Category Archives: Industry News

Key Takeaways from the European Issuers Webinar

ScribeStar Co-Founder and Executive Chairman Adam Shaw participated today in the Europeanissuers webinar on the Digitalisation of EU Capital Markets to discuss technology and market trends in the capital markets space. He was joined by Peter Kerstens, Adviser on Technology and Innovation at DG FISMA, Friedrich Luithlen Global Head of Debt Capital Markets at DZ Bank, Hervé Labbé, CEO of NowCP, and  Robert Koller, the Executive Chairman of the european primary placement facility (eppf).

The event came at a time when Europe is making strong strides towards a Capital Markets Union, and the market is rapidly adjusting to accommodate COVID19 induced demands for quick and efficient access to capital and for new ways of remote capital markets operations. It was an exciting panel of technology providers, bankers, and policy makers, each with a unique perspective on the role of digitalisation  in this respect, and what the European capital market of the future looks like. Below are just some of our takeaways from the discussion.

  • THE BIG TECH TRENDS:There are five notable technology trends driving innovation and change in the capital markets space. These are cloud computing, APIs, Big Data and analytics, Process Automation, and finally DLT, blockchain, crypto, and tokenization. Demand driven market transformation will also inspire regulatory change, but also induce a quicker tech adoption curve on the side of market participants and regulators.
  • LISTING PROCESS AND COSTS FOR SMEs: Though there is still strong demand for innovation on the trading and settlement side, technology advancements on the non-trading side have been slower. This is primarily in respect to documentation production and process management associated with bringing companies and transactions to market, and keeping them compliant with market regulations. For an SME a cost of an IPO can reach up to 15% of the value of the issuance, while regulatory burdens and costs associated with ongoing compliance are often mentioned by managers as some of the most laborious and costly business processes.
  • DIGITAL CAPITAL MARKETS ECOSYSTEM: In order to have a truly seamless issuance process, whether that’s via an independent bond or equity trading platforms or via an established stock exchanges, we have to create a digital environment where the pre-issuance documentation creation and compliance process is integrated with the trading side and linked with automated ongoing compliance. ScribeStar does that by bringing together multiple dislocated market participants to create and manage transaction documentation and process in a secure regulatory compliant digital environment. ScribeStar creates documents in structured data format, allowing for such level of automation and data utilization by the platforms and investors, regardless of the type of security, marketplace, or location.
  • THE ROLE OF STOCK EXCHANGES: To demonstrate this, we’ve mentioned our work with Aquis, a dynamic growth market in the UK, where we are redefining the standards of what an issuance process looks like, how much it costs, and how long it takes. By working together with the regulators, and by placing the issuance and compliance process on a digital platform, in an automated and templated way, issuers will be offered with a simple and efficient listing process, and thus cheaper and easier way to access the market and stay there.
  • REGULATIONS AND WHY WE NEED THEM: Regulations inflate post-crisis, and deflate in times when the economy needs a stronger boost. It is a cyclical process. There is an ongoing debate to reduce regulatory diversity at an EU level, but there are also decisions to be made in terms of the intensity of those regulations. It is a balancing act which has to be approached carefully, and considered in respect of EU capital markets harmonization as well as how it impacts on market participants. Ultimately, regulations are there to protect investors and the market as a whole. Technology is therefore a way of easing compliance with appropriate levels of regulation rather than reducing the levels of regulation. By automating and digitising regulatory processes, the associated time consumption and costs for complying can be reduced. Embracing digitalisation also helps regulators and policy makers to better understand regulatory impacts and make better educated decisions.
  • SUPPORT FOR INNOVATORS: If it doesn’t want to be left behind, Europe has to nurture and support innovation, and help build a strong technology infrastructure. We have to secure risk capital to help companies innovate and grow, and give them a playground where their technology can be tried and tested. For that purpose, sandboxes and a good safe environment to experiment in, while also allowing regulators and supervisors to learn directly from the innovators.
  • BOND TRADING PLATFORMS:Taking bond markets as an example, innovation will mostly be driven by large issuers who have identified shortcoming in the process, that being placement and allocation, documentation, settlement, underwriting, advice, or validation of decisions made by the issuers. From the current perspective there is a strong case to be made for platforms to address the issue of documentation, some aspects of trading, placement and allocation. We should also note that many liquidity bond trading platforms are natural monopolies. Whether that’s ok is a question for the market and policy makers. An example of such a question would be whether the dealers and the issuers would want independent bond platforms monopolising data that they would like to have access to.
  • EQUITY MARKETS:In respect of the equity market, especially SMEs, there is not a single solution that would fit in the same way as for bonds given the bespoke nature of each issuance and the fact that all of the current issuance processes are static and do not allow the use of structured data. Everyone agrees that SMEs have to have a clearer and easier path to market. Currently there are too many legal and compliance costs involved with that process. By creating a digital environment where structured data can be used for equity markets will allow automation, which will a significant positive impact for the market as a whole and in particular for SMEs. Automation will also allow for things to be better standardised, in line with the CMU HLF action points, and data will allow investors to be able to compare and understand investment opportunities quicker. Simpler analysis would drive more investments in SMEs, and more companies to market. Furthemore, enabling the issuers to work together with their deal teams, the exchange, the regulators and the market in a digital online manner will obviate the relevance of location and proximity.

