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Q 4 . . 2 0 1 6

Under surveillance: Getting to grips with the new market abuse regulationAND

THE FUTURE OF INVESTMENT Advice from the stars of the regulatory & compliance network

Plus

MARKET INSIGHT FROM THE HS TEAM

Plotting the regulatory landscape

The FinancialTechnologist

Introduction by Toby Babb

FEATURE Sales talk of the round table A premium selection of sales and HR directors discuss the question: “What is the idealsales compensation plan formy business?”

FEATURE Financial compliance and fintechSimon Leifer of D2 Legal explains how technology is playing its part in the regulatory landscape

FEATURE Fintech: guiding those in the financial industry through a hazardous regulatory landscapeAlan Angell, Chief Operations Officer,WallStreetDocs provides his invaluable tips on navigating the key regulatory hurdles

FEATURE Under surveillance: Getting to grips with the new Market Abuse RegulationMike O’Hara of The Realisation Group looks at just how prepared financial institutions are under MAR

FEATURE A qualitative approach to Best ExecutionThe Realization Group speak to some of the major players from the Buy Side about how they approach data management

FEATURE The future of investment advice?Gilbert van Roon, CEO of Fintech Compliance explains how AI and progressive technology will help influence your investment decisions

FEATURE Skilled staff shortages check post Brexit small business bullishnessPatrick Reeve of Albion Ventures looks at how small businesses might have to change their approach to Brexit

FEATURE RegTech: the final Fintech enabler?Erez Mathan of GoCardless tells of Regulatory Technology could be the final frontier for Fintech

FEATURE Innovation and collaboration identified as key drivers of global financial inclusion and financial transparencyDean Curtis of LexisNexis Risk Solutions explains a recent study on how risk management processes are affecting whether financial institutions will accept a customer or not

FEATURE The Definitive Interview Guide (continued) Parts 5 and 6 of our definitive interview guide looks at the importance of online testing and competency questions

Fintech Focus John Knuff, General Manager, BSO NetworksJustin Short, CEO, Nous Global MarketsAndrew Powell, COO, SoftekGeraldine Gibson,CEO, AQMetrics

Market news & commentaryInsight on the market from dedicated experts in their field

Starr Insights The affects of Brexit: Should we still be talking about them?! By Scott RichardsonThe ideal sales person, by Ani LputianThe growing trend of women in technology, by Sarah Philby

Meet the Editorial Team About Harrington StarrContact

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ContentsThe Financial Technologist | Q4

There’s one peak we Britons have failed to conquer for almost half a century.

whitecapltd.com email: [email protected]

The Vendée Globe has not earned the

nickname the ‘Everest of the sea’ for nothing.

It’s the ultimate test for a sailor. Gruelling,

very, very lonely and pretty hairy. It takes

an exceptional kind of person to win.

We believe that it’s high time that

exceptional person was a Brit. Surprisingly

(or should we say embarrassingly) the last

Briton to win a single-handed non-stop

round the world race was the legendary Sir

Robin Knox Johnston, in 1969. That’s right,

1969. For five decades the French tricolour

has flown proudly at the summit of solo

ocean racing. In the Vendée 2020 we want

to run up a Red Ensign in its place. As we

speak, 12 of this country’s most talented

yachtsmen and women are competing to

be the one to fly the flag. The chosen one.

And right now we’re also looking for a very

special sponsor to share in his or her fame.

For fame there will be. Remember Ellen

MacArthur? She became a household name

and a Dame for her performance in the

‘Everest of the sea’. Imagine if she’d won.

Wave ad2_v2.indd 1 23/05/2016 12:59

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G L O B A L L E A D E R S I N F I N A N C I A L S E R V I C E S A N D C O M M O D I T I E S T E C H N O L O G Y R E C R U I T M E N T

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elcome to the Q4 issue of The Financial Technologist. 2016 has been one of the most interesting periods of recent economic history and the ripples continue to arrive on a seemingly daily basis. If 2015 was the year of Fintech’s breakthrough, 2016 has seen macro-economic issues have a telling impact on its growth. We sit in a period of political and economic uncertainty. At the time of writing the Sterling remains in freefall against the Dollar. Trump vs Clinton divides a Nation with tremors expected no matter which way the voting goes. Brexit is set for

Harrington Starr’s financial technology news, commentary, insight and features.

Welcome to The Financial Technologist

Wrecruitment in the sector continuing to climb? Looking at the predominant market trends impacting FS (regulation, cost savings, staff cuts) and the principal factors driving Fintech (Robo-Advisory, Cloud, RegTech, Blockchain) there is a perfect storm for tech companies in the space to really seize market advantage. With companies looking to cut staff costs, technology becomes a winner with investment needed into headcount to drive efficiency through that tech. FinTech has also continued to boom as confidence wains in the banking sector with a similar exodus being experienced from the sell side to the buy side. The landscape is very different from ten years ago with a far more fragmented scene. We have long

spoken about Robo-Advisory, Payments, Crowd Sourcing and similar disruptive tech seeing wins and this has continued to flourish as the wider more traditional FS space suffers. There is an appetite for faster, more flexible, technology driven solutions that continues to require a job boom. As all of this happens, so too has a gear change been seen in the Capital Markets sector. The recent outstanding report from EY and Innovate Finance begins with Lawrence Wintermeyer citing that “we have seen an increase in activity in capital markets: solutions to complex front-, middle- and back-office problems are emerging in the form of FinTech solutions.” AI, RPA, distributed ledgers and cloud are delivering innovations that have never before been achievable. Efficiency gains, better decisions, cost reduction and regulation have opened up a huge door of innovation. Once again this is driven by technologists. The regulatory climate has never been more aggressive or complex and investment into technology in these areas is no longer a nice to have but, quite simply, a mandatory aspect of any strategy of any business in the sector. This has again opened the door to technology innovation and we are seeing entrepreneurial and agile FinTech players provide the solutions to the issues that have dogged the industry. Far from a luxury, technology has become a cost saving, profit driving element to FS success. A major turnaround over the last ten years. On top of all of this, there remains a skills gap within the UK Technology space and, with threats around overseas talent being welcomed into the country,

T O B Y B A B B , M A N A G I N G D I R E C T O R , H A R R I N G T O N S T A R R

March 2017 with severe concerns surrounding the prospect of a “Hard Brexit.” The situations around Russia and Syria continue to boil with the potential for serious economic disruption. The commodities and oil and gas trading industries are in consolidation and the banks are feeling the savage economic strain. There has been the first rise in unemployment in the Capital for many months. Within the industry, the impact is already being felt. It was recently reported in the Sunday Times that Misys were set to wipe a billion off their flotation price owing to the economic climate. The crisis at Deutsche has seen mass implications and we have recently heard of a major energy trading business dissolving a significant chunk of its senior leadership team following cataclysmic market results. Analysts have predicted that the biggest economic threat that will emerge from Brexit is a lack of confidence that in turn leads to a fall in recruitment. Hiring continues to boom in FintechIt is with some level of surprise, with such a backdrop, that technology hiring within the FS space is continuing, on our evidence, to grow at an ever increasing rate. Job levels are 63% up year on year and there is a climate of hiring not seen for many years. With such a bleak economic backdrop, why is

Analysts have predicted that the biggest economic threat that will emerge from Brexit is a lack of confidence that in turn leads to a fall in recruitment.


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Toby

the shortage proposes a genuine threat to the continued growth in the space. Poor investment into FinTech education and a reluctance to invest and train entry level staff is biting. As long as that continues, jobs in the sector will continue to rise and the “war for talent” will rage on. Whilst it would be naïve, having recruited through the dotcom bubble and 2008’s meltdown, to suggest technology within FS is immune from the wider economic concerns, it certainly seems that the sector is well positioned to continue to grow throughout the gloom. With a talent shortage, technology driven solutions being craved in financial services, an ever more innovative sector and a regulatory climate desperately needing tech staff to “cut through the noise,” it seems that 2017 is set to be another good year for job hunters within FinTech. Harrington Starr NewsOur New York office was officially launched on 5th Avenue in August and we have already doubled headcount in the US with ambitious expansion plans set to keep pace with our UK operation for the year ahead. General Manager Rob Grant and Sarah Philby have both relocated to NY from London and lead our Sales and Professional Services business alongside Ricky Singh. Muhammed Akram joins to lead our technology offering. It is a hugely exciting time for the business and we would be delighted to help with any FinTech hiring in the US. In further expansion news, Harrington Starr Executive Search was launched officially in September with Tony Marshall joining as Managing Partner. Tony brings over 25 years of experience in the Capital Markets sector and is building out a

disruptive names and companies within the FinTech space. This will be broadcast regularly through social media, web and youtube and distributed to over 60,000 FS professionals. If you have something to say on the market or announcements to make on your brand, again please get in touch to find out more about this complimentary service from the Harrington Starr team. Later this issue you will read about our second FS Sales Breakfast Roundtable at Harrington Starr’s London HQ. These breakfasts bring together like minded senior professionals in the space to network and discuss key issues in the space. The sales breakfast runs quarterly and this will be followed up with further change and technology based meetups. Please speak to a Harrington Starr consultant to find out how you can get involved. The Q1 issue of the magazine will showcase some of our hot tips for 2017, a salary breakdown of the major trends in the space and details of our 2017 event programme. If you are looking to do something exceptional with your business in the New Year, speak to us to help bullhorn your news. Your Success. Our Business. Have a great end to the year and I hope that you enjoy the pages that follow.

team alongside Caroline Friel. Focussed on senior searches within Financial Services, please contact us for more information. We have also welcomed several more excellent additions to the team. Vikki Miller joins our infrastructure and network team, Tim Dobie joins the Java practice, Edward Mitchell is welcomed to the C# team, Dom Wothington and Tom Forsdike join the change practice, Ed Manley and Anthony Townsend have joined the Sales practice, Brad Golder is welcomed to the contract development unit, our back office team sees Donna Gaerty arrive and North Starr (our commercial technology business) is swelled by the arrivals of Lee Cohen, Kate Wood and Yousef Gainey. Exciting times and some superb experience to add to the ranks. November will also see the launch of our new channel, Harrington Starr TV, which will offer interviews and insights from the most innovative and

"It certainly seems that the sector is well positioned to continue to grow throughout the gloom.

"Far from a luxury, technology has become a cost saving, profit driving element to FS success. A major turnaround over the last ten years.

Sales seminar

In association with

The second of

our sales seminars began with our host, Tony Amour giving a short overview of his expertise,

he needn’t have. Tony is the CEO and founder of Maclin Armour Solutions and has

a background as a Director of various FS tech providers, global consultancies and Reuters. Around the table sat a collection of 11 Sales and HR Directors from a range of reputable, and some soon to be reputable, companies

all with the goal of discussing the question at hand: “What is the ideal

sales compensation plan for my business?”

Sale

s talk

of the round table

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1 11 0


The nature of the group and their respective businesses lead to the discussion revolving around complex, B2B sales with relatively long sales cycles. A major challenge was how to reward sales teams so that they were appropriately incentivised whilst still remaining motivated. When deciding on the comp plan there are a number of different challenges and questions to be asked such as operational aims, stage of the company (start-up, more established, etc.) but what exactly is it you are looking for from your sales team. Each compensation plan is (or should be) tailored to the specific target behaviours of the sales team; are you looking for ruthless closers who are after as much money as possible or would you like them to be more conscientious of the process and gathering information and a client base; therefore it is so important that the operational aims are taken into consideration when devising any compensation plan.

One example of a plan to suit a long sales cycle is a high-risk plan that operates with a boom/bust model. This is the sort of plan that is ideal for 18 month – 2-year sales cycles and is open and transparent – Year 1 is not going to offer huge sums but Year 2 and beyond could really offer big returns. This would be opposite to a more complex plan that perhaps rewards meetings with key clients and Key Sales Objectives (KSOs) along the way so each Salesperson can earn along the way and not just on completion of “the big deal.” Another option is a goal based scheme whereas everyone has the opportunity to earn the same amount but via different targets according to, for example, territory, regardless of quota and adjust the commission plan according to revenue against an agreed target.

The general theme of the room steered away from goal-based schemes and more towards individual commission schemes or KSOs but it also led to the first true discussion around regardless of how lucrative or not the commission scheme might be, any change to that scheme is, more often that not, greeted with uproar and suspicion. It was thought that regardless of transparency, there is a suspicion around the maths: “I can see that on paper, you have done the maths and it’s better for me but I won’t believe it until I have experienced it for myself” said one of the contributors.

What often happens in these scenarios is that people are inherently against anything that is more transparent against people’s performance. Even though the evidence is there to show them making more money, they do not like the possibility that they may find themselves in the bottom quarter according to performance, for example. Tony’s way to counter this is to be overtly and openly rewarding top performers and make any schemes more transparent and pay the top performers the big bucks but ensure not to punish them for being successful. The traditional model would see the top performer take home the big paycheque at the end of year 1 then their target is doubled for year 2 because of the success they have already experienced. The difficulty in the goal-based approach is that it is reliant on the manager really having a finger on the pulse and a complete understanding of the territory or market their sales people are operating in in order to appropriately set the relevant targets or goals. If the target is misjudged and someone benefits by bringing in huge sums of money for little effort it is unfair and obvious to the rest of the sales team, not to mention the accountants.

The scenario

Key sales objectives

“What often happens in

these scenarios is that people are inherently

against anything that is more transparent

against people’s performance”

It was here that one of the managers from a newer “virgin territory” made the point that for them, at least, they felt it was better to begin with a higher “stretch” target and then adjust accordingly after the reality kicks in. The general mentality of the average sales person was discussed and agreed that “if you have a big target, you work bloody hard to get there, whereas if you have a small target that you know you can cream it pretty easily, it becomes a lot harder to push that target up than it is to drop a larger target down.” It can be very demotivating, in this scenario, if the target is not adjusted quickly so it is important to get to know both your sales team and their market as quickly as possible in the interest of efficiency and moral.

Tony felt that the best way to go was to go ahead and give them what may, at first, instinctively feel like an easy target but over a very short time and adjust and include longer-term targets when you have had a chance to re-evaluate. So when evaluating the market and value proposition, it is probably best to err on the side of motivating your sales team so you can get a true value for a shorter period so that then, when you are more confident you know what you are looking at, you can instil long-term targets, otherwise you run the risk of churning through a number of sales people quite quickly early on.

Tony then gave an example of what not to do when he brought up an example of a commission scheme he had once been given that was 105 pages long and relied on a mix of complex algorithms and a combination of sales cycle and behaviours early in the process to decide on deal by deal margins. “As a sales rep, you would lay awake at night worrying not about how to close your target but how on earth you would ever work out what a deal was worth to you!” Flat out wrong!

Key principles would include, aligning the scheme and the most sought-after behaviours with what the operating vision and goals are. Make it simple and immediate. Sometimes the most basic schemes are the best: a flat sum for one target and additional sums for behaviours along the way and stretch performances. It’s important to make it immediate as well: in a Pavlovian sense, if the reward is left too long after the act, the reinforcement is not nearly as effective as if the reward follows the action immediately. The same can be said of sales people, the most common form of reward in sales is obviously money so there is an inherent risk in that in order to reward immediately, the client may not have paid yet but it is important to give at least a portion of the reward as soon after the good deed as possible.

Reward top performers very overtly and openly as mentioned previously, which can also be tough because the nature of some top performers is that they are overt themselves but it is imperative not to bring them down by doubling their target for the next year because this will only serve to demotivate and essentially open the door for someone else to lure them with a more attainable and therein rewarding scheme. It is a challenge but also important to balance this out across the board so it’s important to know your team and what it is the top performer is doing to ensure the rest of the team can catch up. In some environments it can be a matter of “being in the right place at the right time” but this needs to be vocalised and transparent so everyone in the team knows, the people pulling in the big money are the ones who are working hardest and the most intelligently so it is clear to everyone what they have to do to earn that money as well.

What not to do

“Make it simple and immediate.

Sometimes the most basic

schemes are the best: a flat

sum for one target and

additional sums for behaviours along the way

and stretch performances”

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Part of keeping it simple can also be limiting the amount of KSOs you give each sales person or paying them too much for each task. One approach is to complete a survey on joining the company around how many meetings they might take on average per sales cycle and allocating figures according to their own projections or experience. So this company starting providing KSOs for meetings and rewarding them on the engagement they were generating according to the seniority of the people they were meeting and the resulting engagement, expecting to see a rise over quarterly periods of the total value of the pipeline and then the resulting deal. So if someone is having plenty of meetings but not getting the deal done then the meetings are not real or certainly not having the desired effect so you can see what to work on as a result. This should work in conjunction with other KSOs as a form of motivation not there to replace weekly or monthly debriefs/mentoring or to be used as a performance contracts.

Not everyone was in agreement that this was a model they could implement and it is one of the hardest to validate but there are ways of doing it; letters of intent from clients, for example, are not easily attainable if they do not intend to commit to the sale. Speaking from experience, there were those in the room who could certainly see the appeal as well. The thought of being rewarded for something that is effectively going to increase your billings as well was a clear win for some and an obvious motivator. This reflects the original point that behaviours that lead to deals are encouraged and motivated therefore allowing the sales team to build their pipelines but also reap the rewards as a company when those behaviours lead to an inevitable cash flow if and when repeated, particularly when dealing with longer sales cycles. For shorter sales cycles, it is more than acceptable to reward dollar value however the process is still important and there is no harm in rewarding KSOs regardless of sales cycle length.

An example of where it has gone wrong in the past is where sales people adhering to KSOs for meeting key clients would then go to a meeting where there might be 3 different managers in attendance and recording it as 3 different meetings and therefore fudging the numbers in their favour. As with many schemes, there are underhand tactics to be wary of and should be taken into consideration. The KSO theory is great but can be time-consuming to monitor.

There is also an emphasis on the company to provide the sales person with enough opportunity to hit the value required to trigger the various incentives. As such, the KSO model can provide the motivation for sales people to stay during constraining opportunity times. In these cases, the emphasis is on activities that sales people will build their personal brands through article writing, meeting the right people so when the opportunities arise again, they are ready-equipped to have an impact immediately. There were more than a couple of people around the table who could relate to the issue at hand, one method of retaining sales staff was a retention method introduced mid-year in which sales people struggling to hit their numbers then only had to hit only 50% of their target for them to stay with the company until Q2 of the following year to then receive an additional cash injection. This effectively works to boost morale during a poor results period as well as incentivise staying put until they are through the rough patch.

