mifid - technology solutions pradeep hardikar director & practice leader banking and financial...
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MiFID - Technology Solutions
Pradeep HardikarDirector & Practice Leader Banking and Financial Services
MiFID - Technology SolutionsIn Search of IT Excellence
Pradeep HardikarDirector and Practice Leader
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Key MiFID Directives
Impact on Stakeholders
Impact on Systems
The Way Forward
Questions
Agenda
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Key MiFID Directives
Investor Protection –Articles 18, 19
Best Execution –Articles 21, 22
Coherent Framework – Article 69
Transparency – Articles 27, 28, 29, 30, 44 & 45
Integrity – Article 25 Passporting – Articles 31, 32,
33, 34
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Impact on Stakeholders
Venues Regulated Exchanges – Increased
competition MTFs & Internalisers – Increased
opportunities + Increased obligations Investment Firms
Increased opportunities Tighter controls needed
Investors Gains & Increased protection
Data aggregators & Publishers Increased traffic Increased opportunities (new
Interfaces)
Across The Organisation!!
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IT Impact – Investor Protection , Best Execution & Coherent Framework
Investor Protection Suitability & Appropriateness – Changes to
CRM / KYC systems Track & record client communications
Customer data, prices, Instruments, Size of trades, Time stamps
Increased protection = Increased paperwork Best Execution
Smart order routing Combined order book Internalising engine – Continental EU impacted Order audit trail Proving Best Execution? Reporting!
Coherent Framework End to concentration rules Changes to OMS/ORS
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IT Impact – Possible approaches?
Reference Data Generic reference data framework required
Customers, Venues, Instruments
Messaging Adopting open interfaces to message management
Common standard needed
Architectures Multiple interfaces, Volume increase, Complex messaging, Complex biz logic SOA – Allows best of breed components to be used
Order Management Engines Further complexity to algorithmic systems – Real time decision making Best Execution – Complex biz logic
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Order Processing Flow – Systems View
Communication System (COMS) (Parser, Config file, Formatter)
Trade Processing
Engine
Rules Engine
Broker / Alternate Venue
Market Data system
In Memory DB
Re route To Venue
Exchange / Alternate Venue
Market Data Provider
Position Mgmt Exchange / Data Aggregator / Proprietary
Internalize
COMS Open Order DB
Open Order
Processing Logic
Combined Order Book In
Memory
Order Processing Engine
Order Audit Trail
Smart Order
Routing
Market Data Archive Order Data Archive Trade Data Archive
Compliance Reporting Engine
Reporting
Quoting
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Technology Solutions – The Way Forward
Combined Order Book Smart Order Routing Order Audit Trail Quoting and Reporting Compliance Reporting Engine
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Technology Solutions – Combined Order Book
Combined Order Book Impetus
No concentration rules Advent of MTF and Internalisers Best Execution obligations
Challenges Deluge of market data Varied cost of trading Market access
Solution Streaming market data In memory database Store details, use aggregates
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Smart Order Routing Impetus
Best Execution obligation Fast moving markets
Challenges Requires COB Speed and Efficiency Ability to locate hidden liquidity Ability to identify spoofing
Solution Build COB Direct access Rules Based Evaluate and Improve
Technology Solutions – Smart Order Routing
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Order Audit Trail Impetus
To prove Best Execution Ability to analyze Compliance Requirement
Challenges Multiple points of data capture ‘What time is it?’ – Ritchie Data Storage
Solutions Data tagged to executions Market data history
Technology Solutions – Order Audit Trail
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Quoting and Trade Reporting Impetus
Quoting (Pre-Trade Transparency) Reporting (Post-Trade Transparency) Attract Order Flow
Challenges Venue? Mechanism? Format? Infrastructure? Cost?
Solutions Industry Utility Proprietary
Technology Solutions – Quoting and Reporting
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Technology Solutions – Compliance Reporting Engine
Compliance Reporting Engine Impetus
Best Execution Obligation Proof Stop Abuse Ahead of Time
Challenges Humongous Data Compliance Specification Incident Reporting and Follow-up
Solutions Online Alerts Workflow Monitoring System
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Implementation Methodology
• Four Stage approach – Spans life cycle of Firm’s MiFID compliance initiative
• Stage 1: MiFID Readiness Assessment
Impact Analysis, Gap Analysis & Compliance roadmap
• Stage 2: Implementation
Construction to address gaps identified in Stage 1
• Stage 3: Rollout
Audits on systems modifications implemented in Stage 2
• Stage 4: Continuous Improvement
SLA based Maintenance services
Thank you
Questions?