BME and Deloitte analyse the challenges of post-trade, from regulation to T+1 and AI

Francisco Béjar, Managing Director of Iberclear, pointed out that, in addition to the two major aspects facing the post-trade industry, regulation and digitalisation, a new component has come into play in a very considerable way, which is competition. Competition that is evident in areas such as geography, at the level of trading venues, financial institutions or products. However, he added, this competition should be considered as a positive factor, as it encourages collaboration between different partners, promoting innovation and efficiency, which results into the contribution of value to the market in general and to the final client in particular.

Throughout the day, it was pointed out how increasingly advanced technology allows the market to adapt to regulatory requirements in a much faster and safer way.

Regulatory changes

With regard to the Pilot Regime, the regulation applicable to platforms developed in DLT technology through which a multilateral trading facility is integrated with a settlement system, in which retail investors can participate directly without the need of intermediaries, and in which automatic settlement is tended to,  Openbrick is worth noting.

This digital platform consists of the issuance, administration and settlement of assets linked to the real estate sector. The negotiable securities in this potential new market, operated by BME and which is applying for the necessary ERIR license, will be mainly equities and bonds, and possibly in the future venture capital investment funds may be included. Real-time settlement, and as a consequence, the reduction of operational risks and transactional costs, seek to constitute a safe and attractive market for investors.

Meanwhile, the MiCA regulation, which is responsible for bringing order to the world of cryptoassets, although not all, opened last September the possibility to apply for authorizations for service providers of this type of asset, a request that has already been made by around 25 financial and the sector institutions. The fact that this authorisation is prescriptive to operate the corresponding services generates great security and favours competition at the European level since all applicant entities will be subject to the same rules.

Lara Cortés, Senior Innovation and Business Project Manager at BME, moderated a round table in which the Eurosystem's experimentation project in which the Spanish community participated through an initiative led by BME was explained, and where the participants commented on their experience, the lessons learned and the next steps that the industry is expected to come. The need to have a wCBDC issued by the Central Bank was also discussed in order to continue advancing in the initiatives that are emerging in this interesting field.

Artificial Intelligence and T+1

During the day, the application of Artificial Intelligence in the post-trade industry was also discussed. Since AI should not be taken as an end, but as a means to optimize and streamline processes, it can be considered a powerful tool that can bring significant benefits to capital markets such as greater precision in decision-making by fund managers, more efficient regulatory compliance,  or a reduction in operational risk in the custody and depository business, among others.

The speakers also stated that it is essential to highlight the importance of the reliability of the data with which AI works so that it can contribute to the generation of explainable and auditable processes, and thus obtain optimal and truthful results.

To end the day, a round table focused on the next major challenge of the sector consisting on the reduction of the current settlement cycle. The migration to a one-day settlement (T+1) system in Europe, the United Kingdom and Switzerland is scheduled for October 11, 2027. Until then, there is a long way to go during which all infrastructures must be coordinated to ensure the success of such a complex project.

The panel explained that there are numerous challenges that each participant in the value chain will have to face to reach this point, but there will also be many benefits that will be achieved with this milestone, such as harmonization with the US, reduction of counterparty risk, and greater capital turnover. It will undoubtedly be the main challenge of the industry in recent years leading to more competitive, secure and robust markets worldwide.