This is obviously very much based on the correct company culture and in this case, accepting the software had not performed as expected and adjusting projections accordingly. Not to mention cash flow and trust in your team to deliver, either immediately or by repaying the faith you show in them further down the line.

Keep it simpleThe discussion then moved onto balancing Retention vs. Growth. In cases of renewing existing customers, is it better to have everything, commission-wise, in the same pot or to have specific returns. Given the majority of incentives being directed at finding new customers, it really brings into focus the importance of account management and others involved in the on-boarding and account management process. There are different models, one person had specific bonus schemes for companies renewals involving more focus on bonus as opposed to commission, partly towards appealing towards the likes of Pre-Sales, Account Managers, Ops and those who, traditionally, may be looking towards a more consistent and risk averse method of earning against your traditional sales person who is more likely to thrive with a higher risk, higher reward commission model. Another manager believes in rewarding every time a sales person has a client sign on the dotted line, regardless of how much business has been done with that client previously. This is, of course, hugely dependent on the resources available according to company size and whether there are enough people available to distribute the various responsibilities or if it is all one person.

Sales Managers were also subject to the microscope and posed an interesting question in that some people are 100% deadest against Sales Managers continuing to hunt business themselves and others feel that, yes, they should still look to build their own desks alongside mentoring and enabling their teams to do so as, in the majority of cases, they would have made it to their management position on the back of excellent sales performances. The Sales Managers were also subject to the microscope and posed an interesting question in that some people are 100% deadest against Sales Managers continuing to hunt business themselves and others feel that, yes, they should still look to build their own desks alongside mentoring and enabling their teams to do so as, in the majority of cases, they would have made it to their management position on the back of excellent sales performances. The consensus lead towards gated methods of earning: the manager was incentivised according to the percentage of their team made it over the target or the total output of the team exceeded a particular dollar amount. In both cases, there was an emphasis on not limiting the top performers but on the other end of the scale, it is important to judge and appraise poor performance according to circumstance and to make the decision as to whether they are someone to be let go or nurtured as mentioned earlier in the paper.

The actual role of a Sales Manager differed widely across the room in that some were adamant that the role of the Sales Manager was solely to nurture and get the most out of their team and ensure they reach their potential whereas others felt that time is so valuable that this sometimes has to come second to ensure that the manager is able to bring in their own revenue streams and continue to perform to the level that enabled them to get to where they are today.

Retention vs growth

How do you manage the managers?

One approach is to complete

a survey on joining the

company around how

many meetings they might take on average per

sales cycle

That drew this seminar to a conclusion, KSOs were the order of the day but also covered were the different commission schemes into which you can incorporate them, commission vs. bonus, retention vs. growth, to nurture a flailing sales person or let them go and how you manage the manager. For information on future seminars, get in touch with your contact at Harrington Starr or call us on 0203 5877007.

Conclusion

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an increasingly regulated and competitive world, it is incumbent on financial institutions to fully understand the complex contracts in place with their clients. The financial crisis has led to waves of new regulation piling the pressure on increasingly stretched firms to comply or face severe sanctions - or even to close down businesses. The US Dodd Franks legislation and the European Markets and Infrastructure Regulation (EMIR) are just two examples that have formed part of a tsunami of new law that has put firms into a spin and even, in some cases created panic as to how to comply. It has become apparent that many firms have struggled to get to grips with understanding vital data in their mountains of legal contracts (assuming they could even find all their contracts in the first place!). Of course, financial institutions should really be on top of this information in order to be able to optimise their business decisions (from capital to collateral optimisation) and manage risk appropriately. It is telling that the lower regulatory ask of legal contract data is of itself causing such difficulties for them.

Regulators have woken up to the fact that without correct and up to date data about the institutions they regulate, the next Lehmans could be out of sight but just around the corner. They need and now require information about true exposures and levels of risk. These typically include data about termination clauses containing e.g. rating downgrade events that could lead to market instability in the event of the collapse of an institution due to such clause types being triggered. Historically, these ratings linked clauses were accepted without proper thought being given to the consequences that might flow from them should they ever be invoked; probably due to the

fact that investment banks were much more highly rated pre the financial crisis and the risk was considered very low / remote at the time.

As a result, financial markets and investment banks in particular are experiencing huge amounts of change in both business practice itself and regulatory reporting requirements.

Use of technologyThere has been an increasing realisation by many institutions that the only way they can even plan to cope with this huge new regulatory burden is to embrace fintech.

Gartner predicts that advanced machine learning will be a top strategic trend in 2016, moving beyond classic computing and information management to create systems that can autonomously learn to perceive the world, on their own. Legal data management – although not cool or hip in name – is certainly an area ripe for its use, as shown by the early forays in the use of such technology by a number of leading investment banks and law firms.

Both the banks and law firms have experience with the use of e-discovery tools, which continue to be used in litigation cases and have vastly cut down on the manual labour previously need to search documents for material relevant to the litigation for discovery purposes. These increasingly complex search tools are now being employed to help them find data that they need quickly and accurately.

Can Fintech really help?It is perhaps not surprising that the starting reaction of a lawyer to this is one of scorn, highlighting the sophisticated nuances that exist in legal contracts, the level of interpretation of natural language required, as well as the fact that a machine would not understand the complex contexts in which the documents need to be reviewed.

However, one only needs to consider the creation of Watson, the IBM machine that beat the best Jeopardy champions of all time in 2011. A game of complexity and breadth, Jeopardy requires players to disentangle elements that seem unique to human understanding, including jokes, rhymes,

B Y S I M O N L E I F E RD 2 L E G A L

Financial compliance and Fintech In

http://www.gartner.com/newsroom/id/3143521


1 6

We’re looking for a very special sponsor to ensure that the winner of the

Vendée Globe 2020 is a hero who hails from these shores. The last Briton

to win a solo non-stop round the world race was Sir Robin Knox-Johnston,

in 1969. The French tricolour has flown in triumph in every event since.

It’s high time that changed. Duty calls, England expects.

whitecapltd.com email: [email protected]

Nelson_ad_v2.indd 1 23/05/2016 12:58

and language games. This combination of natural language capability, together with the capacity to analyse issues containing different kinds of information and ambiguity, make Watson’s application relevant to the discussion of machines in the practice of law. Indeed, IBM considers Watson so important that it has created a division around the machine, investing $1 billion in the machine’s development1.

Nonetheless, even if legal departments are not convinced, it is telling that the regulators are, with recent regulatory asks, such as recordkeeping of qualified financial contracts under the Dodd-Frank Act, requiring firms to maintain digitised contracts to enable the use of fintech solutions to find key contract data.

The path to obtaining the legal contract dataDigitisation of documents and use of optical character recognition (OCR) software is the starting point for making sense of financial contract data, turning image-based documents into machine-readable form.

Data is key and in the world of finance the challenge is how to access data from the vast numbers of legal contracts that contain material terms that may be needed on a daily basis by a multitude of consumers e.g. regulatory reporting, collateral management, risk, credit, recovery and resolution planning, CASS (client asset segregation) and others. Such data may range from termination events to collateral requirements. It is not just the legal contract data however that is really required – it is when this information is coupled with other key business data, such as transaction, credit, collateral store and exposure information that the true value of the legal contract data is obtained.

Key techniques are then being used with great effect to work with the digitised documents:

Correlation: at its core, this quantifies statistical relationships between data values. It allows a key legal contract data requirement to be met by simply identifying a useful proxy for it - not by understanding its intricate workings. There is no need, for example, to identify the exact nuances of client asset and money provisions as they are applied in the contract. Of course, even strong correlations can prove to be incorrect. However, the correlations drive the user to the high priority, high-risk areas within legal documentation and therefore can greatly speed up the identification of key contract data for regulatory

reporting and other purposes.Validation: data values cannot be viewed in isolation. A legal contract and underlying law and regulation, imposes natural constraints on the data. By mapping these out and applying them, not only is it possible to refine the search and data extraction process, but also highlight some of the very high areas of concern. These are ones that a human review is far less likely to detect due to the laborious and repetitive nature of the check, such as ensuring that each party has an appropriate threshold defined in the document (rather than, as seen in a number of documents, the threshold being repeated twice to the same party in error through a simple copy and paste of the language by the drafter, forgetting to then amend the important contractual party reference).

Positive Feedback: increasingly, through the use of text analytics and data extraction techniques, more granular and detailed structured legal contract data can be made available to downstream consumers. There is therefore greater visibility of the nuances of the contractual obligations contained within the legal contracts. Through use of this data, in areas such as collateral optimisation and credit/funding valuation adjustments (CVA/FVA), any inaccuracies in the data are immediately noticed and can be corrected through the use of workflow.

When combined, such techniques offer tremendous insights into the contractual obligations and liabilities contained in a firm’s portfolio of financial instrument contract portfolios – with the costs of undertaking contract digitisation exercises quickly outweighed by the optimisation and risk reduction opportunities created.

ConclusionThe advances in technology that have created the fintech revolution offer the potential to bring solutions to the data problems that have long challenged the finance industry. It is perhaps no small coincidence that just over fifty years ago, Harold Wilson, the then British Prime Minister, made a now famous speech reflecting on “the white heat of the technological revolution” predicting the disruptive challenge of automation and the start of computerisation. Prophetic words or history repeating itself? What is clear is that the fintech revolution is another stage in the evolution of technology that will bring huge change and benefits to those financial institutions that chose to embrace it - the question is whether firms can continue to ignore the value inherent in their legal contract data.

1. Source: The Great Disruption: How Machine Intelligence Will Transform The Role Of Lawyers In The Delivery Of Legal Services John O. McGinnis* & Russell G. Pearce http://fordhamlawreview.org/wp-content/uploads/assets/pdfs/Vol_82/No_6/McGinnisPearce_May.pdf

http://fordhamlawreview.org/wp-content/uploads/assets/pdfs/Vol_82/No_6/McGinnisPearce_May.pdf









For large financial institutions operating across multiple jurisdictions, today’s regulatory landscape is a minefield of risk, constantly throwing up new challenges and requiring careful navigation in order to achieve compliance, often under significant time pressures. In the last few years, banks operating in Europe have had to wrestle with the European Market Infrastructure Regime (EMIR) and the EU Regulation on Market Abuse which have both required implementation of major strategic and structural changes. Once you consider that the equally onerous requirements of the consumer protection focused Markets in Financial Instruments Directive (MiFID II) and Packaged Retail and Insurance-based Investment Products Regulation (PRIIPs) are on the horizon for implementation in the next eighteen months, the enormity of the challenge is clear.

In such an environment it pays dividends to be agile, dynamic and quick to react. This is why many large financial institutions, having grown exponentially since the deregulation era of the early nineties, are now weighed down and prohibited by their size, and are increasingly turning to small, nimble Fintech companies to provide regulatory technology (Regtech) solutions to help guide them down the path to compliance.

Although the implementation date of MiFID II has been delayed until 3 January 2018, the changes it will bring about in requiring investment firms to rethink their strategy around the design, marketing, sale and

post-sale handing of investment products are still at the forefront of people’s minds. Firms must implement efficient and scalable processes for approving products for sale on the basis of the identified needs of their clients. Putting in place and documenting such strict product governance and approval frameworks represents logistical challenges that involve trading desks, structuring teams and legal and compliance departments. The stakes are high and both the financial and reputational risks of failing to comply with similar regulatory regimes are very apparent. Very recently UBS was fined $15million by the SEC in the US for the mis-selling of securitised derivatives to its retail clients2.

To address these stringent approval requirements in an efficient and timely manner, without any impact on performance or processing, bespoke workflow and approval software solutions are a must. At WallStreetDocs we have put together a small but highly specialised team with the relevant technical, legal and product knowledge to collaborate with firms, in a time and cost efficient way, to develop either standalone web-based services or platforms which directly connect into investments firm’s internal systems. As part of achieving the overall aims these solutions set out to deliver, they can utilise bespoke algorithms to categorise products by their risk characteristics, raise the relevant approvals, trigger workflows based on that categorisation and provide a

2. http://www.ft.com/fastft/2016/09/28/sec-hands-ubs-15m-fine-over-sales-practices/

>

full audit history of the approval cycle associated with each and every product sold, an extremely valuable asset to compliance and internal audit teams.

The underlying consumer protection focus of the PRIIPs regulation is closely aligned with the goals of MiFID II but PRIIPs presents different, yet equally challenging, requirements and considerations. At its heart the PRIIPs regulation requires investment firms to provide retail clients with a three page, plain language Key Information Document (KID) that outlines a product’s key characteristics, prior to the purchase and sale of certain packaged investment and insurance-based products. This may not sound overly burdensome, but when you consider that the KID must be provided pre-trade; be capable of being produced in any of 24 official European languages; contain a summary risk indicator with a numerical value of one to seven, based on quantitative analysis of the associated combined credit and market risk of the product; and detailed scenarios of the product’s projected performance based on complex statistical models, the task becomes much more daunting. If that were not enough to contend with, the KID must be regularly monitored throughout the life of the product and updated in the event that there is a material change to the information it contains. Many refer to the KID as a “living document”.

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FINTECH: GUIDING THOSE IN THE FINANCIAL INDUSTRY THROUGH A HAZARDOUS REGULATORY LANDSCAPEBy Alan Angell Chief Operations Officer, WallStreetDocs

http://www.ft.com/fastft/2016/09/28/sec-hands-ubs-15m-fine-over-sales-practices/

The requirements PRIIPs imposes are arguably of great benefit to the retail customers that invest in some of the many complex products that are in scope, such as over-the-counter and securitised derivatives. However, this is a large departure from the documentation infrastructure many firms currently have in place today and requires the combination of many different areas of technology, multi-language document automation, complex quantitative analysis, website hosting services and product monitoring services.

Again, large financial institutions are turning to Fintech to provide the Regtech support they need to implement compliant infrastructures. Over the last twelve months WallStreetDocs have been working with many global investment banks to develop a unique PRIIPs platform, PRIIP Cloud. This platform combines market leading document automation technology, a quantitative risk analysis engine and a purpose-built web application that can seamlessly integrate with firms’ internal systems to provide for simultaneous multi-language KID generation, risk calculation and product monitoring and update notification services for structured products and over-the-counter derivatives. Our accompanying distribution platform, PRIIP Hub, then allows any investor to access the relevant KID for their investment throughout its term.

The advantages of partnering with the Fintech industry to tackle the challenges such as those presented by MiFID II and

PRIIPs are numerous. By virtue of their size and the complex nature of their business, many financial institutions have developed a vast array of internal systems for isolated tasks over many years. To integrate them with one another, to address regulatory requirements with such a broad impact, is not straightforward and puts significant pressure on legacy systems to perform functions they were never originally designed for. Throw into the mix business units competing for limited technology resources, the need to focus on multiple regulatory requirements simultaneously and a maze of internal policies and procedures to navigate and the challenge increases yet again.

Fintech providers have the benefit of being free from such restraints. Legacy systems are not an issue for start-ups developing new bespoke technology and by building small, but highly specialised teams, with a single core focus, the Fintech industry can quickly and efficiently react to meet the requirements of the market, often at vastly lower long-term costs. It is this fundamental advantage of being so dynamic that has turned the Fintech industry into the disruptive powerhouse it has become.

As this article suggests, the end result does not always need

to be a disruptive one. Rather than trying to erode the market share for core banking services, something many Fintech firms have focussed on to-date, taking a collaborative approach in partnering with the world’s largest financial institutions can help to achieve greater stability across the wider industry. In the case of regulations like MiFID II and PRIIPs, such Fintech and Regtech partnerships can assist firms in achieving compliant and stable regimes that keep regulators at bay and ultimately benefit those whose wellbeing is the core focus of these regulatory regimes.

About WallStreetDocsWallStreetDocs is the market leading SaaS-based document automation and workflow solution for structured products and over-the-counter derivatives businesses. With offices in London, New York, Vienna and Indonesia we work globally with many of the world’s largest investment banks providing technical, product and legal expertise. In 2015 we received an industry award in the Structured Products Technology Rankings for our unique skills-based approach to document automation.

Our PRIIPs offering combines the award winning WallStreetDocs technology and expertise with a quantitative risk calculation engine, risk monitoring service and our PRIIP Hub distribution platform to provide a comprehensive PRIIPs solution for the industry.

For more information, see www.wallstreetdocs.com

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Under surveillance: Getting to grips with the new Market Abuse Regulation

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IntroductionEuropean authorities introduced new regulation in 2014 designed to prevent markets from being abused by participants through transactions or orders (see links below). It came into effect in July this year, although some technical standards are still being worked out ahead of the start of MiFID II and MiFIR. At the heart of the measure is a requirement for a range of market participants to report any suspicious trades, orders or patterns of activity. To be sure, participants of all stripes have a clear incentive to prevent or discourage market manipulation. But many of these firms have never before grappled with the legal obligation of having to report any sign of market abuse, much less the technical and business requirements for making that happen. Executives from the IT, broking, legal and consultancy sectors say the task of getting up to speed need not be overly daunting; but it does require a good degree of forward planning and the readiness by firms to think long and hard about what they trade, how they trade and what would constitute a sensible automated system for generating alerts. Also, given that this is new territory for a number of players, they say some companies are likely to want to bring in third parties to help them design and implement new systems. MAR represents more than just another regulatory requirement - it marks a fundamental change in how firms work with their regulators.

A sea changeCompared with other transitions to new regulatory regimes, Nick Gordon detects a definite change in the air. Gordon, Business Development Director at change management consultancy Certeco, says there are numerous businesses that are finding themselves in uncharted territory as they suddenly discover they are caught up in an unfamiliar regulatory framework. “They’re being pulled in,” he says. “There are organisations that are not so familiar with how to operate under these terms. So you’ll find that the business people in some of these organisations – really the traders – are just not aware of the requirements and therefore tend to under-estimate the amount of work needed.”

In this article, Mike O’Hara and Adam Cox of The Realization Group look at how prepared financial firms are for reporting requirements under new Market Abuse Regulation (MAR). Many firms that previously didn’t need to worry about market abuse - at least from a regulatory compliance perspective - now must put in place systems that will enable them to report to their local watchdogs any suspicious activity in near-real time. The regulation throws up a host of issues, from broad questions about what’s required to nitty-gritty considerations such as how to handle cross-asset class surveillance. Mike and Adam hear from Nick Gordon of Certeco, Sam Tyfield of Vedder Price, Lars-Ivar Sellberg of Scila AB and Gavin Jackson, MD at Colehouse Ltd. If there’s one thing that’s clear from these experts, it’s that firms need to be thinking ahead. Regulators expect companies to be ready and they’re likely to take a dim view of any firms that aren’t up to the task or are found to be dragging their feet.

