The leading knowledge platform for the financial technology industry
The leading knowledge platform for the financial technology industry

A-Team Insight Blogs

Talking Intelligent Trading with Andrew Delaney: MiFID II and the Coming Post-Trade Revolution

Word has it that ESMA is serious about its intention to publish its final guidance on MiFID II this month. With a possible (unconfirmed) publication date of September 24 doing the rounds, the market is bracing itself for a vigorously more prescriptive approach than under MiFID I, with less wiggle room for divergence from the base requirements.

Here on Intelligent Trading Technology, we’ve been busying ourselves assessing the impact of various aspects of the incoming regulation, which takes effect in January 2017 – just 15 months away.

As might be expected, we’re looking at how MiFID II will change the execution landscape with changes to the rules governing systematic internalisation and the introduction of Organised Trading Facilities (OTFs). We’re keeping an eye on how emerging rules on pre-release ‘production’ testing of trading algorithms will be applied. And we’re watching how firms respond to new reporting requirements across the board, being introduced in the name of transparency and the avoidance of systemic risk.

Another, less obvious aspect is the impact of MiFID II on the post-trade environment. Building perhaps on the US’s Dodd Frank Act, and as part of its remit to implement the T+2 clearing and settlement requirements set out by the G20, MiFID II will address the longstanding inconsistency that characterise post-trade processes particularly in the derivatives markets.

The market is bracing itself for MiFID II and its sister MiFIR regulation because they will push firms to replace archaic, often manual processes with the kind of workflow-based systems that can generate the kind of auditable transaction data sets that meet their transparency obligations. Achieving this, particularly in as short a timeframe as 15 months, will force significant investment in post-trade infrastructures to meet the new requirements.

But according to David Pearson, who looks after the post-trade business at Fidessa, the incoming requirement presents sell-side institutions with an opportunity to drive traditional business. Fidessa’s Affirmation Management Service (AMS) is one of a number of third-party offerings vying to establish order in the post-trade space. By demonstrating tighter, auditable post-trade processes, sell-side firms can differentiate their service offering to buy-side clients, which themselves are looking to solutions under a very tight timeframe. AMS provides a mechanism for buy- and sell-side firms to affirm trades with one another directly (you can download a white paper on the topic here.

As the ESMA guidance comes to ‘market’, Intelligent Trading Technology will be monitoring progress. And this post-trade differentiation will feature in our upcoming Intelligent Trading Summits, taking place in London on February 4, 2016, and in New York next May. Stay tuned for more about those in coming weeks.

Related content

WEBINAR

Recorded Webinar: Trade surveillance: Deploying monitoring and surveillance capabilities for today’s new normal

Let’s face it: The old ways aren’t coming back. A plethora of challenges brought on by the covid-19 pandemic, coupled with unrelenting market volatility and uncertainty, have pushed financial service firms to look for rigorous monitoring and surveillance solutions to meet the demands of the emerging trading landscape. Working from home (WFH) has increased the...

BLOG

AutoRek Urges Industry to Prepare for Jan 1 IFPR Start

Automated reconciliations provider AutoRek has warned firms to start preparing their systems for the complex calculations and processes they will need to undertake to be compliant with the UK’s incoming Investment Firms Prudential Regime (IFPR), which go live on January 1  – now less than 100 days away. IFPR is being introduced by the Financial...

EVENT

TradingTech Summit London

TradingTech Summit London will explore how trading firms are innovating in today’s cloud and digital based environment to create flexible, scalable trading platforms to support speed to market and business agility. Leveraging the cloud, AI and ML technologies to get an edge, automate processes and simplify operations in a cost effective way is the name of the game and will share practical insight from practitioners and technology leaders who are innovating and driving forward change in trading operations.

GUIDE

ESG Handbook 2021

A-Team Group’s ESG Handbook 2021 is a ‘must read’ for all capital markets participants, data vendors and solutions providers involved in Environmental, Social and Governance (ESG) investing and product development. It includes extensive coverage of all elements of ESG, from an initial definition and why ESG is important, to existing and emerging regulations, data challenges...