The future looks bright, and there are many promising technology initiatives which will drive positive change. The only way forward is for the industry, technology providers, regulators and policy makers to work together. We enjoyed exactly such an experience in today’s panel. Many thanks to our panellist colleagues for the engaging discussion, all the participants for tuning in, and EuropeanIssuers for organising. We’re looking forward to the next one!

Digitalisation of EU Capital Markets

Join Adam Shaw Founder, Executive Chairman of ScribeStar at the European Issuers webinar on the Digitalisation of EU Capital Markets, alongside colleagues from DG FISMA, DZ Bank, European Primary Placement Facility, and European Issuers members.

This Webinar is part of European Issuers Capital Markets Webinar Series Programme on key trends in the capital markets space, in partnership with NASDAQ and Euronext.

Join to learn what the European public markets can do to make raising capital easier, how the efforts around the Capital Markets Union will affect exchanges, issuers, and investors, and how technology can help tackle these challenges.

Register for free here;
http://www.europeanissuers.eu/ecmwebinarsprogramregistration

Do you have questions or comments you’d like us to address at the event? We’d love to hear from you at info@scribestar.com.

For some background reading on the topic, here is our take on the latest High Level Forum Report on the Capital Markets Union – https://www.lsegissuerservices.com/spark/scribestar-digitalisation-stock-exchanges

What does the final report of the EU’s Capital Markets Union mean for stock exchanges ?

In the midst of the COVID19 fall out, and coinciding with countries gradually opening their economies to an uncertain future, on June 10th 2020 the European Commission published the long-awaited High Level Forum (HLF) report on the EU Capital Markets Union* (Report). European economic recovery in many ways depends on reviewing its capital markets, and Europe has yet to crack the code on how to make public equity financing a more attractive proposition for non financials and SMEs.

Pent-up demand has left investors sitting on piles of dry powder, eagerly looking for investment opportunities and fresh IPOs. Untapped investment resources are even greater among retail and individual investors, with the latter group still awaiting exposure to equity investing at the level enjoyed by US peers. Corporates entered the year already highly leveraged, and the pandemic has certainly not helped. Going forward, debt won’t suffice and equity investors and capital markets will have to play a significantly stronger role.

There is a sense of responsibility and urgency among economies and policy makers to rapidly remove the obstacles hampering access to public capital markets. On the supply side this implies making going public and staying public more efficient, cost effective, and transparent. On the demand side it means finding solutions which bring capital markets closer to retail and individual investors. The common denominator of both of these challenges is that the solutions also lie in technology and digitalisation.

As for the supply side, however devastating the COVID19 effects on the economy may be, the inability to do things in the traditional way has become a huge tailwind for digitalisation in capital markets. Even the most basic form of digitalisation, things such as e-roadshows and video conferencing have made headlines on the back of efficiencies they have brought to the capital raising process.