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Of course, companies have Legal and Compliance departments that are going to be quite capable of dissecting the regulatory language and understanding its implications. But that only represents part of the story. MAR is essentially about trading activity and it’s the traders and their bosses who will need to work towards practical and effective solutions to satisfy a new breed of regulators.

“It’s a big deal, and they’ve got to make a decision as to whether they can rely on their type of business being undertaken by a package or outsourced through one of their service providers,” Gordon says. “If they can outsource, that’s an awful lot easier than doing it the other way round, which is having to do it basically all yourself.”

The reason why doing it themselves would be so much harder for many firms: modern trading is fast, wide-ranging and, in a word, complex.

“For the industry, it’s a bit of a sea change,” says Sam Tyfield, Partner at law firm Vedder Price. “Firms are now required to implement automated monitoring for market abuse activity, which is required to provide alerts very soon after suspicious activity occurs.”

Once firms have alerts in hand, they’re expected to make investigations and file reports on the suspicious orders or transactions. In an industry which is well known for worrying about milliseconds and microseconds, MAR presents yet another example of time pressure. Only this time the threat is not about losing a fill but about gaining undesired attention from regulatory authorities.

But experts say that by separating the business and the technical aspects of the challenge, firms can start getting to grips with the changes they need to make. Two issues stand out as trading companies

undertake their journeys. Internally, they need to consider all the ramifications of cross-market, cross-asset class activity. Externally, they need to deal with a large degree of fuzziness on the part of the regulators as to what authorities actually want to be reported.

The classic type of firm that is now caught in the regulatory web, which hitherto was not, is the interdealer broker. These IDBs need not be large market players, but they often are undertaking complex transactions, which presents challenges. Suddenly, they need a new perspective on what they do from a compliance point of view, and they need to put in place the operational processes and the IT infrastructure that goes with that.

Challenging timesThe first hurdle is dealing with the unknown.

“The biggest challenge with firms doing this is the fact that this is potentially a technology that they have not put in before,” says Gavin Jackson, MD at Colehouse Ltd who has recently been working with one of the largest IDBs.

In many cases, there will be no track record or experience to draw on for the staff trying to scope out, design and implement a new trade monitoring system. “It’s not like another trading system or an upgrade of a trading system where they (IT staff) perhaps have done it at other companies. It is likely to be the first time that they have been involved in trying to electronically survey the markets,” Jackson says. Crucially, that means they don’t necessarily know what questions to ask or what to expect.

The issue goes right to the heart of the system selection process. How does a trading firm draft an RFP (request for proposal) asking technical and business questions around a product that its staff have never seen or used? It may be relatively straightforward to come up with a list of vendors that might supply the requisite systems, but it’s another matter to determine which ones might be able to deliver the right products given the unique nature of any given firm.

Jackson breaks it down into two discrete areas. One issue is technical. How do you introduce a new system into your architecture? How do you make sure you are comfortable that all of your systems will work seamlessly together? The other issue is more difficult, and it comes before any servers are

purchased or code is written. This concerns creating a set of business requirements. To do this, the first step will be to consider what sort of information regulators might want in any given market.

In Jackson’s view, regulators prefer firms to look at their trading activity from a risk-based perspective. The way to do that is for a company to build a risk heat map, one that identifies the riskiest areas of its business, either in terms of the ability or the potential desire to abuse the market. With that information in hand, companies can then focus on what their alert-generating systems need to target most.

“You would also want to be talking with each individual regulator, each of whom potentially will have different expectations,” Jackson says. Some authorities may want real-time monitoring and alerting, while others may be fine with T+1, at least for a few years before transitioning to real time. Understanding the varying regulatory desires can help when firms start talking to vendors.

Nick Gordon of Certeco takes a similar view. “Understanding exactly what you have to do to meet the criteria of the regulation can be split into two quite clear areas; what the regulator thinks is required and what your own business thinks is required. It’s bringing those two things together that is the biggest challenge.”

Jackson adds that firms need to think about what type of abuse can take place in their different markets. That will then allow them to identify the types of alerts they will need to set up. That’s why understanding their own business, clients and markets becomes so important.

The technical sideLars-Ivar Sellberg, Executive Chairman of Scila, a surveillance solutions provider based in Sweden, says firms should not underestimate the difficulty of making sense of all their activity and the issues raised by connecting their systems.

“It can be a major challenge to start with because a lot of times these firms have a wide range of source systems, which might be completely separated and different for each asset class and business area. They are almost like isolated islands and they don’t have one consolidated view of all,” he says.

Jackson adds, “Firms often in some ways don’t understand or don’t appreciate how complicated putting these things in can be. They start off with a view of, ‘Actually it will be no problem at all, it’s going to work out of the box and we are going to survey everything’. And then all of a sudden this client, when they get to the detail of it, finds it’s a lot more complex. Trying to bed some of these alerts down is a complex and time consuming process.”

For instance, a company may find its alerting system is up and running but setting off far too many false positives. Or it may not even understand its own business enough to define it in the detail needed to create automated systems. Vendors such as Scila can offer a brokerage more than a hundred different types of alerts from a library. Even if these generic alerts don’t match a given situation that has been encountered, the vendor and the brokerage can work together to see which one might be closest and then tweak that to suit the IDB.

Sellberg says Scila’s library of alerts can search for specific suspicious patterns such as layering or spoofing. After working with a customer to

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purchased or code is written. This concerns creating a set of business requirements. To do this, the first step will be to consider what sort of information

“For the industry, it’s a bit of a sea change. Firms are now

required to implement automated monitoring for market abuse activity, which is required to

provide alerts very soon after suspicious activity occurs.”

SAM TYFIELD, PARTNER, VEDDER PRICE

It’s not like an upgrade of a trading system where

they perhaps have done it at other companies. It is likely to be the first time

that they have been involved in trying to electronically

survey the markets.”

GAVIN JACKSON, MD, COLEHOUSE LTD

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determine which alerts may be applicable, the supplier and the client consider whether there is a need for bespoke alerts. “Some of these firms use very specific market models or business models that actually require totally bespoke alert rules that need to be developed,” he says.

Once an alerting system has been developed, the next step is testing. Jackson says it can be relatively straightforward if a firm is using automation, although he adds that much can depend on how time-critical the alert is if it involves surveying trades over a particular time and being able to see a sequence take place. “That may need an automation tool to be able to do that, because if it takes place in a very quick time, it’s difficult sometimes to be able to do that manually,” Jackson says.

Finally, the alerting system needs to be calibrated based on back testing. That can lead to changes in the parameters for the alerts. Jackson adds that some parameters can be user based; that means it need not require a vendor or a developer to adjust the system and can be tuned on the fly using real-time data.

determine which alerts may be applicable, the supplier and the client consider whether there is a need for bespoke alerts. “Some of these firms use

Cross-market considerationsThere have always been, and likely always will be, firms that specialise in one market or another. But over the years, as market linkages have strengthened, connectivity has increased and trading technology has grown more sophisticated, the amount of cross-market trading activity has undeniably surged.

From a self-reporting surveillance perspective, cross-market trading throws up a number of issues.

“It just adds to the complexity,” says Gordon of Certeco. “We’re working with one customer at the moment who has multiple complex types of trades because that’s what he does in the market place. But he’s got to now consider each of those and think, ‘Okay, if I’m looking at a particular type of circular deal that I need to monitor, what does that mean in this respect?’ He’s got to analyse each one of those examples. So it does get very complex.”

Tyfield says the cross-market issue is complicated by the fact that a broker will potentially only see a sliver of a client’s activity. “Put yourself in the position of a compliance officer or somebody who’s operating market surveillance. If you have a trading desk which is operating a strategy that places orders on two, three, four, five exchanges, then there could be any number of reasons that orders are being entered, cancelled or amended on various exchanges, which are perfectly legitimate. But reading the market abuse regs should raise a red flag.”

That ties in with an additional concern: the fuzziness factor. By not spelling out precisely what constitutes market manipulation, regulators are taking a ‘we’ll-know-it-when-we-see-it’ approach. But for a compliance team, taking that into account means that their systems might be generating a large number of false positives.

Regulators took this approach because they recognised that the industry, when it comes to market manipulation, is dynamic. People are always finding new ways of trying to influence the markets. What may be vexing for the industry is how much the onus is now on participants. As Tyfield says, if regulators investigate a situation and find market abuse where none was reported, a firm can find itself in deep trouble. There is little incentive to over-report because regulators could adopt a no-smoke-without-fire approach, plus there would

be the added burden of all the extra work for the compliance team. And there is certainly no incentive to under-report given the possibility of financial penalties or criminal charges. Even in so-called no-intent situations, a firm may be found guilty of market abuse. For instance, a malfunctioning algorithm could create such a scenario.

SolutionsDespite all of the concerns – from cross-market activity to the fuzziness factor – experts say it’s possible for firms to develop robust systems that are fit for purpose.

For a start, some have noted that there is at least one good precedent. The move towards certain types of trade reporting, both under Dodd-Frank in the United States and EMIR in Europe, requires similar types of systems.

“IDBs look upon that area as being a starting point,” Jackson says. “Brokerages are able to leverage some of the work they’ve done to create a trade reporting system, which can fast-track the learning curve early on”.

Another way to ensure the learning curve is not too onerous is to take a gradual approach. For instance, Jackson advises that firms start with a small

number of situations that require alerts, possibly just three or four of the key ones, to capture a decent chunk of a company’s potential risk area. As a company learns from this initial experience and its team becomes more knowledgeable about potential software solutions, it can add new alerts. As he explains, it’s not just about generating the alert. “What do you do about it? How do you close it? How do you create a case out of it? How do you investigate it? And what does it actually mean?”

Scila’s Sellberg says the one prerequisite in any system in the surveillance business is that the supplier needs to support the flexibility required by very different types of firms. Applications need to be able to be deployed with completely different sets of alert rules and be able to be calibrated differently. In addition, firms will have varying appetites for how much they want a third party to get involved in their business. Many high-frequency trading firms for example will want to do the bulk of the deployment themselves. Other firms may want a third party to handle much more of the job, particularly those that are less technologically savvy.

That range of approaches applies to user acceptance testing as well. “We have a defined test procedure and strategies,” Sellberg says, “but there is no way around the fact that once deployed in the customer’s environment, there is a need for final testing in that particular environment to see that it works there.”

Gordon of Certeco stresses the importance of reliability in terms of testing. Once a system is in place, a company needs to be able to ensure it will work 24/7. “What processes do you have in place to assure yourself that when you come into your office in the morning, the systems are doing compliance correctly, they’re performing the monitoring and surveillance that’s required for you to be compliant, in order to keep you out of the eye of the regulator?” Gordon says.

Certeco takes an automated approach wherever possible, while at the same time focusing on defining unique scenarios so that any automated testing is bespoke to a company’s particular requirements.

Gordon’s final advice for companies that are only just waking up to the tasks ahead: try to stay ahead of the game. “Don’t underestimate the challenges of implementing this. Underestimation can be very, very difficult to get around later in the cycle. Because what happens with the regulators is that if you get behind, they get even more interested in you and that creates even more work and pressure.”

“Some of these firms use very specific market

models or business models that actually require totally

bespoke alert rules that need to be developed.”

LARS-IVAR SELLBERG, EXECUTIVE CHAIRMAN, SCILA

“What processes do you have in place to assure yourself that when you

come into your office in the morning, the systems are

doing compliance correctly, they’re performing

monitoring and surveillance that’s required for you to be compliant, in order to keep

you out of jail?”

NICK GORDON, BUSINESSDEVELOPMENT DIRECTOR, CERTECO

Helpful links

Original European Commission MAR regulation (2014): http://eur-lex.europa.eu/legal-content/EN/TXT/?uri= CELEX:32014R0596

Financial Conduct Authority (FCA) overview on introduction of MAR (2016): https://www.the-fca.org.uk/markets/market-abuse/regulation

FCA guidelines on implementation of MAR: http://www.fca.org.uk/news/ps16-13-implementation-of-the-market-abuse-regulations

For more information on the companies mentioned in this article, visit:www.certeco.co.ukwww.scila.sewww.vedderprice.com

https://www.the-fca.org.uk/markets/market-abuse/regulation



http://www.fca.org.uk/news/ps16-13-implementation-of-the-market-abuse-regulations





A qualitative approachto Best ExecutionBy Mike O'Hara and Joel Clark of The Realization Group

Know Your CounterpartyShrewd assessment of one’s counterpart is probably the most fundamental tenet of every business deal, as practitioners in any sector need to feel fully comfortable that the other party will be reliable, delivering exactly what is promised in a timely manner. Such due diligence might typically rely on a range of assessments, both qualitative and quantitative.

It’s a discipline the financial services industry is heavily focused on improving, as firms deal with new post-crisis regulations and a general business drive to vet counterparties more thoroughly and efficiently. Sell side firms have long undertaken extensive know-your-customer (KYC) exercises to protect themselves from a range of risks, but their buy-side clients are now ramping up their own know-your-counterparty routines.

“We have always done a pretty good job with KYC on the banks and counterparties we deal with, but I’m not sure the industry has historically focused enough on terms of business and access to counterparty data. Gone are the days when you could keep this information in a filing cabinet - if you want to be relevant then you need to make sure the data is fully up-to-date and accessible on an ongoing basis,” says PaulCollins, Head of Trading for Europe, the Middle East and Africa at Franklin Templeton Investments.

While some firms may be better than others at performing due diligence on their sell-side counterparties, it is widely recognised that there has been a lack of standardisation and consistency in the way in which information has been gathered, stored and updated in the past.

InefficienciesFormal compliance checks may be performed on counterparties on an annual or quarterly basis, for example, but individual traders are likely to carry out their own more idiosyncratic processes before striking a deal or during the course of a trade. Disparate but relevant information about particular counterparties would then be held in different places within firms, with no central repository to collate the data and no way of ensuring key information is retained when particular individuals leave or change functions.

“A variety of information may exist within an organization which could be considered documented evidence of due diligence on a counterparty, from emails and phone records to trading notes and other traditional documents like terms of business and questionnaires. So there is clearly a need for a central database to aggregate and democratize that information, to create a “corporate memory”. In many firms the information is spread among individuals and departments - compliance has some of it, legal has some of it and traders have some of it, so it’s very hard to look at it holistically and information is invariably lost,” says Allan Goldstein, Chief Operating Officer at Trade Informatics.

Buy-side firms are increasingly focused on finding qualitative ways of vetting their trading counterparties, with the advent of a new electronic order handling questionnaire marking a milestone in that journey. In this article, Mike O’Hara and Joel Clark of The Realization Group hear from Allan Goldstein of Trade Informatics, Paul

Collins of Franklin Templeton Investments, Natan Tiefenbrun of Bank of America Merrill Lynch, Ross Barrett of the Investment Association and Mark Northwood of Bips Global. They all agree that collecting the right information is only the start of the process - it needs to be properly managed, updated and accessed, ideally using an electronic system.

“Gone are the days when you could keep this information in a filing cabinet - if you want to be relevant then you need to make sure the data is fully up-to-date and accessible on an ongoing basis.”

PAUL COLLINS, FRANKLIN TEMPLETON INVESTMENTS

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It is not just within firms that disparate due diligence processes result in inefficiencies, but the lack of a standard methodology across the industry to assess counterparties can make things difficult for banks and brokers as well. Faced with a multitude of clients asking different questions about their processes, brokers will often expend significant time and resources in sourcing and approving information and then issuing the answers to their clients.

Best ExecutionThe sell side has broadly welcomed early moves towards greater standardisation in due diligence and some banks and brokers are already seeing clients looking to formalise their broker selection and monitoring processes. That is being driven in part by an industry-wide focus on best execution as participants prepare for the recast Markets in Financial Instruments Directive (MiFID II), set to be implemented in Europe in January 2018.

“There is heightened attention to best execution as buyside firms look to ensure they’re selecting execution counterparties for the benefit of their end investors. But they want to be sure they are dealing with counterparties that won’t be a source of operational risk or conduct risk in the future,” says NatanTiefenbrun, Managing Director for European Execution Services at Bank of America Merrill Lynch (BAML).

MiFID II covers a wide range of trading practices, but best execution will be central to its provisions, expanding on the requirements set out in the

“There is clearly a need for a central database to aggregate and democratize this information, to create a ‘corporate memory’. In many firms the information is spread among individuals and departments.”

ALLAN GOLDSTEIN, TRADE INFORMATICS

original MiFID text in 2007. Meanwhile the issue has been high on the agenda in the UK for several years, following the publication in mid-2014 of the Financial Conduct Authority’s (FCA) thematic review on best execution and payment for order flow.

Then in February 2015, the European Securities and Markets Authority (ESMA) published the findings of a peer review on how national regulators supervise and enforce MiFID provisions on best execution, concluding that the level of implementation and convergence of supervisory practices was relatively low.

The combined effect of MiFID II, the FCA’s thematic review and the ESMA peer review has been to push best execution higher up the industry agenda, accentuating the business case for taking greater control over counterparty selection. MarkNorthwood, Principal at trade execution consultancy Bips Global, believes these recent developments have helped to crystallise the accepted definitions of best execution for investment firms.

“The FCA review really clarified the fact that best execution is about effective process, insightful monitoring and ongoing management attention on getting the best outcome for investors. The regulators are explicit that anyone handling client orders needs to have clear order handling policies and good governance in place, which requires a combination of qualitative and quantitative techniques,” Northwood explains.

QuestionnaireThe level of attention to the detail of counterparty due diligence may vary from one buy-side firm to the next, but among the most constructive industry developments over the past year has

“Buy-Side firms want to be sure they are dealing with counterparties that won’t be a source of operational risk or conduct risk in the future.”

NATAN TIEFENBRUN, BANK OF AMERICA MERRILL LYNCH

“The regulators are explicit that anyone handling client orders needs to have clear order handling policies and good governance in place, which requires a combination of qualitative and quantitative techniques.”

MARK NORTHWOOD, BIPS GLOBAL

been the Equities Electronic Order Handling Questionnaire, developed by members of the Investment Association (IA) and the Association for Financial Markets in Europe (AFME).

The initiative aims to establish a common framework for buy-side firms to request information from electronic trading providers in the European equity markets. Split into seven sections, the questionnaire covers best execution, trading venue selection, algorithmic trading, non-displayed liquidity, transaction cost analysis, client confidentiality and risks and controls.

