Global Trustee and Fiduciary Services Bite-Sized Issue 6 2025

4 QUICK LINKS AIFMD BENCHMARKS REGULATION CBDC COSTS & CHARGES CRYPTOASSETS ETF FINTECH FUND LIQUIDITY IOSCO MIFID II/MIFIR OPERATIONAL RESILIENCE PRIIPS SIU SUSTAINABLE FINANCE/ESG T+1 ASIA PACIFIC NORTH AMERICA UNITED KINGDOM Global Trustee and Fiduciary Services Bite-Sized | Issue 6 | 2025 ETF FCA Publishes Occasional Paper 68: ETF (Mis)pricing On 30May 2025, the Financial Conduct Authority (FCA) published Occasional Paper 68 examining the role of authorised participants (APs) in Exchange Traded Fund (ETF) liquidity and price alignment. In this paper, the FCA explains that the authors developed and empirically validated a “dynamic equilibriummodel” linking APs’ inventory management and investor demand to ETF mispricing, using regulatory data from 128 ETFs over 2018 – 2022. The authors say that the results confirm that APs’ real-time inventory positions and investor demand significantly explain ETF price deviations from net asset values (NAVs), offering insights beyond traditional economic and fundamental factors. The authors say the model further clarifies APs’ incentives and sheds light on mechanisms underlying the severe mispricing episodes observed in March 2020 across various ETF classes. Link to Occasional Paper 68 here FINTECH CMORG: AI Taskforce Publishes AI Guidance On 15 May 2025, the Cross Market Operational Resilience Group’s (CMORG) AI Taskforce published its AI Baseline Guidance Review. CMORG and its member firms, in conjunction with City of London Corporation (CoLC), Financial Services Information Sharing and Analysis Center (FS-ISAC) and UK Finance, conducted a baseline review of existing Gen-AI risk mitigation guidance specific to the financial services sector and developed best practices for Gen-AI risk management. The Review identifies practical, methodical guidance on: 1. Government and Regulatory Approaches : Broad overview of the approach Authorities take to balance Gen-AI opportunity and risk, including a snapshot of emerging regulation. 2. Risk Management Principles and Frameworks : Outline of various principles and risk frameworks, with description of their role in managing operational, reputational, and compliance risks relative to Gen-AI. 3. Technical Implementation : Standards firms should consider when deploying control frameworks to manage the risks associated with Gen-AI adoption and implementation. The guidance focuses on data protection and privacy, cyber information security, and model risk. 4. Third-Party and Legal Considerations : Considerations regarding third-party and legal risk arising fromGen-AI usage, prompting firms to identify roles and responsibilities along the supply chain and determine the permitted usage of Gen-AI solutions by third parties. 5. Education and Awareness : Guidance for building and embedding a ‘responsible AI’ culture and advice for upskilling colleagues to mitigate Gen-AI risks and threats. The AI Baseline Guidance Review then summarises its observations, provides key takeaways for firms to consider within their organisational context, and provides a reference section as a resource for deeper understanding. Link to AI Baseline Guidance Review here