“Fintech,” or financial technology," is a term that seems to be on everyone's lips these days, from bankers to global finance ministers.  Dramatic advances in computing power, speed, interoperability, and nearly instantaneous internet communication are changing the ways banks, brokers, and other financial institutions relate to their customers, investors, regulators, and each other. But what do these changes mean to the future of financial markets and regulation?  In February 2017, the International Organization of Securities Commissions (IOSCO) published a document that ambitiously charts the bewildering array of fintech innovations and describes how these innovations are beginning to intersect with securities markets regulation. Based on industry surveys, the report looks at the most important technological innovations affecting global finance and makes some observations about regulatory responses.

Though the Financial Stability Board’s March 4, 2015 consultation paper on Global SIFI designation is only a week old, it has already generated a chorus of criticism and condemnation from some of the asset management industry’s most powerful players. This second public consultation proposes revised methodologies for identifying non-bank non-insurer global systemically important financial institutions (NBNI G-SIFIs) based on comments received on the first consultative paper published in January 2014. The consultation proposes a general framework applicable to NBNI G-SIFIs, as well as a specific framework that would be applied based on the type of entity, including separate frameworks for asset managers and investment funds. Despite a multitude of comments on the January 2014 proposal, however, the identification methodology proposed is once again based on size, complexity, and systemic interconnectedness of particular entities, and assessments as to how those factors could cause significant disruption to the wider financial system and economic activity at the global level. This focus on size and complexity has prompted the some of the asset management industry’s most influential groups to issue statements decrying the FSB’s apparent failure to heed their advice. No doubt these scathing criticisms of the Global SIFI proposal will be reiterated, expanded, and elucidated further in each of the group’s forthcoming comment letters.

The Bank for International Settlements (BIS) and the International Organization of Securities Commissions (IOSCO) have published their final framework for margin requirements for non-centrally cleared derivatives. The document sets forth globally agreed standards for all financial firms and systemically important non-financial entities that engage in non-centrally cleared derivatives. Under the guidelines, these firms will have to exchange initial and variation margin commensurate with the counterparty risks arising from such transactions. The aim of this framework is to reduce systemic risks related to over-the-counter (OTC) derivatives markets, as well as to provide firms with appropriate incentives for central clearing while managing the overall liquidity effects of these new requirements.