On algorithmic trading, for example, sell side firms would be asked to answer a comprehensive set of questions about their algo offering, explaining how the various strategies work, whether they can be customised, and how they will react to different market conditions. As algorithmic trading has grown, market participants have developed a need for a more effective way of exchanging this kind of information, says Ross Barrett, Capital Markets Specialist at the IA.

“There is more and more algo trading happening in the market and banks are naturally fielding a lot of questions from their clients, but there was a general sense that the process of sending questions and answers back and forth by email wasn’t really working. The questions were often repetitive or open-ended, and the answers tended to be either too detailed or too high-level,” Barrett explains.

Dealing with disparate questions from clients may be difficult for banks and brokers, but for buy-side firms, it would be even tougher to reconcile answers from multiple counterparties and make effective execution decisions on that basis.

It is hoped that having a common, detailed set of questions will make life easier for both sides and also lead to more informed and effective decision-making and risk management in the future.

Standard frameworkBeyond algorithmic trading, the questionnaire requires sell side firms to summarise their best execution policies, explain how trading venues will be selected, detail what post-trade analysis will be provided and explain how client confidentiality will be protected.

In total, the document runs to well over 70 questions and requires significant detail to be provided by the sell side, but having a standard set of questions has the potential to significantly ease the burden of supporting buy-side due diligence. The sell side now has an opportunity to maintain a “golden copy” combined with a distribution platform to efficiently manage distribution and modifications.

“This is now a much less significant overhead for us, because we maintain our most current set of answers to the questionnaire so that we can respond to client requests in a matter of minutes. We still get bespoke questions coming in as well, and that takes more time because we may not have the answer immediately available and may need input from compliance and legal before we can respond,” says BAML’s Tiefenbrun.

The questionnaire is still a relatively new initiative, having been launched in March 2016, but it is steadily gaining traction as market participants recognise the benefits of having a standard framework. As it is a non-binding document drawn up by practitioners rather than regulators, there is no obligation for firms to use it, or to stick entirely to the agreed text, but its architects at the IA and AFME are confident it will become the basis of buy-side due diligence for electronic orders in the future.

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“Our members have been very pleased with the questionnaire, and I believe there has already been widespread adoption. We hear from the brokers that they are seeing more of them coming through, so it is already improving the flow of information between buy side and sell side, and also has the potential to reduce costs,” says Barrett.

Central information platformWhile the formation of the questionnaire may be considered an effective solution to the challenges that have been encountered by both sell side and buy side in carrying out effective due diligence, it is really only the start of the process. The issues entailed in the questionnaire are extensive and the drafting deliberately stopped short of standardising answers, which means buy-side firms still need to collect and make sense of a fairly large volume of qualitative information.

“The questionnaire is a very positive development, but when you think about all the things traders have to agree and communicate with counterparties across asset classes and derivatives, it goes well beyond electronic trading protocols. These accepted practices and broader terms of engagement now need to be systematically agreed, captured and retained for future reference as well,” says Northwood of Bips Global.

The fact that the questionnaire is being largely

“There was a general sense that the process of sending questions and answers back and forth by email wasn’t really working. The questions were often repetitive or open-ended, and the answers tended to be either too detailed or too high-level.”

ROSS BARRETT, THE INVESTMENT ASSOCIATION

distributed and answered by email at this stage also makes it difficult to quickly and efficiently compare answers as they come in and may deter firms from keeping their counterparty information updated on a regular basis. But if due diligence is only carried out annually, there is clearly a risk that important counterparty information may not be collected.

The need for some kind of central information sharing platform to host the questionnaire and manage the flow of questions and answers has been recognised from the outset. AFME and the IA published an extensive set of specifications to help their members identify software providers that could deliver an electronic trading information platform, and a vendor presentation day was held in June 2016 at the IA in London.

Among the solutions that successfully completed the associations’ review process was Plia, a counterparty management technology offered by Trade Informatics, a financial technology firm based in the US. The review process continues and it remains to be seen whether the industry will coalesce around a single platform to manage the exchange of counterparty information, but Trade Informatics’ Goldstein believes Plia is well-placed to meet the needs of market participants.

Peer comparison“The Plia system gives firms a single repository where they can hold all of the annual due diligence information and questionnaires and also log all of the counterparty information that is collected on a day-to-day basis by traders and front-office staff. So when staff go into a broker due diligence/best-execution meeting or engage with a regulator for an audit, they can clearly evidence their due diligence and pull all of the relevant information very easily,” says Goldstein.

Significant as the questionnaire and other such information gathering exercises may be, it is the ability to combine that formal intelligence with ad hoc information that is gathered during the normal course of business that is likely to engender the most effective due diligence in the future. Managing the process electronically should also lead to more proactive use of the information than if it is stored on disparate emails and spreadsheets.

“In many cases the questionnaires are still just a tick-box exercise for many firms and little is done with them beyond a cursory glance. The concept of an electronic database is the first step towards being able to do something measurable with the qualitative information and exercising proper peer comparison,” says Goldstein.

Effective peer comparison should not necessarily seek to align scores to particular responses and make what should be a qualitative review more quantitative in nature, Goldstein adds. Using the questionnaire and any supplementary points of inquiry, firms should dig as far as possible into the mechanics of a broker’s offering and then set the responses against those of other providers to determine the true profile of each counterparty.

Buy-side firms may still have some way to go before they are in a position to exercise sophisticated qualitative peer comparison, but it is one part of the unwavering focus on best execution that is driven not only by MiFID II, but also by a general business drive to take greater control over trade execution and counterparty selection.

Consistent communicationFranklin Templeton’s Collins sees best execution as a two-part process comprising that which is outsourced to the sell side through smart order routers and algorithms, and that which is encompassed in internal decision-making at the trading desk level. The use of questionnaires and systems and controls is central to the due diligence process, but firms also rely on their counterparties to ensure best execution when handling orders.

“Preparing for MiFID II is a great opportunity to re-evaluate all of our processes and policies to make sure we are pursuing best execution in the optimal way. We realise that the more tools we have to enhance that process the better, and the more we can blend the qualitative and quantitative approach to yield better results,” says Collins.

Banks and brokers must also play their part in the increasing sophistication of the buy side’s due diligence, and that goes well beyond simply answering questionnaires and responding to requests for additional information as and when they are made. It is also incumbent upon brokers to communicate any material changes in their order handling processes to their clients in a clear and timely manner.

Such changes to sell-side processes may not be consistently communicated across the industry today, and here again any communication is likely to take place over a range of email, instant messaging or phone calls, which does not always lend itself to effective record-keeping, adding further to the need for a central counterparty management system. “If we add a new venue, change the logic by which we choose which venue orders are posted to, or change the behaviour of one of our algorithms, we have a governance process that determines when such changes have a material impact on execution and should therefore be proactively communicated to clients. We are now seeing some clients looking for a solution to standardise how they receive, acknowledge and store such communications,” says Tiefenbrun.

ConclusionGoing forward, there is little doubt that industry processes for achieving and evidencing best execution will continue to evolve. As the implementation of MiFID II edges closer and the order handling questionnaire becomes more deeply embedded in the due diligence process, buy-side traders should find that they are better equipped to make more informed choices about their counterparties.

But despite the tangible progress that has already been made, it is unlikely to be plain sailing. The importance of adopting a qualitative approach to best execution may be more widely recognised than it was in the past, but putting it into practice will require firms to overcome cultural as well as technological challenges.

“Although the actual matching of orders is mostly electronic, those orders are often handled by a process combining programmed and human decision-making. Human traders introduce a degree of discretion into the process, typically in response to complex order instructions and market conditions - dealing with that variability will be the big challenge in the years to come,” says Northwood.

For more information on the companies mentioned in this article, visit:

www.tradeinformatics.comwww.theinvestmentassociation.org www.franklintempleton.co.ukwww.bofaml.comwww.bipsglobal.com

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http://www.tradeinformatics.com

http://www.theinvestmentassociation.org

http://www.franklintempleton.co.uk

http://www.bofaml.com

http://www.bipsglobal.com

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Start-up robo-advice services are therefore faced with a stark choice. Either pursue authorisation from the FCA, or face the serious risk that the robo-advice will be regulated advice rather than guidance.

However, the most recent Financial Advice Market Review report, released on the 14 March 2016,highlighted several possibilities for improving the situation, two of which are particularly relevant here. First, the report recommended that the definition of advice in the RAO be changed to be closer to the definition under MiFID. This would mean advice would universally require a personal recommendation to be regulated. Second, the report recommended that the FCA create a specialist unit to assist robo-advice offerings to navigate regulation on a case-by-case basis. This unit opened in May 2016 and information about the eligibility requirements are available on the FCA website.

So, my dream of financial advice from Siri over a morning coffee could become a reality after-all.

However, I am still inclined to be cautious about stating that robo-advice's regulatory problems are over. Recently a machine (AlphaGo) beat Lee Seedol, a professional Go player. AlphaGo was victorious because it exploited machine learning to simulate thousands of games and develop models of what was likely to be a victorious pattern, rather than trying to calculate a perfect solution.

The power of machine learning has obvious implications for financial modelling and robo-advice. However this throws up a variety of legal and regulatory problems related to liability. If a machine learning program is capable of producing outcomes its programmers do not predict, who bears the cost of something going wrong? The programmers, the operators, or the customer?

Whilst these scenarios are not exactly Terminator, it is worth thinking about and definitely a reason why robo-advice could continue to be evaluated by regulators for the foreseeable future.

The future of investment

advice?

P

Gilbert van Roon CEO & Founder, Fintech Compliance

icture a world where your alarm clock wakes you up. The next thing you hear is the voice of Siri calmly informing you that your investment portfolio has increased in value by 10% overnight.

Siri then asks you something you wouldn't necessarily expect. 'Has this increase in value changed your risk appetite today?' Siri then informs you of specific investments you might be interested in and adjusts your portfolio according to your wishes. You then have coffee and think that the Maldives might be a nice place to retire.

Speaking for myself if all of the above where to happen tomorrow I would be thrilled. At present though, financial advice by automated systems (known as robo-advice) has been facing some regulatory issues in the UK.

One example is whether providers of robo-advice are providing regulated advice or merely guidance. Financial advice in the UK is a regulated activity under the Regulated Activities Order 2001 (RAO) and the Markets in Financial Instruments Directive (MiFID). Most financial regulation in the UK is media neutral, meaning that the same standards apply regardless of whether a human or a machine is providing the service. There are also criminal sanctions for providing financial advice without permission from the FCA. In contrast, offering general guidance on investments or savings is largely unregulated. So it is essential for a new business to get the boundaries right and be clear on what is being providing to customers before the significant upfront costs of developing a robo-advice system are incurred. However, the difference between the two is not completely clear and it becomes even more difficult when new technology is involved.

Financial advice under the RAO is defined as offering an investor advice on the merits of dealing in a particular investment. So, if I tell you that you should buy shares in BP tomorrow, I have just given you advice. If, however, I tell you to sell shares in oil tomorrow I am not giving you financial advice because it is not specific to a 'particular' investment. I have simply given you guidance.

In contrast, under MiFID, advice requires a personal recommendation. The recommendation must also be presented as 'suitable' for the customer or be based on a consideration of their personal circumstances.

The definition of advice under MiFID is much narrower than under the RAO. If I tell you that it would be a good idea to buy shares in BP tomorrow then this is advice under the RAO. However under MiFID. I have not presented these shares as suitable for you or made any consideration of your circumstances. So we have a situation in the UK where there are two pieces of regulation defining the same concept in very different ways.

Most models of robo-advice today are based on algorithms which take information from a scripted questionnaire. This is essentially a scaled-up decision tree. The customer of a robo-advisor answers questions on their risk appetite, income and other details and the computer applies an algorithm to (typically) produce a portfolio.

The FCA takes a view that decision tree are a tool for providing advice. Therefore whether a robo-advisor is giving benign guidance or regulated advice depends on context.

If we try to apply the earlier definitions to an algorithm however, there are some confusing results. For example algorithms which recommend a list of shares to suit the customer's criteria are almost always at risk of being advice under the RAO. Even if the choice is left entirely up to the customer and the algorithm is effectively acting as a glorified search engine. This is because the act of narrowing down the selection to shares which could be suitable for the customer can be deemed to be advice on the merits of particular shares over another. The FCA have issued further guidance that an unauthorised person taking another through a decision tree should make it clear that the decision tree/algorithm aids generic decisions and is not intended to recommend any particular investment. All very well for a human to state this and emphasise it appropriately, but when was the last time you read the Terms and Conditions for Itunes or a similar service?

IF A MACHINE LEARNING PROGRAM IS CAPABLE OF PRODUCING OUTCOMES ITS PROGRAMMERS DO NOT PREDICT, WHO BEARS THE COST OF SOMETHING GOING WRONG?

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1 Across the third quarter of 2016 Albion Ventures commissioned YouGov to interview a representative sample of 1,014 British SMEs on the challenges and opportunities they face in growing their business

Patrick Reeve Managing Partner, Albion Ventures

early three-quarters (73%) of small businesses with over five employees plan to grow dramatically or moderately over the next two years, according to a new report1 launched by Albion Ventures, one of the largest independent venture capital investors in the UK. Only 5% think they will shrink or wind down. Based on interviews with 1,000 SMEs, the fourth Albion Growth Report sheds light on the factors that create and impede growth in post-Brexit Britain. Finding skilled staff is the biggest challengeWith 50% of small businesses with over five employees planning to grow their headcount over the next two years, finding skilled staff tops the list of challenges business owners face, up from third place in 2015. It is a particular problem for manufacturing, construction, medical and healthcare companies. In sixth place, the decision to leave the EU ranks below perennial challenges such as red tape, regulatory change and the difficulty of accessing new markets. Lack of access to finance – one of the major problems voiced by SMEs during the recession - has fallen to 13th place from fifth last year. Manufacturers and tech firms most optimisticOn a sector basis, manufacturing companies are the most bullish about growth and the most relaxed

Skilled staff shortages check post Brexit small business bullishness

Nabout Brexit while retailers and construction companies are the gloomiest. Brexit – a split verdictBusinesses are overall split on the impact of Brexit with a third (36%) thinking it will help them enter new markets and 41% expecting it to be a hindrance. However, the report shows significant differences among SME owners towards Brexit by region, size and age that show similarities to the result of the vote in June. Among those groups that are most concerned is millennial business owners aged under-35, of whom half (54%) think Brexit will hinder their ability to access new markets. Leaving the EU ranks as the single biggest obstacle to growth among small business owners in Scotland and was in third place among those in London. Those groups that are the least concerned about Brexit include sole traders, 56% of whom said it would have no effect on their growth potential East Midland-based entrepreneurs are the most bullishRegionally, business owners in the East Midlands were the most optimistic about growth (70%), followed by the East of England (69%) and London (65%). Wales was the most pessimistic region in this year’s report with only 39% foreseeing growth. Appetite for equity financeOver a quarter of firms would consider investment from venture capital, private equity or business angel, rising to a third among larger firms with more than five employees. On a sector basis, over half (52%) of IT and telecom firms are open to equity finance while construction trails at just 13%. Patrick Reeve, Managing Partner at Albion Ventures, said: “Against a backdrop of profound change, one element that has remained reassuringly unchanged is the optimism underlying the UK’s small businesses. Firms are looking to grow their headcount and productivity is on the increase. The biggest barrier to growth, finding skilled staff, is generated by success rather than failure. “The downside is that the economy is coming under capacity constraints at a time of considerable political uncertainty. While many of the pressures on growth we have seen in recent years have eased, the skills that enable us to compete are in short supply.”

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Erez Mathan, COO GoCardless

As much as we all think we represent a tidal wave crashing down against Big Finance, in real terms the amounts we deal with are mere drops in the ocean compared to the trillions processed by big banks. Although now firmly

established, FinTech is still some way from being truly mainstream.

So what will it take for FinTech to reach the next level? Part of the answer is acceptance.

Developments like new payments systems, foreign exchange innovations, and - yes - blockchain will only truly make a difference once everyone accepts them. To do this it’s up to the fintech sector to provide reassurances over security and of course, highlight how we conform to regulatory requirements.

I believe the catalyst for this shift is the rise of regulatory technology - or RegTech. Many early-stage investors are now seeking to replicate the returns created by FinTech in other, similar areas where entrenched inefficiencies could be reduced or even eradicated with the help of technological progress.

This is already happening with processes like compliance and knowing-your-customer (KYC). If they prevail, then that could provide the security banks need to treat FinTech advances seriously.

FinTech & RegTech: The perfect partnershipBut can RegTech succeed? Major financial institutions and startups alike hope it will. RegTech holds the potential not only to save the banks time and money by making existing systems more effective, but also to improve the experience for their customers.

Speaking at a recent event we organised, George Osborne, Innovation Director at Barclays Bank, said that RegTech has the potential to disrupt the way risk is monitored and managed by providing better solutions for existing problems – for example, by creating new resources and frameworks that prevent banks and other institutions needlessly duplicating KYC work already carried out by others.

“All financial institutions are obsessed with regulation. RegTech helps us run ourselves better and not pass on the burden of meeting regulatory requirements directly to our clients – which is what has happened in the past,” said Mr Osborne. “Adoption of RegTech is critical so that we don’t irritate a customer by asking them the same questions every year,” he said. “In five years time we will have shared resources and answers to every single question, and the ability to have one version of the truth.”

Mike Laven, CEO of money transfer company Currency Cloud, said that as well as having the potential

to reduce duplication, RegTech could also hugely speed up the ability of banks and companies to sign up customers, removing a major barrier to entry.

“In some cases, when we sign customers up, we still have to collect utility bills that people have to scan and send to us. There are so many ways of certifying identity in the modern world that this is unacceptable. The [regulatory] mechanism is a generation behind… and it feels like we’re in the dark ages. But [at the moment] I can’t get out of the dark ages and still be compliant,” he said.

A separate obstacle is making sure that new systems meet legal requirements, given that fines for not complying with regulations tend to be substantial.

Although the banks are keen to adopt RegTech solutions, the ability of the companies building them have often not been fully tested, or may even be keener to focus on customer conversion rates than complying fully with the law - which could lead to substantial problems if the regulators decide the new products ultimately aren’t compliant with legislation.