This is but a small-scale proof of concept for what technology can do. Industry has been focusing on tech and innovations on the trading side, leaving the non-trading, administrative, and regulatory processes somewhat ignored. This is starting to change, and we at ScribeStar, who have been propagating use of digital means to facilitate equity and debt issuances, are happy to see this happening and thankful to our clients who have been early adopters of this vision.

The key moment is only just on the horizon. The HLF Report sets out seventeen recommendations for moving the EU capital markets forward, and it is wonderfully clear and precise on what capital markets need to do in terms of technology and digitalisation.

First, HLF calls for an EU-wide digital access platform for companies public financial and non-financial information, as well as other financial product or activity-relevant public information. This in the first instance applies to all information of companies with securities listed on EU Regulated Markets, including their periodic ongoing information disclosures pursuant to securities markets legislation. To deliver on this request, all the national authorities and their reporting mechanisms will have to be aligned and tech-enabled to facilitate digital reception and handling of reports and submissions, as well as structured data collection and processing. The European Securities and Markets Authority (ESMA) will be tasked to develop technical standards for data fields and formats, where it will most likely look to the approach used in the European Single Electronic Format with XBRL for annual financial reports or the Prospectus Register.

Second, HLWG calls upon ESMA to coordinate and drive this implementation with national authorities in order to ensure that the public information collected at national level is accompanied by the correct data fields and in case of structured information, that information submitted by companies complies with the applicable format requirements.

“…it is wonderfully clear and precise on what capital markets need to do in terms of technology and digitalisation.”

ScribeStar fully supports these proposals. We would also emphasise that in order to achieve this objective, stock exchanges and regulators will have to become receptive to solutions like those offered by ScribeStar and allow a rethinking of their listing and ongoing compliance processes. Ultimately, stock exchanges and regulators alike will have to enable prospective issuers and listed companies to use digital means to access capital markets and fulfil their ongoing obligations.

ScribeStar has been successfully working with issuers for the past four years, and most recently with stock exchanges to implement its proprietary digital capital markets platform, wherein complex market documents and processes can be done in exactly such a digital environment, thus enabling the use of structured data and fulfilling the preconditions for AI deployment, big data applications, and data reuse.

ScribeStar is of the opinion that those stock exchanges that start early with digital adoption will be the ones reaping the benefits, and also taking over the share of the ICO and STO future market. Our experience is that this sort of change is not easy and requires time. We advocate an evolutionary, rather than a revolutionary approach. Exchanges should ease themselves into this process, and so should the regulators and key market participants, on a collaborative journey.

Success will eventually be measured by the increase in the number of listings, which will be a consequence of the cost and time savings of going public and staying public, as well of the overall efficiency and transparency of the processes. Digitalisation and technology have the power to deliver on these objectives.

ScribeStar looks forward to the developments on the CMU front and invites those who believe in digital capital markets to reach out and learn about our vision and our work.

“…stock exchanges that start early with digital adoption will be the ones reaping the benefits…”

When is a prospectus not a prospectus?

Today, when a company IPO’s we are presented with a large bound document; the hundreds of pages that make up the prospectus. Pages that have been put together describing the company, the shares it is issuing, its financials, market position, management team, the advisers who have diligenced the information and various risk factors to warn you of what could potentially go wrong. This document will have been carefully crafted, considered, certified and ultimately presented to you in your consideration of whether to subscribe for shares. There will be analyst reports available, pitch presentations (also carefully vetted and verified) to also help you decide on whether to invest. This is a well-trodden process and has been developed over the hundreds of years of public markets since the Dutch East India Company IPO’d in 1602.

