MIFID II - Moving past the challenges

MIFID II - Moving past the challenges

Matt Smith

CEO at SteelEye

Matt is the CEO of SteelEye, the compliance technology and data analytics firm. Matt has over 20 years of technology and management expertise throughout North America, Europe and Asia. Matt has worked at Bloomberg as a senior RegTech product manager helping evolve the product strategies for a range of financial regulation and compliance solutions, trading and analytics platforms. Prior to this, he was the Chief Information Officer at Noble Group, a global commodity trading firm where he oversaw regulatory technology and the deployment of big data, trading and analytics platforms. Throughout his career Matt has helped teams to implement major development initiatives and IT infrastructures, including derivative and physical trading systems, ERP solutions, risk systems, finance systems and regulatory solutions.

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MIFID II - Moving past the challenges

10.06.2019 02:45 pm

Since MiFID II was implemented at the start of 2018, financial markets have struggled to adapt to the new and rigorous regulatory requirements. Recently, high profile cases have brought the consequences of non-compliance into the spotlight, with UBS and Goldman Sachs both receiving fines of £27.6m and £34m respectively, for misreporting their data.

The aim of compliance, however, is not to penalise financial institutions, but to increase transparency and eventually enable a more competitive and fair marketplace to emerge. For MiFID II to deliver on its aims, firms need to move away from the perceived negatives and wake up to the opportunities that MiFID II can deliver for their own operations and the marketplace alike. 

Stumbling blocks

It is difficult to refute that the implementation of MiFID II has been challenging. Recently, it was discovered that 1,335 firms notified the FCA they had filed inaccurate transaction reports in the first year. Prior to this, The European Securities and Market Authority (ESMA) asserted that there was a sizeable deficit in the quality, timeliness and completeness of MiFID II data submission.

There are various factors underpinning this. Many smaller firms have struggled to cope with the labour-intensive, complex and voluminous data requirements, forcing a large reallocation of resources. For some of these companies, still reliant on manual input methods or equally inadequate systems, satisfying MiFID II’s Best Execution and Transaction Reporting obligations has not been easy.

In addition, many large financial institutions are still utilising legacy systems that do not allow for data to be integrated across different sources. Compliance data is often required in a specific and consistent format, meaning that when it’s pulled from myriad sources, financial institutions struggle to aggregate and make sense of it, thereby affecting the quality of compliance.

MIFID II’s first year was also arguably marked by regulator inaction. Late last year, Gina Miller, head of wealth management company SCM Direct, called for the Treasury to investigate the Financial Conduct Authority (FCA) for its lack of regulatory enforcement, after fifty financial firms breached transparency rules while it only followed up with eight.

Firms must wake up to the benefits

Despite the clear challenges facing firms and the industry as a whole, if the benefits of the regulation are to be realised, a change in the approach and attitudes of financial institutions themselves is needed. Firms should replace their ‘tick-box’ approach to regulation with a renewed optimism, founded in the genuine benefits that a more positive attitude to regulation can bring.

Holistic solutions now exist to help companies comply with MiFID II more cost-effectively and efficiently, reducing the regulatory and resource burden of which firms often complain. These systems also enable institutions to consolidate and format their data onto a platform that can be viewed on a single interface, helping them to identify market trends and scrutinise employee performance, as well as optimise their business performance as a whole. As these solutions are adopted more widely, financial markets will be able to realise the benefits of MiFID II and the challenges previously encountered will diminish.

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