(Block)chains will set you freeThe great hope for RegTech is that blockchain could resolve these issues by providing a shared, accepted depository of identity and financial records, while complying with banking systems and regulatory requirements. For RBS, the main potential of blockchain-like technology is the ability to reconcile lots of different sources of data into shared information stores that provide a vital audit trail – while also saving money, said Damian Richardson.

“We’ve had a lot of clients come to us and ask what this technology can do, and [the possibilities] are quite a shock,” he said. “Imagine if one of the nodes on your blockchain is the regulator, and they’re seeing a real-time dashboard of information – then you’d be compliant by default.”

Looking to the futureDeveloping those systems will be an enormous challenge, but will also create substantial opportunities for smaller companies to innovate by combining elements such as automation, mobile apps, blockchain, and data.

That growth will also be supported by the UK’s ecosystem, which has an advantage because regulators are prepared to work with innovators and strike a balance between protecting customers, while also opening up access to data. In particular, the Financial Conduct Authority’s regulatory sandbox, which allows companies to road test products and services, is an example of that forward-thinking approach.

Nevertheless, the development of the sector will largely depend on whether banks can agree to work together on shared solutions – as well as on global regulation itself.

The final word, perhaps, should be left to RBS’s Richardson, who said: “It’s not the technology that stands in the way [of RegTech], it’s political will and regulation. But if we’re still talking about what blockchain can be in five years’ time, then we’ll have done a bad job.”

GC

RegTech: the final FinTech enabler?

A new survey has found that half of those surveyed admitted turning away 6% - 15% of potential customers due to their current KYC or credit risk management processes. -79% agreed they would be willing to collaborate with their peers to streamline onboarding, KYC activity and watch-list processing. -UK banks recognise the benefit of gleaning true insights during the customer onboarding process more than any other region. Financial institutions around the world not only prioritise financial inclusion and financial transparency, but also share the desire to increase data sharing and collaboration with their peers to achieve it, according to a new study by LexisNexis® Risk Solutions, a global big data, technology and analytic linking company. The global Financial Inclusion and Transparency Survey, which targeted 300 senior-level professionals in the financial services sector with Anti-Money Laundering (AML) Compliance responsibilities, revealed worldwide consensus around the benefits of a global utility. Nearly all respondents (99%) agree that a global customer due diligence utility would help protect an institution’s reputation, reduce compliance cost, support greater efficiency and provide better data to transform the way companies make decisions. Nearly 8 out of 10 respondents (79%) agreed they would be willing to collaborate with their peers to streamline onboarding, KYC activity and watch-list processing, and a similar number (78%) stated that they would be willing to share data to see such improvements. The same proportion (78%) felt that the benefits would outweigh the costs if they could be part of a shared service to efficiently obtain, manage and utilise due diligence collected from common customers.

These findings highlight the fact that banks across the world not only share the challenge of managing the increasing compliance cost, but also risk losing consumer and business deals as a result of new customer onboarding deficiencies. Despite the survey finding that 77% of financial institutions consider providing financial services to the unbanked and under-banked very important, roughly half turn away between 6% and 15% of potential individual customers (50%) and small business customers (48%) due to their current KYC or credit risk management processes. More than 40% of respondents cited the cost of collecting information as a top concern. Whilst every financial centre surveyed agreed that their onboarding processes are important for both compliance and better understanding their customers, the UK, however, is the only country where respondents saw onboarding as yielding true insights more so than as just a compliance activity. The results showed that financial institutions across the globe share the view that financial transparency makes it more difficult to hide illicit transactions (83%), and is a priority for company Boards of Directors (85%). The study also found that providing internal stakeholders with the information they need to make compliance risk and credit decisions about consumers quickly is seen as a critical role of compliance functions (87%). Dean Curtis, Managing Director, LexisNexis® Risk Solutions UK said:

“The fight to combat money laundering, terrorist financing and tax evasion continues to intensify and be as important to society. The government’s recent review and action plan aims to increase both the effectiveness and efficiency of Financial Crime prevention. As such, more is expected of the financial services industry to protect society and prevent the issues in question. As our survey highlights, it is clear that improving the KYC process will significantly help facilitate this outcome.”

“Fundamentally, there is a growing need for greater collaboration and information sharing between financial institutions, government and law enforcement agencies around the world. Utilising and sharing the vast, disparate data which is available and using this effectively with targeted analytics is imperative to both the effective detection and prevention. This also ensures resources are prioritised and deployed to provide the most impact. This approach promotes better outcomes, financial inclusion and the management of appropriate risk rather than avoidance where risk can be driven into shadow banking or other areas of the economy.”

Innovation and collaboration identified as key drivers of global financial inclusion and financial transparency

A new survey has found that half of those surveyed admitted turning away 6% - 15% of potential customers due to their current KYC or credit risk management processes

About LexisNexis® Risk SolutionsLexisNexis Risk Solutions UK (http://www.lexisnexis.com/risk/tracesmart) is a leader in providing essential information that helps customers across all industries and government assess, predict and manage risk. Combining cutting-edge technology, unique data and advanced analytics, LexisNexis Risk Solutions provides products and services that address evolving client needs in the risk sector while upholding the highest standards of security and privacy. LexisNexis Risk Solutions is part of RELX Group plc, a world-leading provider of information solutions and analytics for professional and business customers across industries. LexisNexis® Risk Solutions Financial Inclusion & Financial Transparency Survey MethodologyLexisNexis Risk Solutions conducted an online survey of 305 financial services senior managers with Anti-Money Laundering (AML) Compliance responsibilities across eight countries, including U.S., U.K., Germany, Brazil, Mexico, China, Hong Kong & Singapore. This study sought to gauge interest in a global customer due diligence utility focused on Know Your Customer (KYC) compliance and increased financial inclusion and financial transparency via a global survey of financial services executives. LexisNexis Risk Solutions was not identified as the sponsor of this research. Data were collected between August 17th and 25th, 2016.

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Dean Curtis, Managing Director, LexisNexis® Risk Solutions UK

https://www.tracesmart.co.uk/

https://www.tracesmart.co.uk/anti-money-laundering

https://www.tracesmart.co.uk/know-your-customer

www.lexisnexis.com/risk/tracesmart



ConversationAn interview is largely about the art of conversation and many people forget how important it is for them to get their personality across. Never underestimate the value of simply getting on with someone.

Release the passionPassion for what you do should never be hidden in an interview, the more you care, the more likely that the interviewer will feel confident in your ability to work your hardest to get something done. Passion also needs prep. The most passionate of developers often go the farthest however, it’s always a shame when someone with great skills fails to prep on how to best exhibit their talents. This can often be in thinking how best to explain a solution or perhaps in the choice of which project to discuss.

DrawWhere you can use the white board use it, it’s the best form of explaining how you have done things in the past or how you would plan to do something for the new firm. In your day-to-day job many technologists will draw out their ideas or draw a

Every interview process for a technical role within the financial services sector will require some sort of technical testing. It is becoming less and less frequent for candidates to have to sit in

a room and write answers out to purely academic questions on paper. Instead, we are seeing that technologists have to show off their skills in pair programming exercises, live lab sessions and, more often than not, a whiteboard session.

I am very passionate about offering advice for being fully prepared before an interview and believe that there are many more elements at

The definitive interview guideby Nadia Edwards-DashtiParts one, two, three and four can be found in The Financial Technologist Magazine second and third quarter issues

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666666666666666666666666666666Codersrsr : Make ke kyoyoy ur interview ew ea success!

Don’t regretetenot pot po reparing for a white-boardsessesse ion!

diagram to best exhibit what they have done. If you find this the best way of outlining your point, use it.

Many questionsWhen developers are to embark on a new project they question. Question the purpose, question the spec and question the plan – this should be replicated in interview, after all it’s a new project that you will be starting. Only then will you be able to choose the relevant skills you have to highlight.

PracticeIt’s so important that you practise logical problem solving questions and algorithm type questions as it’s very likely these types of tests will be asked of you in interview. Remembering and revising the foundations of your subject can also make all the difference in test scenarios.

There are a plethora of topics that need to be covered for any interview and working closely with your consultant to identify what each company expects is a very important part of the process. For further interview practise and coaching information please contact me.

play than just being physically able to code like the job requires or follow specifications to do the job. Some of these include how you communicate, think under pressure, respond to constructive criticism, work with others, debate and furthermore how well you can actively listen and learn.

When it comes to whiteboard sessions people often come out feeling like they could have done more and a lot of the time wished they had really thought through what should be covered. With that in mind, here is a list of objectives to achieve in any whiteboard session:

z It’s not just about what you write on the board it’s how you talk through it, so practise explaining your ideas, your previous projects and/or solutions that will exhibit the best of you.

z Expect to be stretched as you could get bombarded with questions - what questions would you ask if you sat in someone’s whiteboard session?

z Remember every question is supposed to make you feel the need to explain the reasons as to why you have decided to do it that way – not because it’s wrong but to understand your thought processes.

z There will be questions that physically you don’t know the answer to – that’s not time to panic – how can you know everything? – instead use this situation as a forum to learn and expand your knowledge. That’s the type of colleague people will want.

z Practise with any other techie you know. A whiteboard session is for the sharing of ideas and questioning methods to get to the best or most efficient solution – if you have someone you could practise this with beforehand do it.

z Finally, if you have chosen three choice projects you would like to exhibit in a whiteboard session, practise writing them out on a whiteboard – what’s your handwriting like? Does it flow properly? Did you use all the space? Put yourself in the audience and see whether this could be improved.

Ultimately, this is about you showing off the real you and realistically you don’t want to leave the session wishing you had prepared better. As a self-confessed non-techie, each of these gems of advice has come from people I have represented in interviews.

Each of these people, of all levels of ability, have come to me afterwards and said: “I wish I had done that.”

So no regrets!

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So many excellent developers can’t get through the numerous hoops of interviews. Time after time we have seen developers fall at the various hurdles typical coding interviews throw

at them. The top candidates don’t necessarily get the job purely because they miss out on some simple bits of preparation before interview and often with their communication during it. Read on for the actions that can help ensure a successful interview.

Tailor the CV to the job you wantTechnology is full of technical skills, every coder will have been exposed to a plethora of things that the job entails and a plethora of things the job doesn’t. Either way it’s so important you know that the coders who are most likely to be selected for interview present a CV that highlights the specific skills they have that are relevant to the job.

ResearchSadly too many people forget to spend time researching who they are meeting and even worse they miss investigating the company itself. The personal touch goes such a long way with the company and individuals within the firm. Without this interest it’s very difficult to convince a firm that you are motivated and excited to join them. As a “techie” overlooking such a crucial part of the role will only expose you as someone not taking the process seriously or being a person that lacks detail.

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What can you tell us about your business?Equinix provides a dense interconnecting point for several different industries so we are the crossroads for electronic trading as it pertains to BSO. A lot of companies want to be where the broadest variety of networks, cloud providers and capital market participants can meet together to transact business. It’s a case of customers saying “meet me at Equinix”.

What has been your journey to your current position?I first became familiar with Equinix at the end of 2003 when I toured the data centre as a potential customer. I ran a global financial trading network that operated in 23 countries and I was touring data centres all over the world. I walked into Equinix in Chicago and was shown the first ecosystem concept in the capital markets in which Buy Side, Sell Side, market data providers, global telecommunications providers, exchanges, etc. could all meet and interconnect with each other. I have to say it was really the first time I had seen this anywhere in the world having toured literally dozens of data centres around Europe, Asia and the US. So I became a shareholder in Equinix the day after my data centre tour and a customer of Equinix shortly after that. I was soon entrenched in the company and the business model. Then in 2007 I had some conversations with Equinix executives about potentially joining the company and expanding this capital markets ecosystem concept to other markets outside of Chicago. I was hired

into the strategy group of Equinix in June of 2007 with the goal of promoting Equinix as the meeting place for the global capital markets and electronic trading sector all around the world.

Can you describe your day to day role?Typically, we are working with customers on their strategy around customer access and vendor access and how they can more easily interconnect with their key information sources or execution venues. Much of the interplay between capital markets participants is now digital so companies that are trading equities, currencies, options, futures and even OTC derivatives, are doing that in the form of electronic trading. It is important to be well connected to information sources that move markets, such as Bank of England, Bank of Japan and ECB for interest rate announcements, as a lot of trading occurs worldwide so even though there is a fluctuation and a currency value in one market, it can have a ripple effect globally. Being well connected to all of these information sources helps companies and trading firms react quickly and mitigate risk real time. In an information rich ecosystem, companies can really trade smarter.

As a company, you’ve seen huge levels of growth in recent years, where does the future growth come from? What we have seen is an outflow of infrastructure from what we would call “in-house data centres” into facilities like Equinix, where you can really be amongst

1JOHN KNUFFGeneral Manager Global Financial Services, BSO Networks

H A R R I N G T O N S T A R R T A L K T O S O M E O F F I N T E C H ’ S M O S T E X C I T I N G B U S I N E S S E S

the key telecoms providers, rather than trying to bring all of the relevant networks into your own data centre. It’s often easier to bring your critical systems to where all of the networks are located and that’s certainly what you see in Equinix, London. It’s a very network rich environment to the extent that systems have to be better connected and there’s more interplay between key technology providers. We see more and more that businesses are starting to move critical systems into colocation facilities like Equinix and we believe that trend is just getting stronger. In addition to this, certain workloads in the enterprise, and also in the capital markets, are being offloaded to the cloud. Many critical vendors in that space are creating As-A-Service platforms, replacing some of the in-house systems that used to run in these large corporations. These platforms can now be outsourced and essentially, your managed service provider or your cloud provider can be across the aisle from you in a facility like ours.

Where do you see the opportunity for you in the UK and European market?Well I think the acquisition of TeleCity has certainly helped our presence in the EU market but what we are seeing is a lot of companies in both the Asia Pacific region and the Americas that want to move in to EMEA, specifically for trading. We also see companies from EU markets that want to deploy in some of the fast-growing Asia-Pacific markets so a lot of our global capital markets business is really built on enabling businesses to expand in to different markets across the globe.

What are some of the major challenges facing the industry that your company overcomes?I think there is definitely more focus on conserving capital right now, especially in the financial market space. The idea of investing $20-50 million in your own data centre doesn’t make sense any more. So from a capital preservation

standpoint, a lot of our customers are looking at colocation as a good way to keep their own capital and deal with data centres as a monthly expense that can be expanded or contracted as they need versus having a sunk cost in very large facilities; so I think number one would be management of capital. Second, is cost containment; a lot of the firms we deal with are multinationals and they need to be interconnected to a lot of the key global markets. As an example, in the FX markets and EFX specifically, these companies need to be trading in several markets around the world so they need to be well-connected which means they have got systems and networks that connect those systems. Think about risk and compliance systems for each country that must be deployed in a suitable location to support their trading operation. Uniquely, Equinix operates in 17 of the top 20 global markets (a stat from the GFCI who listed the top 20 global capital markets, 17 of which are home to Equinix data centres) so we can help companies preserve their capital, lower their costs and be better connected to their vendors than their competitors. We can do that effectively on a global scale.

What was the thinking behind the recent partnership with BSO Networks?Unique to Equinix, and one of the things that impressed me when I was a perspective customer and later became an active customer, was that Equinix was really the richest location for a variety of service providers. So if a company wants to use Amazon, or if they want to use Microsoft, or if they want to use Oracle, our goal is to provide access to all of those cloud providers. We like to see it as providing customers with access to ‘the home of the cloud’. The same variety exists in the telecommunications space; if they want to use BT or Colt or Singtel we want to have those telecom providers present inside our facilities, then let the customer decide who the best vendor

The idea of investing $20-50 million in your own data centre doesn’t make sense any more.

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would be for the particular business challenge that they’re trying to overcome. So I think the most counterintuitive thing about Equinix is that we don’t have a network, but we are recognised as the best connected data centres in the world as we have 1,400 network providers within our data centres and over 500 cloud and IT providers. So it’s a unique business model in that we want to have this neutral meeting place but you don’t have to buy Equinix services, you can choose the best provider for your particular need.

Where do you see the future of the market heading?Certainly cost containment and next generation network build outs are key, there’s a lot of activity there. Companies need to operate in more markets and at a lower cost so from a telecommunications standpoint that’s keeping us pretty busy. We have an offering called “Performance Hub” and we can help companies design and build a next generation network that gives them broader reach into new markets and also helps to reduce cost as they scale their business. The other area of development is around risk and compliance and things like data privacy and data sovereignty, multinational companies have to comply with local regulations as they operate their businesses in foreign markets. This is a fairly new area for a lot of our customers so we are helping to educate them on data privacy and data sovereignty laws in Europe where they can deploy in specific markets in Europe or in Asia and comply with local regulation. So this is where cloud services and cloud storage and having local facilities are really an advantage for those companies. Lastly, there is a higher level of interplay and interdependence between companies. A lot of the financial technology companies that we work with are starting to publish open APIs meaning you’re essentially able to outsource specific portions of your technology to partners. Whether that’s

pre-trade risk analytics, fraud detection, fraud mitigation, fraud scoring for digital devices or if you’re doing anything around mobile broker or mobile banking apps, there are often three or four different partners involved in making that platform perform as it should. That new level of interdependence between several different companies to create a product means that they need to be colocated together and so we are educating businesses on why they should have their critical vendors close to them and not be moving traffic thousands of miles between different markets.

Have you found yourself involved at all with negotiations regarding risk and compliance and how the Brexit vote has affected that?We really strive to educate our customers about the options they have for trading in multiple European markets. We have a number of customers in the UK but we also have a considerable amount of customers outside of the UK so we are informing clients on the dynamics of each market and the types of infrastructure typically deployed for trading and that’s really our role.

What areas of financial services do you see as most ripe for disruption by technology?We are seeing a pretty good uptake in business around Managed Service Providers (MSPs) and specifically those that provide connectivity into other global markets or help with risk mitigation (this could be real time risk analytics for trading, things like counterparty risk modelling, portfolio risk modelling). A lot of this is being done in real time and so some of the MSPs that we work with are having very rapid growth, especially when they can provide these services across multiple global markets and essentially have it under one brand. So in the fintech space I think that’s a very high growth area for us – partnering with providers like BSO that can help our customers in multiple markets.

1JOHN KNUFFGeneral Manager Global Financial Services, BSO Networks



www.bsonetwork.com

http://www.bsonetwork.com

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Nous is a highly innovative London-based Fintech/Gaming start-up with two successful apps aimed at increasing global financial market inclusivity. “Spark Profit” (sparkprofit.com), a completely free-to-play virtual-trading app with cash prizes, was released in 2014 to gamify financial trading. Then in June 2016 we launched our second app, “TIQL” (tiql.co), a new category of micro-trading platform with a remarkable set of consumer benefits, operating under our Isle of Man OGRA licence.

