Data Intellect
[custom_headline type=”left” level=”h2″ looks_like=”h3″]Preparing for Mifid II – are you ready?[/custom_headline]
There was plenty of heated discussion from the European trading community during the panel discussion on MIFID II.
Tim Rowe, manager of the FCA, who sets the policies for domestic & international exchanges and trading venues was a key contributer on the panel
Whilst the topic of “Will Mifid II be delayed further than Jan 2017” was debated amongst the audience, Tim warned everyone to prepare for that date regardless.
The talk of delays to implementation only apply to certain parts of the Mifid rules e.g. non equity transparency, position and ancillary activity.
The widespread impact of MIFID II to all European firms and trading venues is undeniable, requiring system updates and working practise reviews.
The message was clear from the FCA that implementation teams will still need to keep up the momentum because there’s a great deal to do.
On the buyside, overall Mifid II addresses pre & post trade transparency rules for equity-like instruments, bonds, derivatives, structured finance products and emission allowances.
Even non-equity products will be brought into a regulatory regime with OTC products moved into regulation platforms and will require trade reporting.
In this push for greater transparency and proof of best execution to clients, the practical implications are a surge in technical requirements to facilitate data publication, and trade reporting.
Which means actual measuring and monitoring of trade performance- capturing, storing and analysing the data points to provide evidence of compliance.
Details such as:
- Algo Testing must be done outside of Production environment.
- Testing must include cross venue and cross region prior to deployment to ensure no market disruption.
- There were talks of Kill Switch policy and technology to cancel trades that could cause market disruption.
- All changes to algo’s including intraday changes must be captured and recorded as an audit trail to provide to FCA if requested.
- All monitoring records must be kept for 5 years, including such items as colocation latency to prove you didn’t provide anyone an advantage!
These rules truly are presenting a huge burden to the Banks budgets and resources, with the majority of attendees considering outsourcing as a solution.
The pain points considered for outsource include infrastructure as a service and outsourcing architecture design to get best practise.
Reporting requirements as a managed service or Utility structure that would allow traders to focus on core value added activities.
The most important point in the discussion was the FCA highlighting that although the practical work may be outsourced- the responsibility & liability of the requirements remains with the trader & company; as does the “monitoring” of the third parties to ensure they delivers reports and service on time & to correct specifications.
All in all, a very interesting discussion.
AquaQ are developing solutions and providing assistance to help firms get ready- feel free to contact us to discuss.
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