Hare or Hedgehog? The Role of Law in Shaping Current Technological Trends in the Securities Post-trading System

This article examines current technological trends in the securities post-trading system and the role of law in shaping these developments. Against this backdrop, we analyse (i) recent initiatives that aim at technologically improving the traditional post-trade system, (ii) projects that aim at enhancing the efficiency of post-trade processes related to traditional securities by using distributed ledger technology and (iii) post-trade issues related to the rise of crypto-assets and decentralised finance. We argue that the current role of law in shaping these technological trends is different in these three contexts. Regarding crypto-assets, the law can be likened to the hare in the Brother Grimms' well-known fairy tale: It struggles in vain to keep up with developers in the crypto-asset system (who represent the hedgehog in the fairy tale). With regard to projects that aim at bringing distributed ledger technology to the post-trading of traditional securities, the roles are, in our view, reversed - the law plays the role of the hedgehog that, maybe unfairly, prevents the innovators (the hare) from succeeding. Finally, as regards two important technological trends in the traditional post-trading system that we analyse in this article different relationships emerge: In one case, the law (as hedgehog) "coaches" the industry (as hare) in its quest to implement technological improvements. In the other case, the law (as hedgehog) needs to prod the industry (the hare) into relevant action.