Nous aims to combine the worlds of Finance and Entertainment. We democratise access to financial markets through unique apps that make the markets fun, safe and affordable for everyone.

Nous has a world-class management team of diverse individuals, each with up to several decades of experience in important areas of business, technology and finance.

What has been your journey to current position?Since “Spark Profit” was launched in 2014, it has signed up nearly 450,000 users in 200 countries at a very low cost of acquisition. TIQL was created and released due to remarkable demand from SparkProfit users for a real-money trading system that fit their lives. This meant it had to support real trading – up to 20x returns – with very low risk – 1¢ trades, no fees and guaranteed stops.

In its first 4 months, TIQL has received over 240,000 trades worth $600,000. With a minimum deposit of just $5, nearly 40% come back to deposit more than once and on average people are depositing a total of $28. The Alexa website ranking for TIQL is steadily improving and is already ahead of better funded and long established competitors.

In September 2014, Nous raised £400,000

in our first seed round. We followed this up with a second funding round of £500,000 in December 2015. We are now raising funds for our Series A round in order to accelerate the next phase of growth by adding customers in existing countries and also by adding additional geographies.

What interested you in this space?My background is in algorithmic trading and market making, and I was regional director at a blue-chip investment bank when I saw the opportunity to build something unique in the consumer space.

Our first objective was to get hundreds of thousands of people connected to the markets for the first time, through their smartphones. We recognised that mobile was enabling people in developing countries to access the internet, and spotted a unique opportunity to open up the world of trading to a new segment of the market.

Where do you see the opportunity for you in the UK and European market?TIQL’s primary addressable market is consumers in developing countries, coming online for the first time via their mobile phones. Nous has built considerable credibility in being able to reach this audience. For real trading TIQL is the only sensible option for these customers given their budgets, but it is also genuinely a very consumer friendly app.

Nous is perfectly positioned to build a very large, friendly, financial brand very quickly, and then in turn grow that brand along with their customers’ lives. Our plan is to add an additional licences and eventually be able to target people in nearly all countries of the world.

What are some of the major challenges facing the industry that your company overcomes?There were two main barriers we needed to overcome. The first one was,

2JUSTIN SHORTCEO, Nous Global Markets


the traditional exclusion of potential players who could not deposit $50 to open an account. For anyone with an interest in markets but a relatively small disposable income, existing brokers are incredibly risky. Finding a solution to this was not easy, but we had the right backgrounds from our multiple decades actively trading in the capital markets, and we had unique data, technology and experience from “Spark Profit”. With TIQL you can open an account with just $5. This is a completely transformative experience for the sector and for the consumer.

The second one was the traditional added costs and risks. Unlike every Spread Bettor or FX Broker, TIQL has no upfront trading fees, no spreads, and each trade is individually guaranteed. That classic line “Losses may exceed deposits” simply isn’t true with TIQL – it’s impossible! TIQL lets you properly benefit from trading skills though – you can risk 1¢ to get a 10¢ return, for instance.

Our product brings the players’ risk levels down to something manageable no matter what their personal financial situation is. It gives everyone a chance to participate in the financial markets.

How does your company differentiate itself from its competitors?Our competitive landscape would include: spread bettors such as IG Index, where a £50 minimum deposit would only get you one or two guaranteed-stop trades (versus 5,000 trades with TIQL); traditional stock brokers such as eTrade (where £50 is not

enough to buy 1 share of some stocks and has almost no chance to return 20x the risk in any reasonable time frame); binary options providers such as William Hill Financial (who provide strictly limited risk on each trade like TIQL, but never pay more than 85% of the amount risked, let alone 2,000%).

We do not charge fees in a traditional way. Before you place a trade you see the potential gains and losses, and the gains are net of our fee. Basically, if you profit so do we. A traditional online broker charges fees and adjusts the probability of winning in sneaky ways. This can be off-putting and costly for consumers, since they can lose more than they put in. With us it’s 100% clear and 100% safe, since they can never lose more than they have staked.

Our competitors’ strengths are mostly around existing market penetration. However, we have created an entirely new, and very large, market simply by allowing anyone to participate in financial markets, even on the lowest budget. Incumbents do not seem to be able (or interested) to offer such a cheap and low risk product.

What do you think the financial services sector will look like in five years’ time?Incumbent firms are not moving fast enough with their own products to adequately address the needs of people globally, especially those in the emerging economies who face difficulty getting access to basic banking or identity services that the we take for granted. Large financial firms don’t have the right mind-set to fund and embrace projects with 90% failure rates, whereas that is a key fact of start-up life, and of capitalism. So I think the most likely way forward for existing brands to stay relevant and build on their strengths is simply to wait and see: be permanently on the lookout for talented teams and good software developed externally, and buy it before it replaces them!

Our first objective was to get hundreds of thousands of people connected to the markets for the first time, through their smartphones


nous.net >

http://nous.net

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What can you tell us about your business?Softek provides Capital and Credit Management services with a focus on regulatory capital, margin lending, security finance and risk reporting. We operate as a full service utility which means we handle all the data management, any risk and capital calculations and generate reports for our clients. This, in itself, creates significant operational efficiency as our clients don't have to worry about the infrastructural or data management aspects which translates into real cost savings for them.

We service the regulatory capital needs for FINRA, SEC, IIROC, OCC, FCA and PRA regulated institutions. Over the last 5 years we have digitised credit policies from all the major global prime brokers and at the same time we have built up a significant pool of high quality reference data. Add to this a focused, experienced and passionate team of experts and we have the ingredients to deliver a complete service to our clients.

In terms of client types, it’s a pretty diverse list which includes; Banks, Prime Broker, Broker-Dealers, Proprietary Trading, Clearing Brokers, Hedge Funds and Wealth Management.

Where do you see the opportunity for you in the UK and European market?We see opportunity in many different business areas but our initial focus has been on Prime Brokerage, Security Finance, Clearing Firms, and Proprietary Trading, given our established presence among these types of firms in North America. To be frank, any financial firm that has issues with regulatory capital reporting, managing in-house or bespoke margin policies, understanding total exposures, liquidity and concentration risk, stress testing, as well as data management represents an opportunity for us.

One area of focus is around the implementation of Basel III standards and the effects it is having on the Prime Brokerage business model. Critical measures introduced by this standard includes Risk based Capital Adequacy (RWA), Liquidity Coverage Ratio (LCR), Net Stable Funding Ratio (NSFR) and Leverage Ratio. We integrate Basel III requirements via rules based algorithms alongside other relevant margin lending and in-house credit policies to provide a seamless reporting and optimisation platform.

What are some of the major challenges facing the industry that your company overcomes?There are many major industry challenges but where we relieve the “pain” for our clients is in the regulatory capital reporting, client margin, concentration, exposure and liquidity management arena. Firms face major challenges when trying to keep pace with, for example, FINRA, OCC, IIROC, FCA/PRA or Basel III regulatory requirements. This is where Softek comes into its own as we maintain a library of regulatory and firm specific rules that meet our clients’ needs. We’re also seeing an increasing demand from regulators and firms in managing capital and credit on an intraday basis and this is part of the Softek offering. Some of our clients are fulfilling the regulatory need to monitor capital and counterparty exposure intraday. In fact we’ve had some very positive feedback from a regulator around our intraday capabilities.

Managing data is another major challenge for institutions and this is where clients benefit from the Softek service. Our end to end process means we’re not just handling the calculations but managing the data workflow from portfolio reception, security master set-up, data cleansing and normalisation. The beauty of this process is that we get instant feedback on the quality of our

3ANDREW POWELLCOO, Softek


data. Firms will not make a margin call without first checking and rechecking the calculations. Needless to say we have very few occasions where calculations have to be re-run due to data errors - we have confidence in our data.

One key part of the data management process is understanding fungibility across all asset classes which is pivotal to optimising, amongst other things, capital and margin. Handling this more effectively enabled one of our clients to reduce their regulatory capital requirements by several $100 million. How does your company differentiate itself from its competitors?We operate as a full service hosted solution and this is the big differentiator. There are solutions in the market that provide the analytics engine, there are data service providers, and organisations that provide the technology stack. Essentially we take all those strands and mould them into one streamlined, robust and fully audited solution. All the client needs to do is deliver the underlying trade and positional data and we do the rest.

A further key differentiator is time to market, the Softek service can be up and working in a very short timeframe. For example, we got a FINRA regulated Broker-Dealer in the US up and running within one month and for a Prime Broker that requires a specific rule set added to the service they would typically be live within two months.

What do you feel are the biggest obstacles facing the industry?Intense regulatory change and maintaining margin are on-going challenges facing the industry. In terms of change this isn’t exactly a new issue but the rate and level of change currently is intense. If you consider the on-going regulatory changes, such as, Basel III, IV, MiFID II, EMIR, Solvency II, all of these absorb a lot of time and resource to understand, assess and then implement to ensure conformity. Firms may well have to consider change in many different areas; such as their internal workflow processes, compliance, risk management, data management and systems so they remain on-side with regulations. They also have to consider if their existing legacy systems can accommodate change or if there is a need to look for complementary or even replacement solutions.

Inevitably with so much change going on there is an inherent likelihood of costs increasing. And this, at a time, when firms are looking closely at their capital utilisation, the impact on their balance sheets and how to optimise business activities to remain profitable in an environment of shrinking margins. Cost containment is not an overnight fix but there has to be a willingness to consider change and in some cases a fundamental re-think in the pursuit of halting and/or reversing the upward cost spiral.

How do you plan to overcome those obstacles?As the industry changes, it expects


As the industry changes, it expects its participants to change with it in order to meet a common end goal. As a participant in the industry we are no different, change is a core part of the Softek proposition and we work with our clients to accommodate the industry requirements.

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its participants to change with it in order to meet a common end goal. As a participant in the industry we are no different, change is a core part of the Softek proposition and we work with our clients to accommodate the industry requirements. Our focus is on offering a full service hosted solution to address regulatory capital, margin lending and risk reporting and this requires us to keep abreast of changes, and implement these in a timely manner.

On the cost side, given participants priority in this regard, our hosted service approach means that we can offer a very attractively priced solution, as we maintain our own reference data, a library of regulatory capital rules and support these centrally. There are inherent economies of scale in our operating model.

What are your plans for 2016 and beyond?2016 has seen us begin the process of developing our business in the EMEA region. We have an established and growing client base in North America so it was the logical step to develop our services this side of the Atlantic. We take a long term view of our business development so our initial efforts have centred on understanding the market, what elements of our service are immediately applicable and what we need to add or enhance to be successful here.

In the US we’ve added additional sales, marketing and SME resource to further develop our client base with a specific focus on the Broker-Dealer community. We support a range of US regulations and our intraday capability plays well to this market.

What areas of financial services do you see as most ripe for disruption by technology?I see the Back-office as ripe for disruption and it’s certainly something I’ve discussed with other people around our industry.

It’s not to say that existing core systems haven’t served their purpose well but there is a high cost to pay in maintaining and adding functionality to these systems. Couple this with the speed of regulatory change and many core systems simply can’t and won’t be able to keep pace. The short to medium term effect is that firms may well need to look to more nimble, niche service providers to deliver critical solutions.

What do you think the financial services sector will look like in five years’ time?The on-going pressure on capital and return on equity will result in fewer active market participants. The likelihood is the firms that are left will have undergone significant downsizing and exited business lines that they see as unprofitable.

Utilities will also play a more central role in the financial services sector providing firms with access to a central source of expertise and knowledge with the potential for significant operational savings and risk reduction. The concept of utilities is already gaining acceptance with some notable examples, such as FIS (SunGard) Post Trade Derivatives, DTCC’s Data and Documentation and Broadridge’s Post Trade utilities. I’d argue that Softek has been operating a Utility model for more than 10 years; we just never called it that.

3ANDREW POWELLCOO, Softek



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What can you tell us about your business?AQMetrics proprietary risk analytics empowers the automation of traditionally resource-intensive and error-prone processes to ensure intuitive, fast, and cost effective financial regulatory compliance and risk management, regulatory reporting and document management. AQMetrics software is a must have for financial services firms looking to comply with recent and emerging regulations.

What has been your journey to current position?It has been a long journey to founder and CEO of AQMetrics. From software developer at Oracle, through building risk models for the derivatives desks at Susquehanna, to senior management at a Fintech startup that subsequently sold to BAE Systems, its an openness to collaboration and working with diverse people that remained constant throughout.

What interested you in this space?I am passionate about design. Organizational design around the people I work with - employees, customers, and investors. Software product design of our leading edge proprietary software. Solution design whereby complex financial services regulations are simplified into user friendly, seamless, simple, quality software. As CEO of a RegTech company design is central to everything I do on a day-to-day basis.

How have you settled into the business?AQMetrics is going into its fifth year in business. Initially it was difficult as a start up to find enough hours in the day and rather than acting as a CEO I was more like a ‘Jack of All Trades’. Today much has changed and with a strong management team now in place, I can truly settle on being the CEO whilst the rest of the team make AQMetrics operationally and technologically the best global RegTech company we envision it can be.

What lessons did you learn in your previous role?In previous roles I have learnt that there is no I in Team. Culture is the glue that holds a company together and if that culture doesn’t embrace teamwork success will not be forthcoming.

Where do you see the opportunity for you in the UK and European market?AQMetrics has started its global expansion but my aspiration is to make AQMetrics a leading RegTech company, globally known for simplification of risk and compliance across both the buy and sell side of the financial services industry.

What are some of the major challenges facing the industry that your company overcomes?The cost of compliance is a challenge for fund administrators and fund managers and this is where AQMetrics comes in. We offer a seamless, cost effective, robust regulatory risk and compliance management tool that saves our clients time and money.

How does your company differentiate itself from its competitors?Many of our competitors offer silos of what we have in one integrated solution. Some are great at data management and analytics, some at risk measurement and management and some at compliance and regulatory reporting. At AQMetrics we bundle all of this into one seamless offering.

Where do you see the future of the market heading?Artificial Intelligence is key to financial services going forward. On the regulatory risk and compliance side Artificial Intelligence and Machine Learning is an enabler for efficient and robust solutions to existing and emerging regulations. It further helps firms turn compliance costs into true business opportunities.

What do you feel are the biggest obstacles

4GERALDINE GIBSONCEO and Founder, AQMetrics



www.aqmetrics.com

facing the industry?Sourcing talent is an obstacle facing the industry. Every financial services firm is looking for technical talent and some are going as far as to say we are technology firms offering financial services. This means there is a shift in the skillset required for both people working in software services and those in the financial services industry. Blending skills across both technology and financial services is a key obstacle that can only truly be addressed in the formative educational years of the talent pool.

How do you plan to overcome those obstacles?AQMetrics is in a specific niche that does not have an endless talent pool. Regulations continue to emerge and the agility required to address these regulations is key to overcoming the talent obstacles. For this reason AQMetrics plans to open a RegTech Center of Excellence in Ireland by 2017.

What makes your company an employer of choice?AQMetrics, is the leading SaaS RegTech company in Ireland. The AQMetrics Centre of Excellence for RegTech has the goal of up-skilling marketeers, risk experts, quants, trading floor technologists with

a comprehensive set of skills that are in great demand in the market right now.

What are your plans for 2016 and beyond?AQMetrics is expanding and scaling into the US in 2016 and plans to solidify its presence in New York throughout 2017. AQMetrics will start to look towards Asian regulations and the Asian market by 2018.

What areas of financial services do you see as most ripe for disruption by technology?Settlements processing is ripe for disruption with Blockchain, as is any area of financial services where asset holding is maintained and monitored.

What do you think the financial services sector will look like in five years’ time?Technology is transforming financial services. Robo advisors, robo compliance and much innovation on the blockchain will be innovations of the past in five years’ time and evolution of financial services technology across the ecosystem will produce more far reaching technology solutions for financial services than we can even imagine today.

Artificial Intelligence is key to financial services going forward. On the regulatory risk and compliance side Artificial Intelligence and Machine Learning is an enabler for efficient and robust solutions to existing and emerging regulations.

www.aqmetrics.com

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Bite size news from the financial services and commodities technology markets

Market news & commentary

LMAX EXCHANGE ANNOUNCED the expansion of its global infrastructure with the launch of its North American matching engine in the Equinix International Business Exchange™ (IBX®) data centre in New York (NY4).

THE LMAX EXCHANGE NY4-based matching engine is a new liquidity pool for institutional spot FX trading. Built specifically for funds, asset managers, brokerages and banks, the new exchange enables North American clients to trade on unique, no ‘last look’ limit order liquidity. US clients will further benefit from low latency execution, high fill rates, price improvement as standard and access to real time streaming market data.

OPTIONS EXCHANGE CBOE ACQUIRES BATS FOR $3.2 BILLIONCBOE, the largest U.S. options exchange, is planning to buy BATS Global Markets Exchange for $3.2bn.Through this acquisition, the Chicago-based Chicago Board Options Exchange will expand into equities and foreign exchange and increase its footprint in Europe. The combined company is expected to move all trading to the Bats platform.

THE INSTITUTIONAL TRADING ARM of GAIN Capital Holdings (NYSE:GCAP) has teamed up with New York-based macro strategy research company Nightberg to deliver its clients additional information about foreign exchange trading. A set of high-quality research will be made available to clients of GTX.

NIGHTBERG has been in business since relatively recently, as the firm was founded last year, but the company’s team is comprised of experienced professionals that have been working at very prominent hedge funds such as Bridgewater, Caxton Associates, and Moore Capital. Mario Manna and Birgir Haraldsson founded the company in mid-2015 alongside Chris Pia – founder and CIO of Pia Capital Management, who was the seed investor into the firm.

Nightberg’s product will be provided on a complementary basis to clients of GTX’s registered swap dealer.

SINCE LAUNCHING ONE YEAR AGO, Liquidnet's Fixed Income Platform continues to demonstrate momentum. It currently delivers critical mass liquidity for more than 200 institutional investors throughout the U.S. and Europe. In the past year, Liquidnet has continued to provide their members with technology and innovation to access liquidity, resulting in smarter execution decisions and overall improving trading performance.

