A summary of the items still to be solved on the way to a functioning regulatory framework by Günter Schnaitt, Head of GSS Austria.
Summer is almost over and I hope that everyone has enjoyed their summer holidays. But when we take a look at the agenda of our regulators there was only limited time for a summer break as there are still ongoing consultations with ESMA.
We are discussing in a call for evidence the question of asset segregation for UCITS and AIFs which has been a continuing discussion over the past few years and it seems that we still have no consistent interpretation of certain rules. There is the impression that there are two streams – the ones who have already segregated their assets between AIFM and UCITS and the others who did not.
However, I believe there are two demands which are clear for all depositories: no segregation at the issuer CSD level and segregation only on the first sub-custodian level – otherwise any regional hub would be heavily impacted. Therefore, a final clarification for this topic would appreciated and necessary as different regulators and markets may interpret the current rules in varying ways.
The second topic on ESMA´s table during summertime is a discussion paper regarding “Distributed Ledger Technology Applied to Securities Markets”. The document provided by ESMA is very insightful as it summarises the ongoing discussion on this topic to a certain extent. Basically, it describes the benefits, the challenges and the risks.
Beside those three points ESMA also tries to analyse how this matter fits into the current regulatory framework. I recommend that everybody read this document as it deals with future technologies that bear the power to shake up our industry. In my opinion, however, the document also shows that there are no quick solutions as many unknown issues are still to be handled and the legal framework does not yet exist for solutions based on ledger technology on the securities side.