Part V New Financial Technology in Financial Markets and Infrastructure, 15 Impact on Regulation of Financial Markets

This chapter considers the impact of fintech and regtech from a macro perspective. It demonstrates the depth of the changes and importance to consider in all the elements that are converging to create a new reality and a new economy. It also adopts the meaning of the term “fintech” as published by the Bank of International Settlements and the Financial Stability Board, which means “technology—enabled innovation in financial services”. This chapter describes the impact of fintech on financial services regulation. It provides a macro analysis on fintech solutions that are tested or implemented in financial services as they are directly applicable to stock markets and exchanges.

Analyzing the Impacts of Financial Services Regulation to Make the Case That Buy-Now-Pay-Later Regulation Is Failing

Fee-based Buy-Now-Pay-Later services (BNPL) are becoming widely adopted in many developed countries, including Australia. Across a variety of regulatory approaches there appears to be relatively minimal regulatory coverage of fee-based BNPL. This review applies a results-oriented, behaviourally informed market failure approach to assess the regulatory outcomes of fee-based BNPL. The review makes the case that the impacts of the regulation of fee-based BNPL in Australia demonstrate multiple forms of regulatory failure. The regulatory failure is particularly due to regulatory capture at a broad level and especially in terms of a lack of consumer protections. Consumers may particularly need consideration and protection because understanding the increasing complexity and financial knowledge at the heart of many fintech services is beyond the capability or responsibility of the consumer. Incorporating social and consumer considerations into analyses of regulatory structures can enable analyses of the regulation of fintech and move financial services regulation toward providing more socially useful and sustainable financial services. In the future, a behaviourally informed approach to the regulation of fintech may be beneficial and enhance sustainability.

2 Commodity Trading Houses

This chapter discusses commodity trading houses, which refer to companies that buy and sell physical commodities and commodity derivatives for their own account and/ or on behalf of their customers. Commodity trading houses may be very specialist and deal in a few commodities only or they may have a wide-ranging business covering many different types of commodity. Moreover, commodity trading houses may form part of a wider group, where other parts of the group are in the business of producing commodities, whether that is by extracting them from the ground as a natural resource or manufacturing a usable product from one or more such resources. The commodity trading house may effectively be the marketing entity within the group. Sometimes that marketing entity will also enter into derivatives. The chapter then considers the reasons why commodity trading houses might trade commodity derivatives and the different ways in which such trading can be undertaken. It also studies the regulatory regime applicable to commodity trading houses and the reasons why such companies may fall within the scope of financial services regulation in some countries.