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Taming the Regulatory Beast with Advanced Data Integration Techniques

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The last decade has seen the emergence of an increasingly complex regulatory environment – one that demands an unprecedented level of data access and integration, for which, it seems, the both the industry and its regulators remain surprisingly under-prepared.

A recent white paper from JWG and MarkLogic entitled ‘Ready for Digital Regulation?’ predicts that there will be 374 new legislative initiatives targeted at financial firms within the next two years alone, with 90% of these applicable to both buy and sell-side firms.

“With so many new rules and changes to existing policies, humans alone will not be able to keep pace with even reading the requirements, let alone be responsive to them,” warns Giles Nelson, CTO of Financial Services at MarkLogic.

It is not just the volume and pace of change which challenges firms; it is also the enormous breadth in terms of activities, processes and functions which will be governed by new rules, found the report. Firms must comply with similar but different rules multiple times. In checking compliance, regulators are increasingly asking for the audit trail of the decision-making process. The ‘how’ is becoming as important as the ‘what’ and the ‘ad-hoc’ requests are becoming more frequent.

Regulatory policy has also shifted from a focus on single data points to a more holistic view of the whole system, creating new requirements for more agile and intelligent data management systems. Transaction and party data are heavily impacted by the growing number of rules governing trade surveillance and associated pre and post trade transparency rules.

To keep pace, both sides of the table are turning to digital regulation – with many regulators already working towards “quantitative regulation” where machine-readable regulation is applied to firms in an automated manner. The FCA, for example, is working with the Bank of England on a Digital Regulatory Reporting (DRR) initiative to link regulation, compliance procedures, and firms’ policies and standards together with firms’ transactional applications and databases within a model-driven and machine-executable regulatory environment.

The holy grail is a fully automated digital interface between regulator and firm that enables regulatory data straight-through processing (RegSTP). But with the volume and complexity of regulatory requirements increasing all the time, both financial services firms and the authorities who regulate them will struggle to keep up without a significant improvement in their data integration capabilities.

“The discussion is just starting around digital regulation and the automation of governance and oversight. If governance could adapt to new regulations automatically, compliance would not take as much effort and risk as it frequently does today,” says Nelson.

MarkLogic provides a solution with its Data Hub platform for digital regulatory compliance, helping clients to meet current reporting obligations while also working towards effectively addressing the future data integration requirements associated with digital regulation. To learn more about best practice in this arena, and to hear Giles Nelson speak in person, check out his keynote speech at the upcoming RegTech Summit New York on November 14, 2019. Book your place here.

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