After Brexit, will a BRICS-it multilateral financial system be next?

Geneva – There is no doubt that the Central Securities Depositories community has evolved through the various partnerships that have been forged over the decades. While countries are leaving regional unions, such as Brexit, CSDs belonging to the BRICS nations continue to come together in the spirit of collaborating for the greater benefit of the financial markets.


Speaking at a panel discussion at the Sibos event in Geneva in September 2016, the CEO of South African CSD Strate, Monica Singer, explains that as a BRICS member, South Africa, continues to seek collaborative and knowledge-sharing opportunities with other countries to introduce innovation and ultimately profile these markets as an investment destination.


“There are strong networks and relationships among CSDs across BRICS, as well as internationally. They share information with one another to further develop their markets and proactively implement solutions to become more resilient, and at the same time, to keep up with the exponential rate of technological change. CSDs across the world share a greater vision of how systemic risk can spread, and when they work together in harmony, they achieve risk mitigation,” she says, adding that “CSDs as financial market infrastructures best serve their clients and the financial markets when they collaborate.”


According to Singer, CSDs are expected to keep up with the pace, be innovative and embrace new technologies – all while remaining resilient and focusing on their core services. “CSDs have been known to be resilient through crises, so they cannot lose sight of their core services and current client needs. They must continue to maintain a central role to provide exchange of value settlement systems, operational efficiency and transparency for the safe functioning and long-term viability of the markets. On the other hand, CSDs also need to assist their clients and the market to introduce new disruptive technologies and keep at the forefront of international best practices and trends.”


Distributed ledger technology (DLT), as an example of disruptive technology, has emerged as a relatively new and rapidly-growing innovative technology, and is set to revolutionise the financial markets and fundamentally create a paradigm shift. With a large number of Fintechs investing in blockchain and DLT, Singer believes that CSDs too have a role to play within this ecosystem to add value to their clients in the financial markets. “There is the potential for financial markets to create a distributed ledger that settles securities transactions, so financial market infrastructures need to embrace the technology and identify opportunities that will add value to their stakeholders.”


Shortly after her panel discussion, Strate and the National Settlement Depository (NSD) , which is a Russian CSD, announced that they have signed a Letter of Intent to forge a partnership to develop solutions that utilise DLT, with the first use case focused on proxy voting. This stands testament to the collaboration that has already begun among BRICS nations to introduce new concepts and solutions to a multilateral financial system.


“At the end of the day, it’s about the investor and the needs of the financial markets. In the face of innovation, cyber security threats, greater regulatory requirements, and protecting investors, CSDs need to come together with a common purpose to make a difference, by helping their clients keep up with the pace, future-proof the risks and provide value-adding services. Collaboration is crucial to the future stability and sustainability of the financial market.”