The Reference Data Users Group (RDUG) has thrown in its cards with three other industry lobby groups to form a joint working group to address compliance issues spurred by the European Union’s Markets in Financial Instruments Directive (MiFID), whose implementation date of early 2007 is causing ructions within the securities industry operations community.
Writing exclusively for Reference Data Review, RDUG founder Tony Kirby describes the MiFID as “not just the Investment Services Directive on steroids. The directive is likely to introduce fundamental shifts at a market level right across the EU-25 member states, whether trading occurs on-exchange or off-exchange.” (See Article, Page 8.)
MiFID, issued as a directive a year ago, is aimed at improving market transparency to raise the likelihood of investors achieving best execution. As such, the directive will require financial markets participants of all kinds, including data vendors, to adapt their business processes and IT structures.
The new working group sees RDUG team up with ISITC Europe, part of the International Standardization for Institutional Trade Communication group, the Software & Information Industry’s Financial Information Services Division (FISD) and FIX Protocol Ltd. (FPL). The group has selected Radianz’s Chris Pickles, co-chair of the FIX Protocol Global Education & Marketing Committee, to act as chairman of the new joint working group.
The four member groups plan to pool their resources “to develop best-practice recommendations, appropriate standards and increased industry awareness to help market participants achieve MiFID compliance.” The joint working group will hold its first meeting early next month.
The activities of the participating trade groups reflect the various stages of the trade life cycle, from the descriptive entity and instrument reference data (RDUG), through market data (FISD) and transaction messaging (ISITC and FPL). Kirby says the group will bring “greater focus and commonality as to how market and reference data should be managed in readiness for the rollout of MiFID.”
Gary Wright, managing director of London-based consultants City Compass, also writing in these pages, says: “The changes in both business practice and the technology that supports the business will be almost unprecedented.
Probably the closest comparison in size to the technology impact of MiFID is that of Y2K.” (See Article, Page 6.)
Wright expects MiFID, finally details of which were being thrashed out by politicians in Brussels, to spark a spike in demand for IT staff that could last for several years beyond the MiFID implementation deadline, as institutions and vendors scramble to achieve compliance. The Committee of European Securities Regulators (CESR) is consulting with the financial industry as a whole to define precisely how participants will comply with the new regulations. CESR and the EU have been urging the industry to come recommend standards for implementing the changes necessary for compliance. The new joint working group is clearly a step in this direction.
