Category Archives: ScribeStar Insights

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!

How technology is driving efficiency in the capital raising process

Join us  on Thursday 26 November at 15:00 GMT  on a webinar hosted on the LSEG Issuer Services Spark, to explore how technology has intervened in the capital raising process to enhance digital communication, distribution, documentation and cash management. Some interesting discussions around the pandemic and its impact on the adoption of technology across capital markets

To register – Click here

 

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

The European Commission CMU Capital Markets Action Plan

On 24th of September the European Commission published the Capital Markets Union Action Plan which aims to deliver on 3 key objectives; i) support a green, digital, inclusive and resilient economic recovery by making financing more accessible to European companies; ii) make the EU an even safer place for individuals to save and invest long-term; and iii) integrate national capital markets into a genuine single market. The Action plan is an operational tool for delivering on the EU’s vision of European public markets, and a follow-up on the CMU High Level Forum report published in July this year. Our write up on that paper can be found here What does the final report of the EU’s Capital Markets Union mean for stock exchanges ?

We are particularly fond of how the EC in its announcement describes the aim of the CMU; to get money – investments and savings – flowing across the EU so that it can benefit consumers, investors and companies, regardless of where they are located. We could not agree more. But we’d like to add that in order to achieve that objective Europe will have to offer those investors a flow of investment opportunities and a steady supply of data needed to make informed investment decisions.

For companies, especially SMEs, going to market and staying in market needs to become cheaper, faster, and overall a more attractive proposition. For investors, the financial and non-financial information on those companies needs to be structured and available at their fingertips. The future of European capital markets is a CMU designed by forward-looking regulation and enabled by technology, to create a single digital ecosystem where market participants come together and where data flows seamlessly.

EC believes that digitalisation will require significant private investment if the EU’s economy is to remain competitive globally, while mastering technological advancement is critical for the EU’s financial sector to gain in efficiency, to improve access to capital. It’s great to see a recognition of the role of technology in the paper. It is very important for the policy makers to fully realise the transformative immediate effect technology and digitalisation can have on making the CMU idea a reality.

Good examples of technology enabled points from the Action plan are; Action 1 –  Setting up of European single access point, Action 2 – Supporting SMEs access to public markets, and Action 8 – Building retail investors trust in capital markets. European single access point to exist needs a digital flow of financial and non-financial structured data, SMEs to raise capital need can a faster streamlined and automated process, and for retail investors to have trust in the system investment decisions have to be driven by a constant stream of utilisable, trusted, structured data and information. Each of these points can be enabled and accelerated by use of technology and digitalisation. The timelines for all 16 action points from the paper are very challenging. We are looking forward to seeing policy makers, industry, and regulators come together with solutions on how these targets can be most efficiently achieved. We will be contributing to those efforts with our tech driven solutions and our vision of a digital capital markets ecosystem.

https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=COM:2020:590:FIN

Key Takeaways – IFLR EU Prospectus and Primary Market Issuance Conference

At the 11th EU Prospectus and Primary Market Issuance Conference  held on 24th September, 2020, Adam Shaw our Founder speaks to  Jessica Walker of Clifford Chance, and Robert Koller of eppf.eu as part of a panel discussion on how FinTech can build efficiencies and digitize the capital markets ecosystem. Many thanks to IFRL  and Jessica for her thought provoking questions, Robert for his cutting edge insights from the forefront of debt markets, and all the participants who tuned in to listen.

Key takeaways

 

Machines and humans working in harmony: Technology will not push out the human element. There will always be a very clear key role for lawyers, advisers, and advisers. We don’t’ envision a scenario where interpretation of complex laws and business judgements is fully automated. We believe in a staged approach where technology makes that process more efficient and easier for those parties, so that they can do their jobs quicker and more efficiently.

Trends and drivers of change: We’re getting strong tailwinds from the COVID19 changes to working practices, coinciding with two other key drivers; regulatory change, and early adopters. Online tools and cloud based solutions are becoming much more important, and capital markets are moving towards an API-enabled environment. On the regulatory side the High Level Forum on Capital Markets Union is pushing for an EU-wide single digital access, ESMA is driving for machine readable digitised financial and non-financial reporting, while efforts around the Prospectus Regulation are envisioning a digital prospectus future. Early adopters of tech and more disruptive exchanges, are looking to challenge the norms by reengineering the process and documentation, which in turn is pushing tech penetration with more traditional players.

Tech can ease regulatory compliance: To drive the costs of raising capital down, we are seeing a drive towards more lax regulations, which is an effort not to be taken lightly. We believe we should not overly loose the checks and balances that protect companies and investors, but instead we should use technology to improve the efficiency of regulations and ease compliance.

Cost of Capital for SMEs: Everyone wants to reduce the cost of capital. Going public and staying public is too costly and time consuming, especially for SMEs. Digital solutions such as Scribestar can significantly cut the costs of going public and staying public already today.

Developing Markets: We also believe tech can significantly speed up the convergence of developing markets, and have companies in those countries access public markets easier. This allows them to benefit from a wider investor base, while crating a data flow for investors to help them understand those markets better.

Vision for the future: Capital markets of the future are a single digital ecosystem where all the processes and participants collaborate and work on a standardised structured data format. We’ll see a move to a completely digital prospectus where information flows seamlessly to the issuers, exchanges, investors, regulators and other market participants.