FinTech delegation travels to South Korea and Hong Kong

As in recent years, in January a FinTech delegation will be traveling under the leadership of Dr. Raettig to Hong Kong for the Asian Financial Forum (AFF). The Asia Financial Forum is the most important meeting of the Asian financial sector and will be held for the eleventh time on January 15 and 16, 2018. AFF’s topics include financial innovation and technology, AI and robotics, green finance, insurance technology, Fintech, Blockchain and banking innovations.

Frankfurt Main Finance will present itself with a joint stand with FrankfurtRheinMain GmbH and Hessen Trade & Invest to the Asian financial community as an attractive international financial center – not only in the Brexit context.

For years Frankfurt Main Finance has maintained close ties with the FinTech community in Hong Kong, among others with HKTDC, Invest.HK, the FATHK and Cyberport and Metta as leading FinTech Hubs in Hong Kong.

The FinTech delegation will travel to South Korea already on January 11, 2018, where it will present itself at FinTech events in Seoul and Busan. Frankfurt Main Finance is closely linked to both South Korean financial centers through a number of agreements, among others in the areas of FinTech and Blockchain. For several years there has been a regular exchange at the level of the financial centers as well as the supervisory authorities. South Korea is an important partner for Frankfurt and also a regular destination for delegation trips of the state of Hesse.

About the Asian Financial Forum in Hong Kong

For the eleventh time, on January 15 and 16, 2018, top-class international representatives of the financial and business world will meet at the Asian Financial Forum in Hong Kong. During the two days they will discuss developments and trends in the dynamic markets of Asia and over and above that. The event, organized by the Hong Kong Special Administrative Region (HKSAR) and the Hong Kong Trade Development Council (HKTDC), has this time the motto: steer growth and pave the way for innovations, both in Asia and around the world. In 2017, the Forum had over 2,900 participants, including more than 100 internationally renowned speakers. There was also a great interest in the Deal Flow Matchmaking Sessions, where more than 490 projects were discussed with investors in over 600 conversations. Overall, the organizer has already arranged 3,800 meetings with more than 1,800 companies since the start of these sessions.

Among the contributors in 2018 are Jacob J. Lew, US Secretary of the Treasury until 2017, David Lipton, First Deputy Managing Director of the International Monetary Fund, Pierre Gramegna, Minister of Finance of Luxembourg, Hu Huaibang, Chairman of China Development Bank Corporation, and Takehiko Nakao, President of the Asian Development Bank. From Germany comes Dr. Andreas Dombret, board member of the Deutsche Bundesbank. Speaker at the Keynote-Luncheon on January 16 is this year the expert for AI and Robotics, Professor Daniela Rus, Director of Computer Science and Artificial Intelligence Laboratory (CSAIL) and Professor for Electrical Engineering and Computer Science at the MIT.

The AFF visitors are also offered to have pre-arranged meetings for participants with common interests, the InnoVenture Salon for Startups, who want to present their business ideas to international investors, a free financial and service advisory zone and sessions with project owners, presenting their projects to potential investors.

To the HKTDC homepage: http://bit.ly/2kpfT38

More articles on the topic:

o “Think Asia, think Hong Kong” in Germany

o FinTech Breakfast with Invest Hong Kong

o Leading Korean FinTech companies visit the Frankfurt financial center

o Delegation from South Korea visits the financial center Frankfurt

 

Contact: Dr. Jochen Biedermann

Frankfurt Main Finance has signed MoU with Bahrain FinTech Bay

Frankfurt Main Finance and Bahrain Fintech Bay have signed a Memorandum of Understanding (MoU) on cooperation between the two FinTech Hubs. Dr. Lutz Raettig, President of Frankfurt Main Finance, and Gerben Visser, Founder of Bahrain FinTech Bay signed the agreement.

The goal of the Co-working space Bahrain FinTech Bay is to become the largest FinTech Hub in the Middle East. To achieve this goal the initiative supports young FinTechs in their development, offers them partnership opportunities and a global FinTech partner network. This network will now be supported by Frankfurt Main Finance. For Frankfurt Main Finance and the Financial Centre Frankfurt’s emerging FinTech Ecosystem the cooperation is an important entry point to the Middle East FinTech events and initiatives.

