The federation wants “rules, standards and guidelines” that will help the securities industry cope with new technologies.
The World Federation of Exchanges (WFE) is urging global authorities to draft new “rules, standards and guidelines” to govern fintech providers serving the securities industry, to facilitate “resilient, stable and robust” markets with level playing fields.
The paper from the WFE, which represents including exchanges and CCPs, covers seven key areas and argues for corresponding principles:
- Market driven innovation: “Innovation should generally be market driven. Nevertheless, it is clear that Authorities have a role to play in ensuring the system remains stable in the face of changing technology, and that some innovation may be prompted by regulatory initiatives (for example RegTech).”
- Existing regulations are sufficient: “The WFE believes the scope of existing regulations should generally be sufficient to extend to many or most potential FinTech initiatives. Initiatives should be considered on a case-by-case basis and legislation, rules and practices should only be adapted if strictly required, and be technology neutral.”
- Investor protection and system stability: “The development of regulatory and/or legal standards should not prevent market and technological innovation. Authorities should remain focused on ensuring investor protection and the safety of markets whilst encouraging an environment that enables financial technology which improves capital markets.”
- The implications of outsourcing: “It is a well-established supervisory principle that responsibility for outsourced functions remains with the regulated entity. While the technology itself may present unique risks (operational, cyber), this underlying principle remains appropriate, even when regulated entities are outsourcing new FinTech applications and solutions.”
- Open dialogue: “Authorities should proactively engage with the industry to identify the nature of the FinTech application, understand the technology which underpins it, and work with the market on an appropriate regulatory framework. Regulatory sandboxes and innovation hubs have proven useful and should be extended, where appropriate, to ensure collaboration and exchange of information between industry and regulators.”
- Coordination: “The WFE believes there should be collaboration at the international regulatory organization level (e.g. IOSCO) to develop a common approach and understanding to FinTech, to ensure regulatory coherence. FinTech is innately international with global applications and uses, and therefore any regulatory principles and/or guidelines should be developed at that global level.”
- Consistent rules: “There should be consistency in the application of rules to both incumbents and new FinTech entrants: Any regulatory framework should be consistent between non-financial companies that enter this market and traditional regulated entities such as exchanges and CCPs. This is essential for maintaining the integrity, stability and fairness of the financial system.”
“The WFE is pleased to publish the first position paper from its newly formed FinTech Working Group (FTWG),” says Nandini Sukumar, CEO of the WFE, in a statement. “As our seven principles show, the global nature of FinTech demands a collaborative international approach, that allows innovation to flourish while safeguarding markets.”
The principles that the WFE is advancing are intended to prompt further “regulatory and industry discussion to ensure rules, standards, guidelines and expectations are designed that appropriately fit the nuances of global markets operating in local jurisdictions,” says Gavin Hill, head of regulatory affairs at the WFE, in a statement.
The WFE’s FTWG, set up last year, has members from nearly 20 exchanges and CCPs globally, officials say. The full text of the paper can be found here.
WFE officials work with standards bodies, policy makers, regulators and government organizations to fair and efficient markets, officials say.
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