THE EUROPEAN COMMISSION is set to investigate the LSE / Deutsche Boerse merger to identify potential monopoly building by effectively wiping out competition with the creation of what would then be the largest European exchange operator. The merger firms have subsequently suggested a willingness to offload the Paris based part of the LCH business in an effort to bring favour on the planned merger. We would like to hear the markets thoughts on the suitability / issues this merger would produce and potential knock-on effects in the wider financial services landscape.

COLT – NEW STRATEGIC HIRESTom Regent joins Colt from BT as Chief Commercial Officer and a member of the Executive Leadership Team. He reports to CEO Carl Grivner. Based in London, Tom will be leading Colt’s global sales, presales and marketing teams. Prior to joining Colt, Tom Regent was head of BT Global Services Global Banking and Financial Markets division.

There are two other senior appointments in the Chief Commercial Officer’s team.Paula Cogan joins Colt as Vice President, Enterprise & Partner Sales Europe. Prior to this, she worked at Verizon as Regional Vice President EMEA & LATAM

Tim Passingham joins Colt as Vice President Wholesale Sales Europe, moving from Level 3 where he held a Senior Vice President role heading up a large team and was responsible for over half a billion dollars of annual revenue. Prior to Level 3 Tim held a number of senior roles across BT.

CENTURYLINKCenturyLink has announced 3,400 job cuts in line with its reduced focus on landline telephony. In balance, it is investing further in video content services.

GLOBAL CLOUD XCHANGEVinod Swahny has stepped down as CEO of Reliance Communications, parent company of Global Cloud Xchange. William Barney and Gurdeep Singh, who will be co-CEOs, will take his place. William Barney is currently CEO of Global Cloud Xchange (GCX).

Global Cloud Xchange and Virtus Data Centres have announced a partnership to build a secure public cloud from within the Virtus datacentres. The new service will be known as Cloud X Fusion, offering better application performance, lower costs and better security for enterprises.

“As enterprises continue to mobilise and expand into new geographies…we are increasing application performance, reducing bandwidth costs and improving security via Virtus data centres.” Bryce

Jewell, managing director of UK for GCX, said.CGX's Cloud X Fusion system offers multi-cloud

orchestration to global enterprises, using its subsea cable and terrestrial networks, which the company claims is the largest in the world. “Cloud adoption is increasing at an unprecedented rate and it is mission critical to have a scalable and resilient infrastructure," Darren Watkins, managing director of Virtus Data Centres, said.

VELA AND LIME BROKERAGE ANNOUNCE INTEGRATION OF SOFTWARE AND LOW LATENCY FEED HANDLERSLime Brokerage and Vela Trading Technologies, a provider of trading and market data technology have announced the integration of Lime's Strategy Studio, its software solution for financial strategy research and deployment, and Vela's low latency direct feed handlers. The combined products enable clients to access Lime’s API and user interface, while accessing Vela's set of over 250 global direct feeds supporting all major asset classes.

DIGITAL REALTY TAKES ON EQUINIX WITH NEW SERVICE EXCHANGEDigital Realty is launching a cloud connectivity platform that will compete with Equinix’s Cloud Exchange. The new Digital Realty Service Exchange will connect to clouds like Amazon Web Services and Microsoft Azure. It will provide direct connections between enterprise data centres and the public clouds of Amazon Web Services, Google Cloud Platform, IBM SoftLayer, and Microsoft Azure, in addition to other clouds.

DIGITAL REALTY SERVICE EXCHANGE WILL IMPROVE THE PERFORMANCE AND RELIABILITY FOR CLOUD SERVICES AND DATA CENTRE ACCESS, FAR BETTER THAN THE PUBLIC INTERNET.Chris Sharp, Digital Realty's Chief Technology Officer, said: "The Service Exchange creates a simple, flexible and scalable solution for our customers, including those looking to make, jump-start or accelerate their digital transformations."

So far it is Equinix that has been the main player in the market for public cloud interconnection. According to the IT analyst company Forrester; Digital Realty will be hoping that it can make up ground.

TELCO:The telco industry is continuing to hire at an aggressive rate, connectivity and network latency is becoming increasingly important due to large amounts of data needed each day. This is due to the gaming industry, streaming and media. A lot of hiring is now focused around ‘new business enterprise hunters’ to join teams and bring on new clients. Approximately 90% of companies within this space are looking for this kind of hire as you read this.

N E T W O R K / I N F R A S T R U C T U R E / S E R V I C E P R O V I D E R S

B R O K E R A G E S , E X C H A N G E S , T R A D I N G H O U S E S , M T F S ,

A LT E R N AT I V E T R A D I N G V E N U E S

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THE ENERGY INDUSTRY has evolved and changed in recent years. It is now under a huge amount of pressure due to regulation. So, energy prices have gone up to deal with regulation costs. That is why market data is now increasingly important and vital for success within the sector.

ACCORDING TO THE INSIDE MARKET DATA PUBLICATION (3rd October), The Intercontinental Exchange is considering selling off the Managed Solutions division of Interactive Data, which the exchange acquired last year. IMD sources say that the exchange has engaged an unnamed investment bank to explore a sale of the Managed Solutions business —which provides web-based workstations and delivers data to customers’ websites, and hosts data portals on behalf of clients — after deeming it ‘non-core’ to ICE’s overall data plans.

REDLINE TRADING SOLUTIONS, a premier provider of high-performance market data and order execution systems for electronic trading, has launched its InRush feed handler for the new high-performance EBS Live Ultra market data feed, helping foster improved price discovery and transparency means, according to a Redline statement

According to Mark Skalabrin, Chief Executive Officer (CEO) of Redline, in a recent statement on the launch: “Our foreign exchange customers look forward to trading with the EBS Live Ultra feed for increased certainty of FX execution. We are pleased to now be able to offer our new EBS Live Ultra feed handler to customers coincident with the full rollout of this high-performance feed.”

SINCE THE 1990’S, the Bloomberg Terminal has been the pinnacle for accessing Financial Market Data; ask the majority of Financial Services industry folk, and the Bloomberg Terminal has all but commoditized its market. Having used Bloomberg, as well as its leading competitor, Thomson Reuters Terminal, there really is a significant margin between the two.

BLOOMBERG’S TERMINAL consists of 85% of Bloomberg’s overall revenue, however for the first time since its first installation, Bloomberg are expecting to make a loss in this financial year, which begs to question, what’s next for Bloomberg?Data management and governance is a hot area of financial technology at the moment for buy and sell side firms. With the MiFID II deadline currently set at January 2018 now is a crucial time for financial firms to transform the way they manage and govern their data critical to this mandate. We are seeing our consultancy and data management vendor clients

experiencing high levels of activity and we expect this to increase as the time window that allows for the vendor selection process, procurement, implementation and testing to be completed begins to close.

MERGERS! Increasingly amounts of mergers between competitors or companies that can help leverage a company’s technology. This year so far, some of the big names have been 4Sight Financial Software and Broadridge (4Sight being acquired by Broadridge). Also we have seen the much publicised IHS and Market.

IS THIS A TREND we are seeing to be able to offer as many solutions to their clients as possible, and become a one-stop shop?

OPENLINK has been Voted Top Commodity Vendor in Asia Risk 2016 Technology Rankings. OpenLink is the market-leader in trading and risk management solutions for the energy, commodities, corporate and financial services industries. Today they publicised that they have been voted as the top software vendor for commodities derivatives pricing and risk analytics and commodities trading systems (front to back office) in the Asia Risk 2016 Technology Rankings.

PRODUCT PRODUCT PRODUCT! – It’s ALL about the product! The trend is confirmed. This year has seen a huge amount of movement in the product management part of the FinTech software vendor space, which would indicate that the (good) vendors are listening to the end-users demands for more adaptable and functional software systems. We believe a clear indication of ‘set to fail’ vendors is that with no current focus on changing, updating or modernising their offerings.

SEPTEMBER SAW THE SOFTWARE VENDOR SPACE ramp up hiring, as the market is moving towards more End User organisations relying on services and products they provide. The biggest area was the Risk Management services for both pre and post trading applications. That meant we saw some key hires being made surprisingly in the C++ Development space. Find good C++ developers is always a challenge but we saw a number of projects being released which brought out some of the best C++ Developers we’ve ever seen.

LEADING ETRM/ CTRM software provider have hired Colin Cooper to help build the Analytics part of the business. Colin is a fantastic hire for the business as he brings a huge amount of knowledge and experience to help EKA continue on their growth path.

AMPHORA have announced the higher of Neil Sangrajka who will be leading the delivery practise for Europe the Middle East and Asia. Neil joining Amphora shows the strength of the journey Amphora are on. Being able to attract high calibre people like Neil to join the business will help them grow from strength to strength. The real winners will be Amphora’s clients.

Risk Analytics Axioma announces new version of their Analytics and Risk Model Machine. These new versions come after extensive investment into working closely with their customers to gather feedback and fully understand the challenges their customers face to be competitive. This has resulted in new functionality added in to the core products offering immediate benefit to their users.

SINCE THE RETURN of the majority of decision makers post vacation – there has been a distinct uptick in hiring activity within the front office with a definite focus on the electronic space. FICC still remains challenged with significant pressure still on Credit yields and a distinct lack of volatility, firms are positioning themselves in the wake of continued regulatory pressure to maximise client relationships and order flow wherever they can. The Managing Director population continues to shrink as firms seek to cut costs and align themselves with regulatory guidelines.

WE CONTINUE TO SEE A CONSISTENT MIGRATION of talent from sell side firms to the buy side where some significant talent upgrading seems to be taking place.Coming into comp season it will be interesting to see how the stress and staring of a challenging year reflect into value

EXPERIENCED REVENUE PRODUCING SALESPEOPLE and candidates who can demonstrate strong Quantitative and technology skills continue to be in demand and with ever-increasing competition from the buy side it will be interesting to see how banks particularly manage their retention.

EUROPEAN INVESTMENT BANKING REVENUES have hit a 14 year low. Overall it has come to £6.2 billion so far this year, according to Dealogic. This represents a 22% fall from 2015 and is at its lowest to date since 2002. These figures came after a Bank of England review said that UK banks are expecting M&A to fall following Brexit due to companies delaying making investment decisions. Following the decision to leave the EU, UK lenders have shown a slowdown in the demand for credit at least in the short term from large corporates and SMES and revenues in general have been lower in 2016 in the investment banking space as the Brexit vote has negatively impacted M&A, mostly just in terms of the uncertainty of it. A quiet 3rd quarter is predicted but growth in Europe and more certainty, both in the political landscape and economy could improve conditions.

WITHIN THE INVESTMENT BANKING SPACE we have seen a number of hiring freezes across a lot of the tier 1 banks that has led to the market place becoming very competitive. I have had a number of clients coming to me saying even when staff have left they have been unable to replace some key hires within the business, what we have seen and heard from a lot of clients is that this has meant that they are able to bring on other resources from different budget pools such as Contract and using an SI or a partner. There has been a huge growth in this area with a lot big bank using the offshore model to reduce costs.

BANKS are still an excellent training ground for young people as they offer structured training programs and good remuneration for people leaving University. However they are really struggling to hold on to exceptional talent with 2-3 years’ worth of experience who start to see greener pastures on the buy-side and outside of financial technology. It’s very difficult to see how banks can truly arrest this slide, particularly given the ever-aging infrastructure and the vast regulatory requirements that put such a strain on their resources.

Unless they do something, in 5-10 years there is a good chance there won’t be any top talent left in the banks!

HEDGE FUNDS have generally had a challenging year with even some of the more household names admitting they are flat to slightly down. There has been significant movement in the Portfolio manager

We are pleased to now be able to offer our new EBS Live Ultra feed handler to customers coincident with the full rollout of this high-performance feed.

A S S E T / W E A LT H / I N V E S T M E N T M A N A G E M E N T & H E D G E F U N D S

M A R K E T D ATA P R O V I D E R S

S O F T WA R E V E N D O R S

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space as funds compete to diversify and dilute their risk profiles away from trading one or two asset classes.

SEVERAL RUMOURS around new ventures related to either development of asset management businesses opening Private Equity arms and diversification into the electronic space. One thing is for sure: the ability of these firms not just to only compete with but potentially dominate the sell side is now very real – we have seen via several searches this year when the chips are down the funds are able and will go the extra yard to secure the best talent!

THOMSON REUTERS acquisition of REDI is a significant ploy to strengthen their Buy-Side Trading capabilities. REDIs flagship product REDIPlus EMS provides advanced cross-asset trading capabilities to the buy-side this will improve Thomson Reuters offering to the Buy-Side and allow Thomson Reuters to integrate the product into Eikon.

A POLL BY 322 MARKET PARTICIPANTS by TABB Group indicated that 64% of the buy-side community consider regulatory changes being their biggest concern following Brexit. Also 38% of interviewees expected a further delay to the implementation of MiFID II.

RIMES TECHNOLOGY recently hired a Head of Compliance to lead the RegFocus team that offers a wide-ranging MAR solution for buy side firms. The technology is a sophisticated system designed by compliance professionals to ensure compliance in the face of constant regulatory demands and change.

THE NEED FOR DATA SCIENTISTS across the financial sector has been growing rapidly over the last few years, with big data being either a growing problem or a growing opportunity for many financial institutions. The buy-side space is renowned for being a dynamic space to work in and gain reward quickly. It is becoming increasingly evident what some Hedge Funds and Asset Management firms can achieve now by utilising data sets and data structures using a data scientist approach. With all the data available within the space, whether it be from Reuters or Bloomberg, there is value behind it. We have seen a major rise in buy-side firms utilising these data points/structures/sets to combat to forecast markets and automate processes to develop strategies and algorithms to generate revenue. Although around a year ago, a data scientist may not even consider the financial sector, this trend is shifting. Why? These organisations will provide the best technologists, best technologies, exposure to the business and enough data to keep any data fanatic occupied for a life-time. Gone are the old days of the standard data analysts involving manual configuration and extraction. This sector is

seeking hackers, engineers and machine-learning fanatics to model revenue generating strategies. It is an exciting period for data scientists within this sector and with the high demand we have seen for these professionals, this dynamic arena of financial services shows no intent of slowing down within the technology space.

WE’RE NOW COMING INTO THE TIME OF YEAR when Asset Managers and Investment firms start meeting with Portfolio Managers and Traders ahead of the movement that occurs every year post bonus season. Firms will be looking for people who have exceptional strategies and Candidates will be looking for a better deal and better infrastructure that allows them to make the most from their trading. It’s imperative that firms get their technology and their sell right as, following a bumper few months for the buy-side, it’s expected to be an extremely busy period in 2017.

THE HOT TOPICS within Investment management continue to be driven my regulation with a particular emphasis on MiFID II – The rubber stamp final draft has still yet to be defined but organisations have started to step up their efforts to meet the official deadline at 3rd January 2018.

The key challenges remain around the data with MiFID II, how to store, access and report. Clients are also reaching out to their providers – Third Party Administrators, Custodian and Software vendors to see what offerings they will provide. We anticipate a busy Q1 with quality regulatory projects resource being very much in demand.

The release by the FCA of the 3rd Consultation paper on MiFID2 should have made it much clearer on what you need to act on. Will this aid you in getting your house in order? Does this answer all your questions and fill in the gaps surrounding MiFID2?

POST Barclays POINT The sale of Barclays Risk and Analytics platform to Bloomberg see the platform decommissioned by the end of Q4 2107.

Barclays POINT has a globally footprint across a number of Investment Organisations and has been the number one tool for Fixed Income analytics, this has be met with clients of POINT looking at alternatives to this system – whilst this is in early stages of the process, RFP and vendor offering for alternative has increase. We have seen a number of different solutions being selected and have seen many software vendors competing for the fallout of POINT.

This will continue to be an interesting space and will also be interesting to keep an eye out in case of any trends in alternatives emerge.Now that the acquisition of Barclays Point is complete and in the process of being swallowed

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in to the Bloomberg PORT product suite, there are concerns across their user base for business continuity due to the short remaining time of the existing support structure. A report carried out by SimCorp suggested that of 114 users across 60 firms, 90% are unsure that the Bloomberg PORT will be able to fulfil their Fixed Income requirements. 75% are actively reviewing other providers and 50% are re assessing their entire front to back Fixed Income tech stack. This could be a great time for POINT competitors to reach out to existing point customers!

THE US REGULATORS, THE SEC (Securities and Exchange Commission) and The CFPB (Consumer Financial Protection Bureau) are set to waive some rules for FinTech firms, working on new innovations, under new legislation dubbed “Permanent Beta.” This Regulatory Sandbox would encourage entrepreneurs to have creative freedom without the entanglement surrounded by detrimental regulations.

US Financial Technology companies are very aware that they lag behind their UK counterparts and the continuation of appeasing the regulators will not succeed in the Digital Age.

The bill, presented before congress, is unlikely to pass before the conclusion of the year; but is a start in shaping the future of FinTech in the US.

Blockchain From a recruitment perspective we have seen clients take up this new technology with R/D development roles. Thomson Reuters have increasingly publicised their interest in Blockchain and future R/D into this innovative technology.

Blockchain, the underlying technology of the world’s most adopted digital currency, is quickly becoming one of the hottest topics across a number of industries. At its core, Blockchain technology obviates the need for a trusted middleman, which it achieves by offering the ability to send, receive, and store information in a decentralized, immutable database or ledger.

The power of Blockchain lies in its ability to power new modes of financial transactions, improve existing insurance processes, and track documents. Digital currencies that sit on top of Blockchain can add many applications of their own especially for newer models like micro insurance and P2P pools. Many of Blockchain applications could be grouped under a new umbrella term that is often described as smart contracts. In simple terms, these contracts are software that is developed and executed inside a Blockchain system. Since the technology ensures that it cannot be tampered with (and it does so without human intervention), we can begin to develop and automate applications that involve multiple stakeholders and where trust is a concern.

EC backs Financial Technology in Capital MarketsThe European Commission has initiated a process to bring companies and investors closer to the capital markets. The plan covers key areas such as:z Financing for innovation, start-ups and non-listed companiesz Making it easier for companies to enter and raise capital on public marketsz Investing for long term, infrastructure and sustainable investmentz Fostering retail and institutional investmentz Leveraging banking capacity to support the wider economyz Facilitating cross-border investing

The European commission recognises how technology can help drive competition and create a stronger and more diverse landscape while at the same time acknowledging the new challenges and risks financial technology possesses.

