Common language faces regulatory hurdle
Divergent laws and regulation hold back development of common financial language
Instead of attempting to create an overarching common financial language (CFL), the securities industry should create multiple, sector-specific languages, speakers on Monday’s ‘A common financial language for the securities industry’ session, said. Seung Jae Lee, secretary of the ASEAN+3 Bond Market Forum initiative for the Asian Development Bank said building an effective common language would hinge on the industry resolving underlying regulatory issues.
“The issues coming from different legal and regulatory frameworks are the key hindrance to creating a CFL. There is no one answer to how we can achieve more standardised regulation, but we must move step by step,” Lee said.
During the session, Alistair Milne, professor of financial economics, Loughborough University School of Business and Economics, presented a research paper exploring the benefits and challenges of creating a CFL.
He said the advent of legal entity identifiers showed the industry could drive global solutions to common problems, adding a segregated approach to common financial languages should be sought, broken down by asset class, for instance.
Milne’s research, funded by a SWIFT Institute grant, cited the FIX protocol and SWIFT’s ISO 20022 message standard as further examples of participant-led change in the securities industry.
“ISO 20022 is a recipe for creating messaging standards and it’s spread be- yond payments into the trading space,” Milne said, adding the message standard had benefitted from take-up by market infrastructures, including European settlement initiative T2S.
The above article originally appeared in the Tuesday 17 September 2013 publication of Sibos Issues.
Alistair Milne’s research, co-authored with Malcolm Chisholm, can be downloaded here.