Global Trustee and Fiduciary Services Bite-Sized Issue 9 2023

Global Trustee and Fiduciary Services Bite-Sized | Issue 9 | 2023 8 QUICK LINKS CYBER FINTECH MONEY MARKET FUNDS SUSTAINABLE FINANCE/ ESG AUSTRALIA ASIA EUROPE NORTH AMERICA UNITED KINGDOM Asset management : The EU fund sector partly recovered after the historical decline experienced in 2022, primarily due to valuation effects. Bond funds received inflows, which contrasts with the outflows in 2022. Fixed income funds which reduced their maturity and interest rate sensitivity during the monetary tightening are now positioned to benefit from higher yields. Fund risks remain high due to prevailing credit, valuation, liquidity and interest rate risks, especially for funds combining several vulnerabilities, such as in the real estate fund sector. Consumers : Investor sentiment remained negative amid lingering uncertainty and weak expectations on long-term developments. Performance of retail investments remained subdued, reflecting sustained price pressures in the underlying asset markets. Infrastructures and services : The first half of 2023 saw renewed growth in equity trading volumes. Infrastructures under ESMA’s remit proved stable and well-functioning faced with high volatility linked to the banking sector. After the peak in 2H22, CCP margins relating to commodity products decreased in 1H23, in line with the drop in energy derivative prices. Market-based finance : The ability of non-financial corporations to raise funds through capital markets slightly picked up in 1H23 from the lows observed in 2022. Corporate bond issuance peaked, with concentration in shorter termmaturities given monetary policy expectations. Sustainable finance : The EUmarket for ESG products and sustainable investments has continued to grow at a robust pace. The demand for funds with a sustainable investment objective remained strong. Crypto-assets and financial innovation: Crypto-asset valuations rebounded in early 1H23 but remained far below their historical peak. Persistently elevated cyber risks remain an important source of concern for the EU financial sector. Financial markets have started exploring potential implications of Artificial Intelligence after the launches of various Generative AI tools in 1H23. Link to ESMA’s TRV No.2 2023 here NORTH AMERICA SEC Directs Equity Exchanges and FINRA to Improve Governance of Market Data Plans On 1 September 2023, the Securities and Exchange Commission ( SEC ) issued an order directing the equity exchanges and the Financial Industry Regulatory Authority ( FINRA ) (the Participants) to file a new national market system plan (NMS plan) to replace the three existing national market system plans that govern the public dissemination of real-time, consolidated equity market data for national market system stocks. The SEC’s Order follows a 6 May 2020 SEC Order that was reviewed by the D.C. Circuit and, among other things, was upheld with respect to the SEC’s requirements that the new plan allocate votes by exchange group and provide for an independent administrator. The SEC states that the consolidated equity market data produced pursuant to NMS plans is a critical component of the national market system through which equity investments are priced and traded. Developments in technology and changes in the equity markets have heightened the inherent conflicts of interest between the equity exchanges’ regulatory responsibilities in their oversight of existing NMS plans and their individual interests in maximising the viability of the proprietary data products they sell. The SEC says this has raised concerns about whether the existing NMS plans for equity market data continue to fulfil their regulatory purpose to ensure the availability of information with respect to quotations for and transactions in securities. The SEC Order addresses conflicts of interest inherent in the current governance structure of the existing equity data plans and is designed to improve the efficiency of NMS plan operations and the responsiveness of the plan to the concerns of market participants that are not self-regulatory organisations. Under the Order, the Participants must submit a new NMS plan that will be published for public notice and comment. Until such a new NMS plan is effective, the current NMS plans will continue to govern the provision of consolidated equity market data. Link to SEC Order here