“SCA launched an e-system that allows for real-time information reporting and sharing by market participants,” Dr. Obaid Al Zaabi
The Securities and Commodities Authority (SCA), in collaboration with the Arab Federation of Exchanges (AFE), hosted the first webinar to discuss supervisory technology, SupTech, for capital market regulators.
H.E. Dr. Obaid Al Zaabi, SCA’s CEO and Vice Chair of the board of the International Organization of Securities Commissions (IOSCO), opened the webinar. In his keynote speech, Rami El Dokany, AFE’s Secretary General, shed light on the significance of SupTech and its relevance to the Arab region.
The webinar included a presentation by representatives from the Financial Conduct Authority (FCA) in the UK on the FCA’s use of cloud-based technologies to deliver analytical insights and intelligence. The presentation was followed by a panel discussion moderated by Mirna Sleiman, Founder and CEO of Fintech Galaxy, and consisted of senior representatives from the Bahrain Bourse, Ernst and Young Singapore, AFE, Accenture Middle East, and Fintech Galaxy. Panelists discussed the challenges facing the development of SupTech in the Arab region.
This event is in line with SCA’s strategy, which reflects its commitment to proactive vision and to lead the development of financial markets by working actively to create resilient frameworks; amend regulations, business strategies, and operational procedures to keep pace with the financial sector development; enhance efficiency through automation; digitize data and business tools; employ new technologies to facilitate administrative and operational procedures; prepare innovative and accurate supervisory reports with better layouts; allow for more proactive supervision; and ensure the compliance of entities falling under SCA’s supervision with the regulations and decisions.
In his speech, Dr. Obaid Al Zaabi, Chair of IOSCO’s Growth and Emerging Markets Committee (GEMC), said: “SupTech refers to the use of innovative technologies, such as artificial intelligence (AI) and machine learning (ML), by supervisory authorities to support supervision. It has emerged recently and gained significant acceptance among supervisory and regulatory authorities around the world as there are notable examples of their use by capital market regulators across the globe,” adding that “in the present crisis experienced during COVID-19 pandemic and the rapid changes in economic conditions, systems for collecting and analyzing data—and their impact on RegTech and SupTech—offer important tools as they provide more accurate and real-time information about financial health, thus requiring significant institutions to report core data. Our only option is to choose how we respond: by resisting pressure exerted by external forces and embracing market instability by actively working across agencies and borders to shape a set of positive outcomes that are the fruit of the vision, leadership, and sound governance.”
He also said that “as far as the UAE capital markets are concerned, SCA, in collaboration with a leading IT company, has launched a project for enabling real-time information sharing and reporting by all market participants. Additionally, SCA’s team has already started working to deploy e-enforcement and e-supervision tools to ensure effective financial supervision in this new era of remote working and social distancing.”
SupTech generally focuses on the automation and streamlining of administrative and operational procedures, data digitization, and improved data analytics for regulatory authorities.
The webinar discussions stressed the importance of the availability of the necessary skill set, capacities, cost considerations, availability of data, and the need for effective digitization to ensure the success of SupTech across the GCC region. Various aspects relating to the development of SupTech solutions for regulators were also discussed as to whether they should be developed in-house or outsourced to technology providers and consultants given the sensitivity surrounding SupTech.
Rami El Dokany, Secretary General of AFE, for his part, said that “SupTech in capital markets has many opportunities in many service areas to enhance communication with investors. Capital markets should ease the way for younger generations to start investing in them. If capital markets did not innovate, they will soon run out of individual investors. The AFE is keen on tacking these issues.”
The webinar received tremendous response and had participants from regulatory and supervisory authorities, international organizations, market players, and other relevant stakeholders across the Arab region. The findings of the webinar are being compiled into a joint report by SCA and the AFE for future research.
SupTech refers to the use of innovative technologies, such as AI and ML, by regulators to support supervisory functions. SupTech applications can play a significant role in tackling quality-related problems, such as data gaps, inconsistencies and errors. They allow for data validation, verification, matching and integration, in addition to real-time surveillance of capital market trading activities and the identification of unusual cases that require investigation.
Therefore, SupTech provides significant support to regulatory and supervisory authorities. It has positive impacts on two areas: data collection and data analytics. Within data collection, SupTech applications can be used in data management, supervisory reporting and virtual assistance, eventually leading to reduced costs and better allocation of supervisory resources. Data analytics, on the other hand, focus on four many areas: market surveillance, misconduct analysis, microprudential supervision and macroprudential supervision. This is ought to achieve a key aim, which is to enhance the confidence of market participants and other market institutions in regulatory authorities.
Narjes Farookh Jamal, Chief Operating Officer of Bahrain Bourse, while participating in the panel discussion said: “As an SRO, we, in Bahrain Bourse, are implementing active surveillance and are committed to investigating questionable market activities. To gain the confidence of our investors, we have to ensure our ability to oversee the activities taking place in the market, especially given the complexities of securities transactions conducted on cross boarder markets and in multiple currencies. Therefore, there has become an urgent need for SROs to put in place the right SupTech tools to enable more efficient and resilient business operations.”
For his part, Luca Bianconi, Managing Director at Accenture Middle East, stressed that “regulators and exchanges must avoid going for tactical solutions. They should first define their SupTech vision as it can be part of their overall digital aspirations, and then establish a strategy to achieve it.”
Sherif Sami, Former Chairman of the Egyptian Financial Supervisory Authority (EFSA), currently serving as an Advisor to AFE, stressed that “ New technologies provide more efficient tools for the management of financial market risks and the detection of manipulations, in addition to warning against practices that may affect currency stability or investor rights. Sami indicated that investment funds and securitized bonds are areas where the application of supervisory technology can help with the early detection of imbalances or problems”.
On the other hand, Varun Mittal, EY ASEAN Emerging Markets Leader, indicated that “SupTech enables regulators to embrace the changes brought to financial services due to the scale of new solution providers, use cases, and data,” adding that “technology is the biggest ally for regulators to bring digitization and automation to ensure proactive and cost-effective governance of emerging products and services. SupTech is a necessary foundation for the next generation of financial services and FinTech solutions to be successful.”
The webinar concluded with closing remarks delivered by the event moderator Lara Abdulmalak, Unlock Blockchain’s Editor-in-Chief.