But, I believe we are about to go through a technology driven revolution in prospectus drafting that will ultimately mean we may not even have a prospectus at all. This is not a coordinated effort specifically targeted at ridding the world of the prospectus, but the result of a combination of the way ESEF is changing the way companies report, and the way stock exchanges are looking to improve the attractiveness of capital markets as a source of capital to help drive economic growth. The European Single Electronic Format (ESEF) became law in May 2019, forcing a process of digitisation which, as many have commented, will have a profound effect on company reporting across Europe. However, the implications of ESEF on capital raising in the UK and Europe are equally profound. ESEF means that all listed entities and PIEs from this year will have to file annual reports digitally as inline XBRL filings – allowing not only humans to read them, but also machines. The idea being that the data contained can be used to do much greater analysis and improve business transparency, particularly for investors, pension funds, investment banks etc.

At the same time stock exchanges are looking to improve the attractiveness of public capital markets for SMEs which are the heart of a good economy. The number of SMEs going public to raise capital in the UK and Europe has been falling for over 20 years with key factors being the cost of issuance and ongoing governance. Public capital competes with private capital and as stock exchanges look to improve the competitiveness of public markets they have to look at reducing the cost of capital for companies looking to list – a lower cost of capital and simpler ongoing governance will drive interest in companies listing. The competition for capital is where technology will come into play for stock exchanges.

Stock exchange driven technologies combined with the ongoing reporting required by ESEF will come together and ultimately mean the most efficient prospectus is not one that is documented and presented in the way that it has been for hundreds of years, but one that has been produced in a digital form. The prospectus will be a set of XBRL readable data containing information produced, approved and authorised by the traditional participants. Information that the regulator can review by AI quicker, more efficiently and at lower cost. Information that can be read by the investors’ models in the way that allows them to focus on the parts they are interested in. Information that works with the investors’ tax algorithms. Information allowing comparisons to peers. Information that combines with other data sets in similar XBRL form allowing easier analyst reviews.

So why will we need a prospectus at all? We will need something because investor protection matters. However, the shape and the form of the prospectus as we know it will become obsolete. An authorised data set will be all that is needed. Data that the investors know has been vetted, that has all the required parts as needed by the regulator, that they only get access to once approved.

So, when is a prospectus not a prospectus? Much sooner than you think…

ScribeStar joins CMS’ equIP

London, 29 April, 2020. ScribeStar, a digital ecosystem that improves the efficiency and reduces the cost and time required for document production for capital markets transactions, has been selected by CMS, one of the world’s largest law firms, to join its accelerator program, equIP.

CMS’ equIP programme brings together a network of international start-ups and helps them with their growth ambitions. ScribeStar will benefit from the support and strength of CMS through legal advice and contacts within the legal sector, and through the network effect of partnering with other equIP companies.

Srinivas Suravarapu, CEO of ScribeStar, said: “We are delighted to join CMS’ exclusive equIP programme. It offers us an exciting opportunity to expand the use of our technology in capital markets and leverage CMS’ network of other leading legaltech companies across the world. Our track record in the UK in capital markets keeps growing. In the same way that datarooms went online, we are seeking to bring digital benefits to the capital markets documentation process. Our partnership with CMS takes us a step closer to realising that goal.”

Charles Kerrigan, Fintech Partner at CMS, comments: “We are very pleased to welcome ScribeStar to CMS equIP. The programme has developed a track record of supporting some of the brightest minds in the start-up world, and we think that ScribeStar’s innovative platform will be a perfect fit. ScribeStar is at the forefront of the digitalisation of capital markets transactions, transforming what was previously a manual process into something much more efficient. We plan to work with ScribeStar in our capital markets practice globally and use its technology in other areas of our firm.”

CMS has used ScribeStar for capital markets transactions for almost three years. Mostly recently, in February, CMS completed the Sequoia Economic Infrastructure Income Fund prospectus on ScribeStar’s platform.

Other capital markets documents produced on ScribeStar’s platform include: the Aston Martin IPO registration document and prospectus; both Smithson Investment Trust Plc IPO prospectuses – the first being the largest ever investment trust IPO; S4 Capital plc’s last three fundraising prospectuses; and the Equiniti Group plc rights issue prospectus.

Contact Simon Barker at sbarker@barkercomms.com 

+44 7866 314 331