Hardeep Tamana, Managing Director of Avenir Registrars, takes a look at the year ahead
It’s fair to say that for many of us working in capital market infrastructure, we have spent the last few years navigating a series of hurdles, each of which has arrived with a varying degree of unpredictability. We received clear – if perhaps unwelcome – warnings of events such as Brexit, which even today continues to yield a series of regulatory changes, challenges and opportunities. Conversely, the global health pandemic that has dominated the agenda for the last two years was a true black swan event. Some postulated that it may happen, but only a tiny minority expected such a catastrophic turn of events on their watch. So as we look towards 2022, is this now an opportunity to return to something approaching business as usual, or will the already crowded agenda serve to hold back true innovation? At Avenir, our hopes are pinned very much on the former, but we wanted to use this opportunity to look ahead at some of the key points of contention which the industry will be squaring up to in the coming months.
CSDR
2022 has the potential to see marked changes to the way markets operate. In many cases this will be rather nuanced, but understanding, adapting, and adhering to any developments here will be critical. One key point here is CSDR. The Central Securities Depository Regulation covers many aspects and the overall process has been ongoing for some years. The first phase was deployed back in 2014 along with MiFID II and EMIR. There’s been a lot of discussion over the mandatory buy-ins to the settlement discipline regime and whilst these could arguably improve market quality, onerous burdens on participants have seen EU regulators defer implementation and the UK – given its Brexit freedoms – abandon the clause altogether. However, it’s moving transferrable securities into book entry form that we’ll be watching most closely, as again the plans here – for digital records to become mandatory for new issues in 2023 and all existing traded securities to migrate by 2025 – have been disrupted as a consequence of Brexit. Ireland remains on track to implement these changes and London will be watching closely as whilst the move is likely to be popular with both issuers and investors, some dealmakers could push back. Political posturing as to whether such moves are necessary has already been seen, and more divergence in process between the UK and EU could follow.
Prospectus reform
As London seeks to maintain its position as a multinational financial hub post-Brexit, the UK government has been consulting on a number of topics, including prospectus reform. By all accounts, some degree of change here is overdue and will offer issuers greater flexibility when looking to raise capital. At Avenir we’re mindful of the fact that this could have a fundamental impact on the security lifecycle, potentially resulting in the ability to bring offers to market faster than ever. Our technology-first approach has always looked to leverage the inherent benefits of securities digitisation and we are confident that as change materialises here, our processes and delivery will comfortably keep pace with any accelerated timelines.
Improving market quality
Wider market reform reaching beyond changes to prospectus rules is also anticipated in the coming years. How this plays out will be instrumental to both the quality of London’s capital market as a whole and the post-Brexit growth of the venue in general. We have already seen a significant increase in minimum market cap levels, with smaller issuers being routed to venues such as AIM – something that should add vibrancy to London’s already unparalleled choice of markets. Consistent narratives from the regulator, where there may be additional benefit in ensuring that markets are “effective” – something which is lacking from the current remit – whilst still mitigating against systemic risk also have the potential to help cement London’s position. However this plays out, migration between markets could well become even more popular. And whether that’s on a domestic or cross-border basis, such transitions are well within scope for Avenir to assist with.
We can already see that 2022 will bring about some predictable – and arguably helpful – change for markets and investors alike. If you’re an issuers or professional service provider wanting to learn more about how Avenir can support you, both this year and beyond, please contact info@avenir-registrars.co.uk
This article originally appeared in the January 2022 version of AIM Journal. You can download a printable version here.