mifid life after november 2007? ian wigman bcs 25 th april 2007
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MiFID Life after November 2007? Ian Wigman BCS 25 th April 2007. Word on the street …. 20 billion Euro expected to be spent on 42 European regulations in Europe by 2010 on compliance of which MiFID constitutes 1-2 billion - PowerPoint PPT PresentationTRANSCRIPT
MiFIDLife after November 2007?
Ian WigmanBCS 25th April 2007
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Word on the street …
• 20 billion Euro expected to be spent on 42 European regulations in Europe by 2010 on compliance of which MiFID constitutes 1-2 billion
• UK market is top of the maturity curve for current execution/planning against MiFID requirements by far – Holland and Luxembourg not far behind and Ireland somewhere in the middle – Spain, Greece and Italy way behind and USA sell-side also behind
• Most firms see MiFID as a 3 to 4 year evolutionary transitional process rather than a one-hit in Nov 2007 and are planning budgets/resources well into 2008/2009 to support implementation and training etc.
• In a recent poll 30% companies are now looking to drive benefit from MiFID
• Organising a company better and creating transparency (two of the four main MiFID requirements) are the lowest on the priority list whilst understanding customers & products and transacting the offering are highest – However all need to be equally addressed to meet Nov 2007 deadline
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Key Challenges
Principles based regulation lays responsibility for compliance firmly at the feet of senior management Establishing effective and demonstrably up to date, effective and well managed policies across the organisation Enhancing senior management oversight, business continuity, outsourcing contracts, records keeping and control
functions independence Conflicts of interest and client inducement requirements now more onerous
Systems & Controls
Minimum level of Client disclosures required The greater detail and frequency of pre- and post-trade reporting Record keeping will need to focus heavily around customers, products, transactions, transparency and governing
the enterprise Assessing impact of home/host regulatory reporting requirements
Reporting
Proving Best Execution – Scope of Best Execution across your transaction chain with more execution venues Revised best execution measures – not just price determines what other parameters suit your business Achieving greater transparency of the costs of execution and increase focus on client protection Roles of market participants will evolve from day 1 e.g. emergence of trade data aggregators
Best Execution and Trade
Transparency
Client reclassification requirements, increased consumer protection and wider market mean closer focus required on client management and records (effect on client retention)
Improving client take on procedures, acquiring new clients from other companies streamlining their client base to comply with MIFID (Professional and Retail clients especially)
• The greatest challenges are posed by the end-to-end nature of changes to enterprise models
Client Management
Understanding the effect of MiFID on your business Exploiting new markets, products and services; reducing trading and compliance costs and complexity Countering the threats of increased competition, cost of MiFID implementation and increased regulatory risk Local regulators implement/interpret differently and at different speeds
Strategic
Impact Assessment
Managing complex programmes of this scale are difficult - multiple stakeholders and jurisdictions, working across functional/product silos and balancing business vs. compliance needs
There needs to be a demonstrative link between the MiFID imperatives from functional requirements to business and technical collaboration as well as to MiFID test triggers ultimately to the ‘to-be’ view of the business
Companies need to organise better around operational processes and procedures for implementation Embedding compliance into core business across front, middle and back office to deliver sustainable compliance
Programme Delivery
As well as the basic challenges of cost effective compliance with MiFID, firms need to understand and address the strategic implications and long term ways of building sustainable practices
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MiFID - a catalyst for strategic change?
Solution Roadmap
Governance and Compliance
Records and Data management
ReportingProvision of ServiceAcceptancePre- acceptance Execution &
Order Handling
Marketing ClientClassification
Information to Customers
Client Agreement
Suitability
Appropriateness
Best Execution
Reporting toClients
Client Order Handling
Reporting to regulators
Conflicts of Interest
Transparency
New Services/
ProductsNew Markets
Tax
Arbitrage
Regulatory
Arbitrage
Client Retention
Sustainable
Compliance
Client Onboarding
Reduced Transaction
Costs
Streamlined
Reporting
Outsourcing/
Insourcing
Joint Ventures
Entity
Rationalisation
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Implications for IT
• MiFID should not be seen as an IT project - to do so is a recipe for disaster - it a business process problem
• Just six months now remain to perform the required systems transformations, which are likely to prove extremely costly.
– Balancing commercial and regulatory demands– Large, bespoke architectures– Key skills shortages– Dependency on key vendors of data, applications and IT infrastructure– Many silos to cross (e.g., function, region, business)– Difficulty collaborating “many to many” – More processing power for spiky demand curves/increased volume– Historic data retrieval requires active data management – Significant new long term storage requirements – Complex structured and unstructured data management over time – More automation of front office activity – Customer management required to obtain single view
• Delivery of the massive IT project has become a top priority among the City’s CIOs, according to Patrick Ludden, MiFID programme project manager at Barclays Capital, which has created no less than 13 teams to assess the directive’s impact across the bank's various business lines.
• According to Anthony Kirby of the industry body MiFID Joint Working Group (JWG), Europe could sleepwalk “into a $20 billion bill collectively” if it does not grab the strategic advantage of MiFID and act quickly.
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Guidance for Business in a Compliance Driven World
Sustainable Compliance
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Build for the future
Integrated MiFID Business Change Program
Roles & Responsibilities
Policy Management
Reporting
Process Management
Infrastructure and Apps
MiF
IDIm
pac
t A
sses
sme
nt
Tools
Templates, Approach
Post-MiFID Operating Model
Integrated Workstreams
Ris
ks
Dat
a
Info & Data Management
Process Alignment
Organisational Change
Policies and Procedures
Reporting Com
plia
nce
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Build for Sustainable Compliance
• Identifies and prioritises the business drivers; stabilises and then establishes a strategy to:
– Establish sustainable compliance standards & deliver improved compliance – Reduce the cost of compliance and reporting– Reduce the headcount needed to sustain compliance– Reduce the cost of technology to meet existing and new regulatory challenge– Reduce the duplication of compliance effort– Reduce cost of compliance associated risk and paper– Reduce the likelihood of Regulatory intervention through consistent & accurate
reporting– Provide a sound basis for agile business change
Sustainable Compliance
Business Opportunity
Increased Shareholder Value
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Use tools – here’s one - MiFID <start here>
Impact Assessment
Process Model
Impact Assessment
Process Model
Effected Trade Processes Model
Effected Trade Processes Model
Client’s Business & Processes
Model
Client’s Business & Processes
Model
MiFID Implementation Options & Plans
MiFID Implementation Options & Plans
Processes, guidance notes, references,
checklists, templates,
background reading
A model of basic trade processes + MiFID conditions
and impacts
Firm’s MiFID-level model of processes - impacts, efforts, IT
& outsourcing.
Compliance recommendations, strategic options,
consolidation possibilities, plans
and budgets
• Allows for “slice and dice” analysis of MiFID impacts.
• Creates a repository of information for use by MiFID implementation.
• Allows a modern, easy-to-use process documentation tool.
• Provides ongoing MiFID support and a community for the exchange of information.
• Reduces elapsed time for the impact assessment – 20-30%.
• Improves productivity by 15-25%.• Brings down the cost of implementation
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Moving forward
• Implementation date of 1 Nov 07 will not change• Prioritise and demonstrate a workable plan that will
satisfy regulators• Complete urgent high risk projects around client
classification, policy management and systems and controls
• MiFID implementation times are already being squeezed• Consider Principles based regulation on your current
compliance activities• Identify longer term remediation and exploitation projects• Look for sustainability in approach