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Data in Finance Roundup – MiFID II edition – Jan 2017

The Coeo Blog

Anyone working in or around financial services would have been hiding under a rock if they don’t know that MiFID II came into force on January 3rd. After a shaky start where introduction was delayed by a year due to the inability of organisations to comply, this new regulation is now in place for all 28 EU member states. But what is MiFID II and what does it mean for data and technology professionals?

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The revised MiFID, or Markets in Financial Instruments Directive and Regulation, is being billed as the way to tackle market abuse and prevent a second financial crisis like the disaster of 2008. Amongst other changes, businesses must implement greater transparency and speed of transactional reporting and failure to do so will involve hefty fines or even the inability to trade. In fact, any communication ‘intended to lead to a transaction’ must be retained for five years, creating a large data retention requirement. There will also be new data streams coming on board determining instrument and venue status, and all the legal information needs to be accessible via an interface.

Compliance with this isn’t always easy when organisations need to consolidate existing manual or even migrate paper-based reporting systems, or when they don’t have a good data culture - in fact, 50% of firms cited a lack of internal data governance or poor data quality as their issue in complying in a recent survey by Sapient Global Markets. Experts also anticipate further requirements for data standardisation going forward which will only increase the burden. Pressure on headcount and budget only adds to the issue, as companies undertake pricy technology projects without the internal skills to guide this transition.

Concerns have also been raised about MiFID II’s ability to offer solid guidance to companies as regulation often lags behind developments like artificial intelligence and machine learning and so it could be hard for data professionals to get a clear answer on compliance as they introduce these technologies.

In addition, here in the UK we are unsure how Brexit will affect our institutions’ need to comply or indeed the enforceability of MiFID II at all, although initial indicators from the FCA suggest there is no desire to loosen compliance. If analysts agree on anything, it’s that the true impact of this major change is yet to come.

Here’s a selection of the most useful articles dealing with MiFID II:

Waters Technology explain how new developments in technology like artificial intelligence make the process of regulation ever harder

‘So far so good’ say the European Securities and Markets Authority, but the true picture is yet to come: Bloomberg

Technology upgrades vital to ensure data compliance, say Sapient

Finextra anticipates future data compliance needs anticipated – we aren’t done yet

I hope you’ve enjoyed this round up of the most useful coverage of MiFID 2. If you’d like to understand more about this and how you can ensure your data platform is compliant with the new regulation or migrate and consolidate existing systems, please contact us.

 

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