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FinTech Trends Newsletter Week 9th October – 13th October 2017
MiFID II: 81 Days to Midnight Deadline Introduction
Time is running out for buy-side firms to get their houses in order, ahead of a wholesale revamp of Europe’s trading rulebook. There’s something about deadlines that most people don’t understand – it is a date or a time by which something has to happen. Anything else is merely a guideline and the clue is in the name. That so many buy-side firms can’t seem to make the distinction is sobering, to say the least. The problem becomes more acute with the revised Markets in Financial Instruments Directive (MiFID II). The scale and the frequency with which regulators are warning that time is running out shouldn’t just be setting alarm bells ringing – IT and compliance departments should be flashing red like the bridge of the Enterprise when it’s under attack and all hands should be at battle stations. Yet that’s not the case. Even now, some shops are sleepily awaking to the realisation that MiFID II is coming and it’s coming soon – January 3, 2018. So, why has everyone left it to the last minute? I believe there are three primary reasons, sprinkled with a dash of human nature, in that most people tend to leave things to the last minute.
Where the Blame Lies
The first reason for this, and where much – but not all – of the blame lies, is with the European Parliament, Commission and Council, along with the European Securities and Markets Authority (ESMA). MiFID II is a far-ranging and sweeping file to work on, touching nearly all asset classes and all aspects of the trading process to some extent, but last
-minute wrangling between the Parliament and Commission over key aspects of the technical standards has confounded the industry. It’s also given it an excuse not to work on MiFID II or spend money where it can reasonably argue that it hasn’t a clue where to target resources.
The second reason is commentary from regulators such as the Financial Conduct Authority (FCA). The UK regulator has been one of the most vocal proponents of the industry being more prepared for MiFID II, but has tempered this in nearly every speech by saying it won’t crack down hard on those making a genuine effort. As such, several people I’ve spoken to have said they are making efforts, but expect forbearance to such a degree that January 3 isn’t really a “hard” deadline as such.
This is a dangerous assumption to make. While the FCA has indeed been saying that it won’t bring the full force of the regulatory weapons at its disposal to those who aren’t 100 percent compliant on day one, it hasn’t said that there will not be repercussions, either. Furthermore, it hasn’t defined the quantum by which it deems compliance levels to be acceptable – 50 percent ? 75 percent ?
90 percent ? There may be a few firms that will be in for a rude awakening come next year, and there will be little sympathy, I suspect, for those who cry foul.
The third is the lack of engagement by the buy side on the topic of MiFID II, whether it’s the smaller shops that are still subject to its rules in Europe but seem to be existing in some kind of fantasy world where the original MiFID was never revised, or US firms that will be forced to, at the very least, understand the requirements of MiFID II, and possibly even comply with elements themselves that go beyond the mere call recording, data collection & storage, unbundling of research and execution costs. That many still seem deliberately unaware of basic provisions within the rules is frightening. Implementation of technology also needs to be considered.
Today, it’s currently 81 days to midnight, but in industry terms, that may as well be minutes. The fire of MiFID II is approaching and yet the buy side seems to be dousing itself in gasoline. As Mark Steward, executive director of enforcement for the FCA said in a speech at an industry conference on the 20th September 2017, firms who have not done so, “need to take action now.”
For help & guidance to prepare & advise Hedge Fund, Wealth Management, Asset Management, Private Equity & Alternative Investment firms on IT, MiFID II Call Recording Compliant Solutions, data storage & management, disaster recovery, back up, cybersecurity, managed solutions, FCA, MiFID II & GDPR regulatory & compliance technology, please contact Storm IT Financial for more information.
Storm IT Financial FinTech News & Trends picks: Week 2nd October – 6th October 2017
Finastra puts payments on Micosoft Azure
Finastra is bringing its next-generation payments solutions to the cloud via Microsoft Azure, Microsoft’s enterprise-ready trusted cloud platform:
https://www.finextra.com/pressarticle/71111/finastra-puts-payments-on-micosoft-azure
CIO Tapes – Tech won’t produce alpha – Video Interview
3 major AM firms Leaders debate how data is being used, manipulated & mass produced for better, or worse, in the modern investment world:
David Cameron takes job with US tech electronic payments firm
David Cameron has taken a job with the electronic payments firm First
Data Corporation, his first major private sector job since leaving office:
Fintech Monthly Report Card – September 2017
September 2017 Fintech Report Card; Top Nine Tech Events in Sept:
http://www.wealthmanagement.com/technology/september-2017-fintech-report-card-top-nine-tech-events
Humans Beat Computers With Light Street Hedge Fund Gaining 44%
The human stock pickers at hedge funds are leading the pack this year, while computer-run strategies pull up the rear. That’s no accident:
Why companies struggle to cultivate digital strategies
Firms cultivating digital strategies are struggling to facilitate transfor- mations because most CIOs are simply not equipped to be digital leade
Voice brokers fighting to survive Europe’s big shake-up
MiFID II’s sweeping new rules may imperil traditional deal negotiated over the phone:
https://www.ft.com/content/c22ffc9e-a395-11e7-b797-b61809486fe2?mhq5j=e5
AI: Transforming your Investments
AI looks to automate & optimise the process of con- verting information into useful / actionable knowledge:
A former Goldman Sachs VP who founded a crypto hedge fund says betting on bitcoin is like betting on the internet in the 90s
Bitcoin’s meteoric rise doesn’t mean that it’ll be the top-dog crypto forever:
New tech will give boutiques edge on fund titans, says NCI
Bouique asset managers who fully exploit the potential of new financial tech….:
Masters of the Universe adjust to the new reality as tech hits government bonds
Technology is creeping towards the bond trading desks of large investment banks:
Banks abandon the high street: Ten branches are shut every week to save the lenders millions
The banks insist they are just following their custom- ers, who have moved online in droves.
