In a speech given by Martin Wheatley at Lansons in London, the CEO of the FCA spoke about the ‘electrifying pace’ of technology and the impact that technology has had on the growth of the UK financial sector.
Mr. Wheatley pointed out that when senior executives were asked about how concerned they were about technology, they ranked it as 18th on the scale two years ago. For many it is now ranked as 4th.
Given the rise of technology, it appears there is a challenge being made about how the financial sector can avoid the pace of technology outstripping the pace of effective regulation and oversight, for example the ability to circumvent cybercrime, flash crashes and hacking, to name a few concerning areas. However, while these concerns exist, Mr. Wheatley recognizes that technological innovation can be beneficial for consumers and as such he has made it clear that the FCA will be supportive of change and will itself need to adapt to advances in order to provide adequate regulatory oversight and support. Mr. Wheatley does not want the FCA to inhibit progress and it is the regulator’s aim to ensure that technological advances are ‘safely fast tracked into the UK’.
As part of this safe fast-tracking it was announced that a hub is being opened to help provide compliance expertise to firms developing new models or products as well as the launch of an ‘incubator’ to provide support to small financial businesses that intend to apply for authorization.
In discussing high-frequency trading (HFT), a financial area particularly dependent on technology, Mr Wheatley confirmed that the implementation of MiFID II should serve as a way of mitigating many of the risks without disrupting the benefits associated with HFT due to the technical rules that will be applied to HFT firms. Mr. Wheatley appeared confident that the current checks and balances implemented by the FCA in relation to peer-to-peer lending and crowdfunding platforms offer sufficient protection for smaller investors.
Despite the many benefits offered by technological improvement, Mr. Wheatley did highlight that some risks posed by cybercrime would remain a constant challenge. The focus for regulators is to confront these challenges in order to support the benefit felt by the financial services industry and consumers as the result of technological innovation.