1 Year TechQuartier – FinTech scene in Frankfurt

The Tech Quartier celebrates its 1-year anniversary. Lars Reiner, founder and Manager of Ginmon, Thomas Schalow, founder of AsiaFundManagers.com, Andreas Mang from easyfolio and Christopher Schmitz, author of the EY-study „Germany FinTech Landscape“ take a look at the FinTech scene in Frankfurt and the Rhine-Main-Neckar region.

The FinTech scene in particular continues to grow in the financial centre. These are the findings of the EY study Germany FinTech Landscape – Insights into the respone of financial institutions to FinTechs and inter-FinTech collaboration, which was published in September 2017.  Of the 300 German FinTechs, 73 alone are located in the Rhine-Main-Neckar region. 19 of them have settled in the TechQuartier, between Messe and Tower 185.

Frankfurt offers the best conditions for FinTechs

Lars Reiner, founder and managing director of Ginmon, a Frankfurt-based FinTech company, explains why Frankfurt is a particularly suitable location for FinTech. It enables private investors to invest in an automatically managed ETF portfolio. “The Frankfurt region combines important location factors that are unique in Europe in this combination. The most important financial institutions and regulatory authorities have settled here in the Main metropolis. As a technology company, Ginmon also relies on IT specialists to constantly optimize existing algorithms. The region can exploit the potential of numerous universities, especially the TU Darmstadt.”

Thomas Schalow, founder of AsiaFundManagers.com, shares this view: “Frankfurt has an established financial ecosystem with many relevant national and international players. Especially for B2B-FinTechs this is a decisive factor. Brexit will further increase the importance of the city as THE financial centre within the EU.”

FinTech cooperates with banks

The results of the EY study also show that FinTech’s links with traditional companies in the financial sector are becoming increasingly close. Christopher Schmitz, author of the study and partner for EMEIA Financial Services at EY, explains, “FinTechs and Incumbents are increasingly working together in digital ecosystems. This creates new opportunities and models for the industry.”

A glance at the partners of the TechQuartier shows this. Deutsche Bank, Frankfurter Sparkasse and Landesbank Hessen-Thüringen are among the handpicked but established partners who round off the diverse mix of the world’s best start-ups. The exchange between the “big ones” and “newcomers” is promoted and desired through various networking events and workshops in the TechQuartier. Here, people work together instead of against each other.

This means that Frankfurt can also hold its own internationally, says Andreas Mang of easyfolio, who offers private customers individual investments on a digital basis, “There is more space than just one or two FinTech hubs in Europe. In addition, the Brexit discussion could also make Frankfurt more interesting for international start-ups.”

Thomas Schalow of AsiaFundManagers.com also draws an international comparison, explaining, “If the strengths of AsiaFundManagers.com are used consistently and quickly, in the long run, Frankfurt can also hold its own internationally. The advantages of the location are obvious: an existing financial ecosystem, the position as the most important financial centre within the EU and the infrastructure. However, I also have a direct comparison with other FinTech ecosystems such as London and Singapore. Unfortunately, Frankfurt is still years away from them.”

Short distances distinguish Frankfurt as a location

Nevertheless, Frankfurt has become home to him. He likes the mixture of Hessian down-to-earthness and internationality and is always looking forward to returning to Frankfurt. The founder of FinTech particularly appreciates the short distances between international investment companies, which can be covered well with Vespa or the subway. It is also the short distances that Lars Reiner of Ginmon at the Mainmetrople enjoys. “Frankfurt is the city of short distances. From our office, we can reach important partners in a few minutes. This makes it possible to work effectively,” Reiner explains. “In addition, a broad network has been established in Frankfurt by promoting and inspiring each other.”

