On 17 October 2023, the European Securities and Markets Authority (ESMA) published a speech by Verena Ross, Chair, at OPTIC 2023, Brussels. The speech was entitled ‘Being ready for the digital age’ and focusses on technological developments and their impact on the operations of financial institutions.
Key points in the speech include:
- In June ESMA published a new Data Strategy which sets out its specific objectives in this area for the next 5 years.
- ESMA has already established a Data Platform and the next step in the Platform’s evolution is to turn it into an information hub that provides analytical outcomes and actionable insights in a user-friendly manner.
- ESMA is also planning specific initiatives aimed at aligning and modernising reporting regimes and, consequently, reducing reporting burdens. The legislation amending the Alternative Investment Fund Managers Directive and UCITS directives, that are being finalised, mandates ESMA to assess the feasibility of improving data reporting in the asset management sector.
- ESMA has completed a study to understand the specificities of different DLT / blockchain solutions. It sees several challenges that still need to be resolved to ensure that supervisors can use DLT for more efficient data access models. The study also concluded that on-chain data does not provide sufficient information for market surveillance purposes and would still need to be enriched with additional off-chain data.
- The question of how long the settlement cycle take should has become a subject of debate again. Looking at European markets, at the technology available and at the evolution of other markets outside the EU, the question arises as to whether a two-day settlement cycle is still right for European markets. This is the question that ESMA is currently consulting on through its Call for Evidence on shortening settlement cycles. There are two considerations on this issue that should be highlighted (i) European markets must be stable and work in an orderly fashion (ii) EU markets also need to remain efficient and competitive. The challenge in assessing a possible reduction of the settlement cycle in the EU is to weigh the pros and cons. Would a shortening of the settlement cycle contribute to building an efficient and attractive EU capital market or not?
- As a side benefit of the Call for Evidence ESMA hopes to also find out whether there are any unexpected barriers in the legal framework for EU market participants to operate in a context where other jurisdictions move to T+1, while the EU remains in T+2.