MiFID II: How to Cope with the Ensuing Complications

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With the new rules around Markets in Financial Instruments Directive (MiFID II), most financial companies are struggling to comply with the regulations in time. It is said to be the biggest change in the financial services industry in 10 years. I believe it is more of a challenge because, for past several years, we have seen financial firms trading in a more opaque way and now the aim is to achieve transparency in the financial markets across ALL parties involved.

It is not going to be an easy task, though the European Securities & Markets Authority (ESMA) have issued Q&As and guidelines for the smooth implementation of MiFID II in addition to the detailed directives. But they have forgotten that this is a big task to ensure that the current IT infrastructure is sufficient for the financial institutions to comply with the directives. In the directives, there are requirements to set up automated surveillance systems to detect market manipulation, set pre-trade controls on order entry, have real-time monitoring and define post-trade controls. The directives themselves are a call for software vendors to drive the change the financial institutions are going through.

If we think about the need for complying with MiFID II, keeping regulation and potential fines aside, it is in the market participants’ (brokers, banks, hedge funds, etc.) best interest to adopt surveillance systems that will enhance visibility and transparency while assisting them in minimizing risk and avoiding losses due to rogue trading, too. With the growing legislation around end-to-end trade visibility and combating abusive trading, this would require increased self-regulation by market participants. This means financial institutions would need a solution to be set-up that could monitor or run analysis on all the trades in real time in order to identify suspicious activities in trades. In addition to this, the financial institutions also have stewardship and fiduciary duty to shareholders as well as the “Reputational Risk” attached to non-compliance which can easily be quantified.

At TIBCO, we can help you solve this problem with the use of a pre-designed accelerator (which can be downloaded from TIBCO Community page). The TIBCO accelerator connects data sources, big data assets, and applications to build machine learning models and logic flows that drive faster insights in real time. TIBCO has used its many year of experience in delivering solutions to trading desks when creating the Trade and Market Surveillance Accelerator. The specific benefits this brings to market participants include faster time to resolution, accelerated adoption and deployment of surveillance, and flexible surveillance scenarios.

The architecture of the accelerator has three main components:

Streaming Analytics: the core of real time surveillance and reporting

Rules Based option: many regulatory requirements are inherently rules based and have  a familiar approach

Predictive models: more forward thinking firms understand that rules based systems alone are not enough

Thus, with its wide spread of product portfolio, we are able to help you implement this solution and help you comply with MiFID II in any environment and in the minimum amount of time possible.

For more information or a demo of the accelerator please contact me at rsehgal@tibco.com.

Also, stay tuned for the next blog where we will discuss how we have successfully implemented this solution a number of  global companies and what impact the solution has had for them.