Nevertheless, there are still some things that could be done better in Frankfurt. Lars Reiner von Ginmon wants affordable office space and the expansion of public transport. Thomas Schlaow also has concrete wishes like “networks, low-cost office space, simple regulation, venture capital and easy access to B2B partners. All this should go hand in hand. Andreas Mang from easyfolio sums up what all three FinTechs think, simply stating, “We feel very comfortable in Frankfurt.”

The complete EY study can be found here.

 

Deutsche Börse AG turns 25

Deutsche Börse was founded as a stock corporation in December 1992, this date marks the start of the digitisation of the entire exchange value chain.

11 December 2017. Frankfurt (Börse Frankfurt). Deutsche Börse AG celebrates its 25 anniversary on the trading floor of the Frankfurt Stock Exchange on Monday. Numerous clients, regulators, former executive board and supervisory board members as well as employees join the bell-ringing ceremony to honour this anniversary.

On 11 December 1992, the former owners of the three independent companies – Frankfurter Wertpapierbörse AG, DTB Deutsche Terminbörse GmbH and Deutsche Kassenverein AG – opted to merge their businesses. The merger became effective on 1 January 1993, marking the foundation of Deutsche Börse AG. This created an integrated market infrastructure provider in Frankfurt and in Germany for the first time.

“European harmonisation plus digitisation were and are the cornerstones on which financial centre Frankfurt has been built. In the 1990s, the creation of Deutsche Börse as AG laid the foundation for boosting the financial centre’s international significance to a level corresponding to the important role the German real economy plays in Europe,” summarized Lutz Raettig, Chairman of the Supervisory Board of Morgan Stanley Bank AG and former Chairman of the Exchange Council of the Frankfurt Stock Exchange for many years, in his laudatory speech.

“Over the past 25 years, Deutsche Börse has developed into Europe’s most important financial market infrastructure provider by far. The driving force behind this achievement was and is our vertically integrated business model that rests on efficient technology in all areas. On this basis we expanded globally and extended our business to include a wide variety of asset classes,” said Andreas Preuss, Deputy CEO of Deutsche Börse AG.
Some of the most important milestones in the company’s history are:

  • Launch of electronic trading system Xetra as an equities trading platform in 1997
  • Foundation of Eurex in 1998 as a merger of Deutsche Terminbörse AG (DTB) and the Swiss futures exchange Soffex to create Europe’s largest futures exchange,
  • Deutsche Börse AG’s IPO in February 2001 and inclusion of its share in the DAX blue chip index in 2002,
  • Introduction of a central counterparty, first on the futures exchange in the 1990s and for Xetra in 2003,
  • Merger of the German post-trading business with Luxembourg Cedel and subsequent 100% takeover of Clearstream in 2002,
  • Foundation along with partners of STOXX index provider and full ownership acquired in 2015;
  • Entry into foreign exchange with the takeover of Germany’s most successful fintech company 360T in 2015.

Photo Source: Deutsche Börse

TechQuartier-Director Sebastian Schäfer: “We are a community based on innovation”

It is the focal point of the FinTech and start-up community in continental Europe’s biggest financial centre – and it is celebrating its first birthday: TechQuartier in Frankfurt. A discussion with the director Dr. Sebastian Schäfer on the FinTech ecosystem in Frankfurt. In the interview, he discusses the milestones they have reached and the goals that TechQuartier has set for the future. Finally, he discusses the insecurity from Brexit facing FinTech scene.

Mr. Schäfer, You are looking back at one year of TechQuartier. Which milestones have been reached during this period?

First of all, we are really happy about the reception we’ve had from the start-up scene. With around 80 start-ups, we have a full house now. Within the first months, we had already let the first 1,600 square metres with around 110 working spaces. In June, we added another floor with further 114 working spaces. From the very first day, we kept asking ourselves how to create a lively community and how this should look. We know it is not only about a nice place to work but about inspiration, learning from each other and networking. So, we brought together interested parties, members and supporters along with fitting topics – and successfully developed and started interesting formats. For example, Landing Pad, Papillon, Money meets Idea, or the Start-up Academy.

From the experience you have gained – where do you see further potential for TechQuartier, what are its strengths?

