The World Federation of Exchanges responds to UK FCA consultation on global sandboxes to test FinTech applications

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The World Federation of Exchanges (“The WFE”), the global industry group for exchanges and CCPs, has welcomed the UK Financial Conduct Authority’s initiative to consult the market on broadening the reach of its existing regulatory sandbox, and reiterated its support for a globally coherent approach to FinTech.

The WFE, which represents more than 200 market infrastructure providers including exchanges and CCPs, believes there are significant benefits to integrated financial markets and supports strong common principles, approaches and supervisory coordination to promote financial integration and market integrity, whilst safeguarding supervisory coordination.

The full response to the FCA draws on the consensus positions agreed by WFE’s global membership in a January position paper entitled FinTech in the Market Infrastructure Space. The WFE’s January position paper examined seven key areas in FinTech, and identified corresponding principles for markets authorities to consider when designing rules, standards and guidelines for FinTech in the market infrastructure space.

The FCA response also draws on the empirical evidence and data contained in the joint WFE-McKinsey report on FinTech in the capital market infrastructure space – entitled Fintech Decoded: Capturing the opportunity in capital markets infrastructure – which looks at potential uses of new technologies across the sector, and areas likely to see the most innovation.

As part of its mission to further regulatory coherence, the WFE set up a member-only FinTech Working Group in 2017. The WFE’s FTWG comprises senior technology and innovation representatives from nearly 20 exchanges and CCPs globally. The purpose of the FTWG is to enable members to develop comprehensive and coherent industry policy positions to help shape regulatory thinking in this space, while also sharing information and best practice about new developments.

Nandini Sukumar, CEO, The WFE said: “It is important that authorities are proactively engaging with the industry to identify the nature of FinTech applications, to understand the technology which underpins it, and to work with the market to ensure the existence of an appropriate regulatory framework (if existing frameworks are not deemed appropriate). In this regard, regulatory sandboxes and innovation hubs have proven to be a useful tool for the FinTech industry and these should be extended – where relevant – to ensure that appropriate collaboration and exchange of information occurs between industry (whether regulated, or not) and regulator.’’