FMIs on addressing constraints of scale and interoperability

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Financial Market Infrastructures (FMIs) have been supporting the transformation of the world’s capital markets for decades. Since the dematerialisation of physical securities began in the 1970s, the world’s FMIs have underpinned the evolution of the financial markets by providing scalable, resilient and trusted infrastructures on which the industry can build.

Throughout this journey, The Depository Trust & Clearing Corporation (DTCC), Clearstream and Euroclear have played a pivotal role in helping the world’s capital markets adopt and benefit from transformational technologies. While we operate in different geographies, under different regulatory regimes, the objective of harnessing technology to increase efficiency, liquidity, maintain high degrees of resilience and ensure the safe continuity of financial markets is central to our strategies.

Today, the opportunity for us to continue to support the industry’s digital transformation is as real as ever. With the accelerating pace and scope of technological change putting significant pressures on firms, we are well-equipped to support our clients in incorporating Artificial Intelligence (AI), Distributed Ledger Technology (DLT) and other emerging technologies into their operating models — and hence manage the complexities and challenges of today’s change agenda as well as drive new business opportunities in the securities space.

In the specific case of DLT and digital asset securities, the last several years have seen a growing number of initiatives drive a new maturity in the use of this technology around the world. These initiatives have demonstrated new opportunities for financial market participants to transform the ways in which they issue, invest and process different asset classes — well beyond traditional securities. After extensive pilots and several larger-scale deployments, new operating models are emerging that deliver unique levels of operational efficiency and liquidity benefits across entire trade flows and asset classes. Intraday repos, fractionalised bonds and natively issued digital structured products, for example, are starting to deliver significant value — and this is just the start.

Looking ahead, there is an industry realisation that the adoption of these operating models at ever-greater scale is contingent on broader regulatory harmonisation, industry-wide standardisation and integration of institutional-grade payment rails, as well as connectivity across DLT protocols and legacy platforms. With a growing number of pilots now complete, conclusions are being drawn regarding the need for well-regulated, neutral players to provide trust, resilience and standardised connectivity in their respective ecosystems. This is a role that FMIs have been playing for decades.

There is also increasing market evidence that the adoption of digital assets and modern technologies, such as DLT, are picking up speed. Over the next 15 years, digital assets are anticipated to grow in value to around USD16 trillion. As FMIs, we are excited to partner with the industry to help bolster and underpin this growth, unlock the value of the rapidly maturing technology and deliver additional value and opportunities to the financial industry.

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