Travers Smith’s Fintech, Market Infrastructure & Payments Practice (FMIP) is the ‘go-to’ practice for financial market infrastructures and payment institutions seeking legal advice on wholesale and retail payment, settlement issues and fintech offerings. Over the years the practice has become renowned for the innovative and paradigm-shifting nature of its work.
In this interview, Partner and Head of Financial Services & Markets Tim Lewis and Senior Counsel Natalie Lewis talk about the long history of the practice, key individuals behind its establishment and success and why the next few years are likely to present some ground-breaking developments in this area of law and practice.
Tell us about the history of Travers Smith’s FMIP practice? When was it formed and why?
Tim: Travers Smith has a long history of advising providers of financial market infrastructure, the London Stock Exchange (LSE) was an early client, at the forefront of modernising securities settlement by operating a dematerialised nominee protected by specific laws to facilitate market side settlement. We established the rules which governed this system and towards the end of the 1980s we were appointed as the legal adviser to the LSE on its TAURUS project. This was revolutionary for its time, involving the removal of all share certificates for UK listed companies and their replacement by a computerised settlement and title registration system.
The aim of the system was to improve stock market liquidity and resolve the financial stability concerns arising from a large backlog of unsettled paper trades. The proposal required a whole new body of statute law, as well as having huge system and contractual implications for the LSE and market participants. The project was deeply controversial. Many politicians worried about replacing “safe” paper certificates with “unreliable” computers.
New laws were passed, rules were drafted and the project appeared set to launch. After nearly five years of working on the project it was cancelled in March 1993 as the computer system had failed to perform in testing.
The shock in the City at that time cannot be overstated, the Bank of England set up a taskforce to consider the best way forward for the development of securities settlement, share registration and share transfer. The taskforce made a proposal for the system now known as CREST. Travers Smith was appointed by the Bank of England to advise on CREST, which was incredibly successful. Over 20 years later, CREST remains the UK’s settlement and registration system for listed equities, other securities, gilts and money market instruments.
Who were the key people who shaped the practice in its early stages? What kind of work did they focus on at the time?
Tim: Partner Jonathan Pym and Margaret Chamberlain (first as an associate and then as a partner) led the legal work on the TAURUS project. Margaret continued to lead this work when Jonathan Pym retired from the partnership and later, with Alan Keat, Jane Tuckley and Mark Evans, collaborated to develop the legal framework for the CREST system. In the process, Margaret, Jane and Mark also founded the broader Financial Services & Markets Department. The CREST work formed the foundation of our FMI practice. CREST was the first major “fintech” client for our team, long before fintech became the “buzz word” it is today.
How has the practice evolved and what is its structure and focus today?
Tim: Mark Evans continued to act for the CREST system operator and (after its merger with Euroclear) Euroclear Bank, and the firm still acts for Euroclear today. In addition to heading up the securities clearing and settlement side of the practice, Mark took the lead in developing the payments focus of the practice, taking the payments, banking and insolvency expertise developed in setting up CREST and applying this successfully to help the growth of our UK and international payment systems work into the market-leading practice it is today. Mark continues to play an active role as a senior consultant to the team.
Natalie: The practice has always relied heavily on the firm’s cross-disciplinary strengths, with the Commercial, Competition and Derivatives teams all playing an important part in its success.
I joined the firm in 2016, from London clearing house, LCH, and found the Travers Smith financial markets infrastructure capability to be an excellent fit for my previous experience of advising large exchanges and clearing houses on their international FMI operations.
In 2019, Tim and Commercial, IP & Technology Partner Louisa Chambers took a larger role in this part of the practice and we re-branded and relaunched it as our FinTech, Market Infrastructure & Payments (FMIP) Group. The practice provides a one-stop shop for all of our FMIP clients’ legal needs. We are regularly called upon to offer expert advice by FMIs, central banks, payments and e-money institutions, fintech start-ups and fintech giants. We now have deep-rooted and integrated relationships with a number of high-profile clients who look to us as their trusted advisers. The daily value of transactions passing through our clients’ systems exceeds £5 trillion!
Why is it important for the firm to have the FMI capability at this time?
Natalie: As the Coronavirus lockdown continues to accelerate the move away from cash to electronic payments and towards more sophisticated fintech offerings in the financial markets, the need for FMI and fintech solutions has become increasingly urgent. Coupled with Brexit, the UK FMI, payments and fintech ecosystem is in the midst of an important period of dynamic change and innovation – in which our clients will rely on us to provide them with dynamic and practical advice on the wide range of legal and regulatory issues affecting their business and their products.
Can you tell us about some of the recent matters you have worked on?
Tim: Natalie recently led the team in advising Euroclear UK and Ireland Limited (the operator of CREST) on the launch of a new post-Brexit market solution for euro settlement, which we designed from the ground up. This hugely innovative and systemically important project had to be delivered to an unprecedentedly tight timeframe, due to EUI’s existing access to TARGET2 via the European Central Bank terminating at the end of the month.
In 2020, we also acted as project counsel to Pay.UK Limited (which operates all of the UK retail payment systems, such as direct debit and faster payments), on the launch of a “next generation” fintech payments solution called Request to Pay (RtP). RtP provides a new, flexible way to manage and settle bills between businesses, organisations and friends.
What does it take for a trainee to qualify in the FMIP practice? What kind of training can one expect to receive?
Natalie: In the FMIP team, we are looking for collaborative, ambitious and intellectually inquisitive individuals who are willing to work hard to “get to grips” with this difficult and constantly changing area of law, and who are excited by the idea of working on cutting-edge projects of immense systemic significance for the UK economy and under intense market scrutiny. In return, junior lawyers in the FMIP team receive first-class training, development and knowhow, in an environment which is challenging but (as one associate puts it) “light-hearted” and “never dull”!
How do you see the future of the practice in the next few years?
Natalie: The next five to 10 years undoubtedly have the potential to present the most fascinating and ground-breaking projects that our FMIP team has seen so far – and we are poised for the challenge. With the proliferation of distributed leger technologies, cloud computing and central bank digital currencies in the FMIP space, the next chapter is set to be one to remember!