You can always improve. Our claim is to become a globally recognised Hub. This includes strengthening engagement on the venture-capital as well as marketing of our success stories in Frankfurt. Obviously our strength is that all participants are pulling in the same direction.

Brexit is occupying the financial sector. Is it a subject-matter for FinTechs as well?

Of course we are talking about Brexit and possible consequences for the FinTech ecosystem. We can see that insecurity levels are huge. Since nobody knows exactly how things will develop you can primarily feel indirect effects. If, for example, a FinTech from Asia wanted to come to Europe, they would probably have chosen London as their location. Now Frankfurt is an option people think of. We can see that by the fact that FinTechs from over 20 different countries applied for our last LandingPad where we offer the possibility to get to know the FinTech-Hub in Frankfurt. This interest bears the possibility for Frankfurt and the region to develop itself into a powerhouse of innovations thanks to systematic measures.

If you look ahead: Which goals has the TechQuartier set for the future?

Our goals are well-defined: More start-ups, more partnerships, more success stories. We want to make a contribution to Frankfurt’s start-up scene becoming internationally recognised.

Thank you very much for the interview.

Financial Centre Frankfurt

Spahn calls for more élan for Frankfurt

Twenty-four banks are already planning to expand their Frankfurt business ahead of the upcoming Brexit – but the actors cannot rest on their laurels, reminds CDU executive committee member Jens Spahn. Especially opposite Paris, Hesse and Berlin would have to exert themselves. There is still much to be done on the Main.

The Parliamentary State Secretary of the Federal Minister for Special Tasks, Jens Spahn, emphasized on Wednesday at an event of the Hessian CDU how important the further development of the Financial Centre Frankfurt is for the federal government in Berlin. Politicians must work even harder to maintain the metropolis’s leading position, he said. Spahn referred to Germany’s failed attempt to bring EU banking supervisor, EBA, from London to Frankfurt. Instead, Paris won the bid in November. In view of Brexit, and a possible resulting shift in euro clearing, Frankfurt must be more successful than EBA, said the 37-year-old, who was still working as State Secretary in the Federal Ministry of Finance until October.

In order to make the Financial Centre Frankfurt more attractive, some things must be done on site, he said, recalling housing construction and labor law adjustments, especially for investment bankers. In contrast to other EU member states, the Federal Government is still keen to maintain a close relationship with the British in the future. However, it is not yet clear which access to the financial market the British choose: London, like Singapore, could become a financial centre whose looser regulation attracts business or anchor itself to the rules of the EU area.

Money for a light bulb

The phase of confrontation with the digitalization of the financial sector is over: Fintechs pivoted to cooperation with established actors – for which Spahn himself launched a number of initiatives and contributed to bringing the banks into dialogue with Fintechs. His motto: “Talking to each other is half the battle.” Speaking several times about the subject of blockchain, Spahn pointed out that the technology, which makes transactions comprehensible and without a central authority, allows him to see far-reaching changes possible. “Blockchain can make the business model of intermediaries completely superfluous.” Thanks to digital identity management, an investor can then also transfer money “to a light bulb in Malaysia,” said Spahn with a smile. He sees a need for action in the establishment of blockchain companies in Germany. Although a large number of software developers are at home in Berlin, the companies themselves (usually via foundation constructions) are at home in Switzerland – there is the so-called “Cryptovalley” in Zug.

After the Financial Centre event, Spahn made a stopover at the first Portfolio Day of the Deutsche Bundesbank. In his opinion, the German government is still at the beginning of sustainable finance. “Everything is still very timid in comparison to the demands and wishes,” he said. “With all our strength towards green finance is certainly not our motto.” In the recent exploratory coalition talks, Green Finance had been an issue, but in the economic not in the finance department. “However, it was just about a general commitment to it.”

