technological neutrality and coherence in regulatory and supervisory approaches.”
As part of its mission to further regulatory coherence, the WFE set up a member-only FinTech Working Group (FTWG) in 2017. The WFE’s FTWG comprises senior technology and innovation representatives from nearly 20 exchanges and CCPs globally. The purpose of the FTWG is to enable members to develop comprehensive and coherent industry policy positions to help shape regulatory thinking in this space, while also sharing information and best practice about new developments.
The WFE has published a series of white papers, reports and consultations in the Fintech space since 2016 including: a position paper entitled FinTech in the Market Infrastructure Space; a joint WFE-McKinsey report on FinTech in the capital market infrastructure space – entitled Fintech Decoded: Capturing the opportunity in capital markets infrastructure; a paper undertaken in conjunction with the Affiliate Members Consultative Committee (AMCC) of the International Organisation of Securities Committees ((IOSCO) on DLT; along with various consultation responses. FinTech is one of the WFE’s strategic priorities for 2018, and a regular topic on the agenda for the WFE’s bi-annual Technology Conference (with MIT in 2015; with Imperial College London in 2017; and scheduled for late June 2019 with Umeå University, Sweden.)
You can read the WFE’s full response to the GFIN Consultation Paper here.