For a more in-depth read at the paper produced. See the following link: http://ec.europa.eu/finance/capital-markets-union/docs/20160913-cmu-accelerating-reform_en.pdf

CREDIT SUISSE has put together a 135-page report analysing the impact Bitcoin and Blockchain pose to payment giants such as Visa, MasterCard and Worldpay. Broadly, they conclude that Bitcoin faces a tough battle to become a force highlighting a number of barriers before the technology can go mainstream. The report also mentioned the issue with Swift technology, which is slow and costly with little flexibility. The full report can be downloaded at: https://www.finextra.com/finextra-downloads/newsdocs/document-1063851711.pdf

M I F I D I I

Blockchain, the underlying technology of the world’s most adopted digital currency, is quickly becoming one of the hottest topics across a number of industries.

F I N T E C H / D I S R U P T I V E T E C H N O L O G Y

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http://ec.europa.eu/finance/capital-markets-union/docs/20160913-cmu-accelerating-reform_en.pdf



https://www.finextra.com/finextra-downloads/newsdocs/document-1063851711.pdf

https://www.finextra.com/finextra-downloads/newsdocs/document-1063851711.pdf

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CONTRARY, TO THE ABOVE ANALYSIS FROM CREDIT SUISSE, a survey carried out by the World Federation of Exchanges (WFE) stated that 84% of trading venues and clearing counterparties are actively investigating or actively pursuing ways of adopting and adding distributed ledger technologies to their arsenal.

A full report can be downloaded at: https://www.finextra.com/finextra-downloads/newsdocs/WFE%20IOSCO%20AMCC%20DLT%20report.pdf

Manchester is second only to London in FinTech SectorManchester has become the largest financial services hub outside of London, thanks to its fast-growing FinTech sector.

This was one of the findings from a recently held conference that took place in Canary Wharf. Several of the world’s largest banks and start-ups had discussed what the FinTech and Services Sector would look like “post-Brexit”

Over the last several years the UK has grown to become the global capital of FinTech and from its early innovative roots now boats a £6.6bn industry employing over 60,000 people. Digital Technology is fast changing consumer banking and spending habits, and also how we work in every professional sector.

Nothing has been left untouched, from how we manage our finances, communication, shopping habits and absorb information and business intelligence. The UK FinTech Sector is showing no signs of slowing despite the previous and current uncertainties of the EU Referendum outcome.

The UK Fintech Sector attracted the second highest amount of funding in 2015, coming second to the USA. The UK was also came in at third place with only the USA and China, in terms of volume invested. Manchester enjoyed growth, particularly for the comparatively young start-up sector.

When Manchester’s two largest industries, financial services and digital technology converged, this resulted in a growing hub of FinTech businesses; from well-established financial services companies to smaller firms developing innovative solutions to disrupt existing business models. A significant growth has been seen specifically in FinTech firms specialising in payments.

Manchester has a long successful track record in supporting Financial Services and FinTech investments and is complemented by a highly talented pool of FinTech professionals. Manchester also boats leading edge digital infrastructure which enables the City to attract super fast-growing SME’s, e.g. AccessPay and Crowdcube both establishing and growing their technology markets from a world class location. By the end of 2016, a new hub for innovative companies, SMEs and start-ups – The Vault, will be moving to the Spinningfields site at XYZ. This combined with spaces such as Rise, Manchester, has led to an emerging FinTech cluster of hubs in this area.

FOLLOWING BREXIT uncertainty Fintech firms are still unsure of what the future holds. Azimo, a London based online money transfer business is weighing up whether to move its HQ to Europe as it is worried Brexit will threatens Britain’s position as the hub of fintech. Fintech firms currently rely on the EU’s ‘passporting’ system allowing them to sell services across Europe whilst only being registered and regulated in Britain, thus making it much cheaper than setting up in separate member states. Following Brexit, it is uncertain whether Britain will keep its passporting powers meaning Azimo and similar companies are looking at moving to countries such as Germany. The future for fintech in Britain following Brexit remains unclear with Azimo co-founder and Chief Executive Michael Kent saying "To become a fintech hub, you need people, capital and the regulatory environment. Unfortunately, Brexit puts a question mark next to all of those."

A REPORT THAT ACCENTURE released last year just shows us the growth that has developed in this sector “Global investment in financial-technology (Fintech) ventures tripled from $4.05 billion in 2013 to $12.2 billion by the start of 2015, with Europe being the fastest growing region in the world” This goes to show the significant growth of the industry in the last few years.

CHALLENGER BANKS have been an area of interest during 2016. The idea is straightforward. No physical Retails Banking site but a Mobile App that allows you to do all your banking activities at a touch of a finger via an App on your mobile, any time, any place. The possibility is endless. You get complete control of payments, transfers, updates and balance checks at any time. This means for the business to work you need a world-class mobile app that allows you to do such activities. Over the last 3 months we have seen Challenger Banks hire a record number of Front End developers, iOS Developers and Android Developers who have challenged the large investment banking by reaching the dizzy heights of £700 per day for anyone who can code in those languages.

THE FINTECH ARENA has been booming throughout the month of September especially within the payments sector. There has been a big demand in the FinTech payments sector with blockchain technology companies growing their IT teams to enhance their software products/platforms with enhancements on security around these products and the user experience around these products/systems. This has seen an increase in the use of front-end tools like ReactJS and Redux, which is seeing the demand in these tools surpass the use of AngularJS. From a software development perspective, these exciting business models are not only seeing traditional banking and broker methods for payment transactions be revolutionised, but is also seeing digital currency being a contender for the traditional

currency. Although, security will always be an issue, the rise in digital currency is packing a punch. From a market perspective, this is exciting!! More data scientists, more data engineers, more open source developers needed and loads of creative user experience specialists making London FinTech the hub of software development!!

ACCORDING TO RESEARCH FROM THE BOSTON CONSULTING GROUP the overwhelming majority of money invested by banks in financial technology goes to the payment and lending space. It is estimated that investment in capital market and trading technologies accounted for only 4% of nearly $100bn in the last 16 years

THE LENDING AND PAYMENT SPACE CONTINUES to see disruptive players emerging and companies such as Transferwise have quickly established themselves as a major force in commercial and consumer foreign exchange transfers with smaller upfront fees and market-leading exchange rates.

SIX IN TEN GLOBAL BANKS are open to partnering with FinTech Firms according to a recent survey on future proofing banks by SAP.

A RECENT SURVEY BY SAP has uncovered that one in three banks are open to partnering with a Fintech Firm and one in four would consider an acquisition. The survey was run IDC Financial Insights and sponsored by SA.

THE ‘’THE FUTURE-PROOF DIGITAL BANK,” by the IDC surveyed 265 retail and corporate banks in 24 countries on how they are driving digital transformation.

The study discovered found that while relationships between banks and fintech firms are improving, the banks still need to do more to adopt key lessons learned from fintech firms to achieve full digital transformation (DX).

Other key findings include:z North America places a key focus on DX as a business enabler. 40% of North American Banks are investing more than 25% their IT budget in DX initiatives and 20% see DX as an organisational strategy.z A customer centric focus drives investment in EMEA, with 57% noting improved customer experience as a clear result of DX and 44% of DX initiatives mainly focused on the front office. z Latin American banks are building fragmented initiatives. 24% of the DX initiatives are focused back office operations (4% higher than global average), at the same time 42% of the DX initiatives are focused on the front office.z Asia Pacific Banks are moving much more to

a strategic DX approach, 29% have implemented an enterprise-wide DX strategy, higher than the worldwide 28% However, they have less focus on improving the customer experience in APAC. Only 41% treating this as a priority compared to global average of 50%. To see the full report, visit: http://sapworldbanking.idcinteractive.net.

EXCITING NEWS IN THE WORLD OF COMPLIANCE & RISK, IBM have bought Promontory and are investing their time to teach IBM’s Tech Watson compliance issues that occur in banking. Could this be the new benchmark in terms of Compliance Software going forward?

ARGENTA GROUP will announce the streamlining of the business as they aim to merge the Private Capital & Syndicate Management businesses in an effort to unify the business and reduce headcount.

The Sales RevolutionIn recent times, having spoken with clients and with senior executives of large companies, one thing seems to ring true - how to approach first contact.

Not too many years ago the term, “it’s not what you know, it’s who you know”, was a well-practiced mantra. In this modern world that relies on technology, senior people have taken a full step back in saying get off your laptops, your iPads and smartphones and go back to the old school.

Do not send them a generic email or in-mail if you wish to stand out from the barrel loads of electronic “kind regards” they receive daily.

By speaking to people you know, being referred to by others and utilising your network – senior decision makers are more willing to listen to you. But please make first contact by picking up that black box to the side of your desk and physically speak to these people.

C O N S U LTA N C I E S

I N S U R A N C E

D I G I TA L B A N K I N G

https://www.finextra.com/finextra-downloads/newsdocs/WFE%20IOSCO%20AMCC%20DLT%20report.pdf



http://sapworldbanking.idcinteractive.net

http://sapworldbanking.idcinteractive.net

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“To put it in more technical terms, the shit hasn’t hit the fan yet, as Theresa May tries to delay turning the fan on for as long as possible”(Private Eye, - “‘No Major Effect’ From Brexit So Far”)

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June seems a long time ago. Waking up this morning to pitch black, freezing cold conditions and

searching frantically for the thermals, you’d be forgiven for relegating all that happened in the Summer months to ‘a different time’ best left alone. In what has been a year best described as turbulent and what others might call downright treacherous, we have seen enough celebrity deaths to have the likes of Sir David Attenborough and Sir Trevor McDonald wrapped in bubble wrap and market analysts throwing in the towel as crash after crash threatens to bring them all down with the ship.

Then there was the small matter of the Brexit vote.

A dispute that split more households than Team Brad vs Team Angelina (not to mention the Team Jens out there) and caused the most heated debates since Honey G got through to the live shows (just…..how?!) you’d be forgiven for thinking it’s all come to a bit of an anti-climax recently. There has been no apocalypse, no riots, no real change and people have a right to know why!

Well the answer is simple:

NOTHING HAS HAPPENED YET!!

As highlighted brilliantly in a recent Private Eye satirical article, the country is yet to go through Brexit and is still very much a part of the EU, still able to trade across 27 countries with minimal, if any, limitations and is as European as a Parisian mime, eating a bratwurst whilst cruising down the canals of Amsterdam humming an Italian opera.

The nation has been roped in by this fascinating battle between the so-called ‘nay-sayers’ (a collection of those who insist that there’s no such thing as Brexit anyway and are just going to sit tight until the next referendum and wait for this to all blow over), the ‘doom-mongerers’ (much like the fortune tellers of old; they see death and destruction at every turn) and the ‘I-told-you-so-ers’ (who have been saying there is nothing to worry about that we can finally get rid of those pesky migrants and go back to the good old days) all of whom have their own take on what’s happened so far and none of whom seemed to have realised that nothing actually has. How then, as a nation, can we be so grossly ill informed?Much like during the original referendum, a lot of the blame must go to the country’s media. As those responsible for keeping the masses up to date and providing a supposedly impartial, objective viewpoint they have been either scandalously ambiguous or outrageously inflammatory (depending whom you read/watch) throughout the campaigns and perhaps more so now it has passed. Massive hype over promises around healthcare and reinvestment has been replaced by flat out scaremongering and tabloidism. Those at the top have not exactly acted in the most transparent way either. Theresa May ensuring she is ahead in the polls before announcing the deadline for Article 50 smacks of collusion and personal gain over what’s genuinely best for the country. Whilst also scuppering herself by issuing a deadline without any assurances from the EU regarding the negotiations thus leaving her, and the therein the country, at a disadvantage when it comes to arranging for potentially the biggest recovery since Ali vs Henry Cooper. Although one could argue that professional suicide in ploughing forward blindly and could be even worse, in what is an unprecedented time for the country, transparency has to be the number 1 priority, surely.

How this will all turn out is still very much to be decided. Fretting will do no good, nor will ignorance but what is for certain and what was so wonderfully put by the Private Eye article: the shit and the fan are still yet to be introduced to one another.

A sales person needs to be hungry for success and restless to excel no matter how far along in their career they are. It can sometimes feel like once a sales person has proven themselves as an effective new business individual, their focus switches and they are drawn to managing accounts. This has resulted in a shortage of experienced ‘new business hunters’

in the senior market space!

It is also becoming common for sales individuals to focus on their base salary, as opposed to the overall OTE. Usually, if the company has a good product and a comfortable place in the market, they don’t need to tempt sales people with high base salaries – so it may be more of a risk than a security if you’re offered a huge basic salary.

Of course, a good benefits package is always important, however the questions you should be asking are ‘what is the cap on commission?’, ‘What’s the most a sales person in your team has taken home in a year?’ and ‘what accelerators are in place if I exceed targets?’. This is what employers want to hear from their sales people.

Collaboration is also an essential trait for any sales individual. Sales people have to work daily with their technical specialists therefore it’s important to be a supportive team player and communicate effectively.

A number of sales studies have demonstrated the impact on success a strong relationship with the pre-sales team can have.

Another necessary skill is the ability to open the door without a marketing team. A lot of employers tend to emphasise this, as the sales individual should not depend on marketeers to pass on leads. In other terms, sales individuals must have the ability to bring on new logos personally, and can share ideas with the marketing teams on what they feel may be a useful

campaign to build the brand further, not the other way around!

Finally, sales people must be organised and diligent. One of the most overlooked and tedious parts of a sales role can be the admin, strategy and building a pipeline. Nonetheless, organisation is key.

If you believe you tick these boxes and are an ideal sales person – then get in touch on 020 3587 7007. This profile is sought after in the market space, and demand outweighs supply.

The affects of Brexit: Should we still be talking about them?! The ideal sales person

STARR INSIGHTS STARR INSIGHTS

By Scott Richardson

By Ani Lputian

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STARR INSIGHTS

It can sometimes feel like once a sales person has proven themselves as an effective new business individual, their focus switches and they are drawn to managing accounts.

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Has being a ‘woman in technology’ become an advantage in terms of securing a role and career progression?

This is a subject that I talk about on a regular basis with clients and candidates alike and covers the wider topic of diversity. It is a well-known fact that women in technology are few and far between

and the struggle to get any sort of parity continuously sticks in the craw of some of our technology managers here at Harrington Starr.

There is pressure for organisations to become more diverse. It is also a known fact that some of the large corporates have been targeted to increase numbers of women in the board room. There are many examples of other industries and working environments which have enforced allocations of minorities into leadership positions and the general consensus is they are more PR stunts than having any genuine impact.

To suggest that someone is only running a huge company because of their gender or ethnicity is naïve. Women have to work just as hard and prove themselves to be just as capable on a regular basis. However, working in recruitment, I know perhaps more than most how difficult it is being a woman working in a male dominated environment. The unfortunate truth is that many women, who set out with the intention of a technical career, will veer off-road into other options.

So how do we ensure that women are not corralled off the path towards a successful career in technology?

The most effective method, to me, comes from a two-pronged attack. We are seeing coding taught at younger ages with even primary schools now teaching the basics. Technology is not going anywhere and this integration into everyday life from such an early age is exactly what

the women of tomorrow need to get rid of any stigmas or pre-conceptions around tech-focussed positions. From the other and of the scale, they need genuine role models to aspire to. Women like Marissa Mayer, former CEO of Amazon who was in charge of the company’s largest drop in stock price but even the bottom end of that drop was a 150% increase on where it was 4 years earlier when she took over. This very public fall from grace may have tainted her reputation to some but she actually demonstrated exactly the sort of endeavour and thick skin touted by many entrepreneurial greats both new and old.

Whilst the technology market remains incredibly competitive, there has never been more opportunity for women to stamp their presence in what has long been a male dominated sector. Whether or not you agree with affirmative action, it is here for now and we are seeing a larger number of hugely talented women putting their cases forward in a meritocratic sense as well resulting in a hugely diverse and exciting time for all involved.

As it stands, there are more CEOs named “John” than there are female CEOs. How much longer before the industry is turned on its head?

The growing trend of women in technology

STARR INSIGHTS

By Sarah Philby

WWW.THENORTHSTARR.COM

COMING SOON

COMING SOON

EDITORIAL TEAMC O N T R I B U T O R S

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Lewis Bickerton

Claudine Eastwood

Antonio Ciarlegio

Andrew Thomas

Sarah PhilbyRob GrantTom Forsdike James Platt Anthony Townsend

Dominic Worthington

Luigi Negri Ian Bailey Vikki Miller Bradleigh Golder

Michael Paterson

Yousef Gainey Ed Mitchell

Caroline Friel Ani LputianHarry VaneRyan WatersScott Childs Stephen QuinnTim Dobie Kate Wood

Cyber SecurityWe’ve always listening to our clients for ways we can continually support them and help make their businesses even more successful... One of the biggest areas affecting almost every industry is Information & Cyber Security – now North Starr has got you covered!

■ Security Operations Centres■ Information Security ■ Engineering■ SIEM■ Data Loss Prevention■ Identity Management■ Vulnerability Assessment■ Penetration Testing

Upcoming industry insights: GDPR, Security Metrics & Ransomware…

Share your thoughts on these hot topics and find out more about our next round table events with key industry speakers by contacting Lee Cohen on 0203 8000 [email protected]

Toby Babb Editor

Dan Biddulph Art Director

Scott RichardsonAssistant Editor

James Hounslow

Tom KempNadia Edwards-

Dashti

Hari Sopal Elliot Parfitt Richard Twumasi

Lee Harding Tony Marshall

Lee Farthing

Andrew Watson

Jonny KayCharlie EmeryHarriet Lamplugh de

Smith

Felix Symonds Robyn HarperLee Cohen

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For more information, please contact: Toby Babb at Harrington Starr

T: 0203 002 2850 F: 0207 022 1750 E: [email protected]

Harrington Starr Company Registration Number: 7246003Company Headquarters: Vintners Place, 68 Upper Thames Street, London EC4V 3BJCompany Telephone Number: 0203 587 7007Company Email: [email protected]

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Harrington Starr Limited

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Imagine if you had a Recruitment partner whose purpose was to help you grow.

Imagine if you had a Recruitment partner that believed better people made by better clients, better candidates and better people.

Imagine if you had a Recruitment partner that cared as much about putting the right people into the right businesses, as they did about investing back into the community they belonged.

You can!

Harrington Starr. Your Success, Our Business.

In 2010 we launched Harrington Starr and over the past five years we have become the Global Leaders in Financial Services and Commodities Technology recruitment, insight, events & consultancy. Delivering high quality opportunities for professionals on a permanent, retained, contract, and interim basis, to over 500 partners within the sector.

About Harrington Starr

http://www.harringtonstarr.com

mailto:[email protected]

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