Spahn pointed out three areas in which the federal government is already strengthening itself for sustainable investments: the fund for financing nuclear waste management, into which the nuclear power operators have paid around EUR 24 billion, is to be managed according to ESG criteria (environmental, social, governance). Secondly, sustainability is an issue for KfW, which is owned by the Federal Government and the Federal States: “In 2016,44% of KfW’s funding volume went to environmental and climate protection measures.” In addition, KfW is Germany’s largest and the world’s second largest issuer of green bonds and an important investor. Thirdly, during its G20 presidency, which just ended, Germany fought for a stronger focus on the issue of sustainable investment.

According to Spahn, public sponsors often have different ideas about what sustainability means. “There is certainly a consensus that there should be no investment in companies that rely on child labour. It’s more difficult when it comes to climate issues like nuclear power or coal.” He himself considers nuclear power to be an important bridge technology. “Should the question of how the state invests really be politicized?” He believes that market regulation is more important: the state must ensure transparency, for example. “That would be comparable to the electricity sector: only green electricity can call itself what green electricity is.”

Spahn also made it clear that for him, sustainable investment does not only consist of green capital investment and ESG criteria. This also included the security of the investment and financial market stability. “George W. Bush’s measures to promote home ownership were intended as a social measure, but ultimately contributed to the financial crisis.” Yield is also an important aspect. Spahn has long advocated a higher proportion of equities in federal funds such as the nursing care provision fund.

Source: Börsen-Zeitung, Issue 235 from 07.12.2017.

Costs of relocating Euro Clearing significantly lower than expected

  • Up to thirty-percent savings for asset managers if Euro Clearing moves to EU27
  • 100 billion USD costs estimated by London Stock Exchange found far too high
  • Maximum costs over five years to be around EUR 3.2 billion

Frankfurt am Main – The discussion on the effects of Brexit on Euro Clearing and its supervision continues to concern experts, practitioners and politicians. A working paper from Frankfurt based asset manager, Union Investment, indicates that relocating Euro Clearing to an EU27 financial centre would result in significant cost savings for asset managers. These savings should be realised in initial margin costs and clearing broker fees which currently account for approximately seventy-percent of the total clearing costs for asset managers. The paper explains that in the long term, the up to thirty-percent savings would compensate for any temporary additional costs caused by a wider bid-offer spread.

Another working paper by the Center for Financial Studies (CFS), an independent non-profit research institute at Frankfurt’s Goethe University, contests London Stock Exchange’s (LSE) estimate and other similar studies. According to the paper’s author and CFS Managing Director, Professor Dr. Volker Brühl, “Due to the fragmentation of the market there may be a temporary increase in costs. However, the costs of up to USD  100bn cited by LSE are not verifiable and are far too high. Basing an estimate on more realistic assumptions, the maximum costs over a period of five years are likely to be around EUR 3.2bn. This is before even accounting for the potential savings that asset management companies could make as a result of the relocation.”

Central counterparties (CCPs) and clearing houses are systemically relevant and critical components for maintaining global financial stability. Any crisis situation would likely require an injection of euro liquidity from the ECB and thus, these CCPs deserve to fall under ECB supervision. “The primary goal of any discussion on Euro Clearing must be protecting stability in European financial markets,” explains Hubertus Väth, Managing Director of Frankfurt Main Finance. “The exaggerated estimates stemming from London are neither constructive nor prudent. While decisions on Euro Clearing should not be made purely on a cost basis, the findings of CFS and Union Investment are reassuring. Should clearing relocate, the Financial Centre Frankfurt would be a competent alternative to London, especially with Deutsche Börse’s Eurex Clear.”

Currently, ninety-percent of euro-denominated OTC derivatives are cleared in London. Following Brexit, the calls to relocate Euro Clearing to a European financial centre under the ECB’s supervision, like Frankfurt, were reborn. In response, estimates from the London Stock Exchange pointed to a cost increase of more than 100 billion USD if clearing were to leave London.

The study from the Center for Financial Studies can be downloaded here.

The study from Union Investment can be downloaded here.

 

The Financial Centres Frankfurt and Astana intend to work more closely together

Frankfurt Main Finance e.V. (FMF) and the Astana International Financial Centre (AIFC) from Kazakhstan signed a Memorandum of Understanding (MoU) on cooperation between the two financial hubs on Friday, 17.11.2017.

The AIFC Governor Kairat Kelimbetov and Dr. Lutz Raettig, President of Frankfurt Main Finance signed the MoU agreement on the premises of the company Economic Development Frankfurt in the presence of the Kazakh Ambassador Bolat Nussupov, City Councillor Markus Frank, Managing Director of Frankfurt Economic Development Oliver Schwebel, and Hubertus Väth, Managing Director of FMF.

An AIFC delegation visited Frankfurt am Main last week. In addition to holding several meetings with Frankfurt Main Finance and FMF members such as German banks, the delegation attended the Astana International Financial Centre Forum within the framework of the Euro Finance Week, where Kairat Kelimbetov and his team presented their extensive plans for the years ahead.

“Astana is a young and ambitious financial centre, with which we have enjoyed a close and friendly relationship for many years,” as Frankfurt Main Finance President Dr. Lutz Raettig described the links to the Kazakh financial centre.

Hubertus Väth sees great potential in the new agreement that has been reached: “There are many different opportunities for collaboration in the fields of infrastructure, training, or internal and external financial centre marketing.”

Frankfurt and Astana will be implementing their joint plans over the next few weeks and months and will thus be making a contribution together towards strengthening their respective financial centres.

European General Affairs Council decides to relocate the EBA to Paris

The European Banking Authority (EBA) is moving from London to Paris. This was decided by the European General Affairs Council in a secret ballot on 20th November. The German government had also applied to host the EBA in Frankfurt am Main. The transfer of the EBA from London to another EU country is a direct consequence of the UK decision to leave the EU.

“We congratulate Paris on the relocation of the EBA, but we would have preferred a different decision because we believe that Frankfurt, all things considered, best meets the criteria stipulated to achieve the award,” says Dr. Lutz Raettig, President of the financial centre initiative Frankfurt Main Finance. “The award of the location to Paris means a greater decentralisation of financial market regulation and, in our view, signifies a political decision in favour of the principle of an EU-wide distribution of agencies and institutions. We remain optimistic about the future development of Frankfurt as a hub of financial activity.”

In addition to the Main metropolis and Paris, six other cities had applied to become the headquarters of the institution. The decisive criteria for the European General Affairs Council decision included a smooth continuation of operations, the timely provision of a suitable building, the transport infrastructure and international accessibility, the availability of living space, and the job, school and healthcare services available for the families of the employees.

Deutsches Aktieninstitut presents its second Brexit position paper and claims: Transitional arrangements now!

The Deutsches Aktieninstitut (DAI) presents its second position paper. The paper on the exit negotiations between the European Union and the United Kingdom complements the first position paper from February 2017 and covers further relevant topics, e.g. clearing, benchmark and rating. In the light of proceeding negotiations, the position paper claims to find transitional arrangements that prevent Europe from a Cliff Edge Scenario.

Under the slogan “Exit negotiations between the European Union and the United Kingdom: Minimise Brexit risks and strengthen the European capital market”, the analyses of financial and capital market legislation and concrete examples from practice, illustrate which topics deserve particular attention due to their significance for business and society in connection with the Brexit negotiations.

No deal is the worst deal for all parties affected

“The United Kingdom’s departure from the European Union will have considerable consequences for the European economy and society”, Dr. Christine Bortenschläger, Chief Executive of DAI mentions in the paper, “It is not yet possible to predict how those will look like in detail since the outcome of the ongoing negotiations between the United Kingdom and the European Union is still completely open. This means that companies are losing valuable time they need to adjust to the new situation.”

Risk and consequences of a hard Brexit can be reduced with transitional arrangements

The third country regimes in financial -and capital markets law won’t serve as a sufficient basis to regulate the relations between the 27 EU-states and the United Kingdom, as the second position paper shows. Therefore, the European Union needs a new and broad trading agreement that complements first transitional arrangements. “Transitional arrangements are of decisive importance to buy more negotiating time, enable businesses to prepare for the new situation, and avert a no-deal scenario”, is one of the first position paper sentences.