by Abide Financial Guide to MiFID II Success YOUR SUCCESS OUR SUCCESS Operational Risk Awards 2017 Best Regulatory Reporting Platform or Service

Transcription

1 by Abide Financial Guide to Success YOUR SUCCESS OUR SUCCESS Operational Risk Awards 2017 Best Regulatory Reporting Platform or Service

2 What is? 3 January 2018 the implementation deadline for Markets in Financial Instruments Directive II () and Markets in Financial Instruments Regulation (MiFIR) indicates that firms must act now to mitigate the risk of trade and transaction reporting failure, associated financial penalties and reputational risk. Will You be Affected? Investment Managers Under MiFID I many investment managers were able to rely on the brokers reports and did not need to submit a separate report to the regulator. Under EMIR it was simple to delegate reporting to market counterparties. However, under, investment managers cannot rely on broker reports and there is no simple route to delegated reporting, meaning that many buy-side firms need to create an infrastructure from scratch to support transaction reporting and, in some instances, trade publication requirements. The only investment management firms out of scope are pure AIFM and UCITS managers. Banks and Brokerage Houses While used to transaction reporting under the simpler MiFID I regime, banks and brokers find themselves faced with a greatly expanded scope of reportable instruments and hard questions about their place in the new market infrastructure. For many this will mean registering as venues or systematic internalisers for the first time, both of which designations bring with them a host of additional reporting and other requirements. Retail Firms In the past, retail financial firms could report transactions against their individual clients using only their internal account number. Now the regulator wishes to uniquely identify retail activities across the market, which means that all retail financial firms will need to acquire a national identifier to include on all client-side reports. This identifier will differ according to the nationality of the client, and no universal default value is allowed to be adopted. The practicalities of collecting this information and curtailing access to reportable products for those who have not supplied them are exercising minds in all affected firms. Venues Although traditional venues have always had their regulatory bar set high, both these and many more new entrants to this sector will find a host of additional challenges, from record-keeping requirements which include collecting national identifiers for decision makers within their member firms, to transaction reporting from the perspective of any members which are not MiFID firms. The following guide aims to walk you through some of the key challenges you will face, in particular - 1. Understanding Scope of Regulation 2. Finding a Simple Solution NEX Regulatory Reporting platform 3. Hitting the Deadline Fully-guided implementation 4. Future-Proofing your Compliance 5. Keeping your Data Safe 2

3 1. Understanding Scope NEX Regulatory Reporting has the knowledge and expertise Article 26 of MIFIR defines the regulatory obligation for MiFID regulated firms to submit transaction reports. The core purpose of transaction reporting is the provision of appropriate data to assist regulatory authorities with the oversight of the financial markets and Market Abuse detection. What is in Scope? Transaction reporting requires the report to be submitted no later than by the end of the business day the day after execution (T+1) increases the scope of reportable instruments and execution venues: > Reportable financial instruments include equities, rates, credit products and new asset classes such as currency, commodity and interest rate derivatives (and emission allowances) when traded on venues, as well as OTC derivatives when based on venue-traded instruments. > In addition to Regulated Markets (RM), Trading Venues now include Multilateral Trading Facilities (MTF), Organised Trading Facilities (OTF). In addition, Systematic Internalisers (SI) can be seen to operate as an additional type of Execution Venue. > Best execution reporting is required in respect of equity execution quality and commodity positions reporting is also required for both venues and, to a lesser extent, investment firms. A reportable instrument must be transaction reported whether the trade has been executed on or away from an EU trading venue. OTC derivatives and non-eu ETDs with a venue-listed immediate underlying are also required to be reported. Trading activity in dual listed securities (with one listing in the EU) are reportable, as their product details will be included in the reference data list published by ESMA and based on all EU venue-listed products. OTC Derivatives If No Equivalence to Venue-Traded > CFD on Vodafone transaction reportable using underlying ISIN, with no transparency reporting requirement > CFD on EUR/USD no transaction reporting or transparency reporting requirement as underlying not venue-traded Equivalence of OTC derivatives to their venue-listed counterparts has been defined by ESMA in a very narrow way almost all attributes included in the venue s Financial Instrument Reference Data submissions must be exactly matched by the OTC derivative for the latter to be deemed equivalent. Systematic Internaliser (SI) Determination While the mandatory systematic internaliser regime has been deferred for six months, to allow ESMA to collect data on overall size of individual markets, there are good reasons why some firms will opt in as voluntary SIs even during the early days of reporting, for example: > The trading obligation for equities will mean that equities must be traded on a venue or SI. Those who wish to trade off-exchange from their own inventory will have no alternative but to register as SIs in order to continue this business. > Clients of many brokers have expressed concerns as to whether they will be obliged to publish immediate trade reports, and brokers registering as an SI will give clients comfort, as SI always takes on publication requirement when their counterparties are non-si. In its role as an APA, Nex Regulatory Reporting will be accumulating data from all venues and APAs to gain an early insight into the overall size of each market, from which we can advise clients of their likely need to register once the mandatory SI regime comes into force. 3

4 Approved Publishing Arrangement (APA) Requirement MiFIR Articles 3-15 define the transparency obligation upon MiFID regulated firms to make public the details of the trading activity undertaken in financial instruments. The core purpose of transparency is the provision to investors of appropriate trade and price information to assist with their investment decisions and to ensure fair and transparent markets. Trade reporting is the provision of the core trade details being made public by a Trading Venue, APA or Consolidated Tape Provider (CTP) in real-time on trade date (T0). significantly increases the requirements around trade publication with the requirements extended to equity-like instruments and non-equities for the first time. Trading activity undertaken in any financial instrument which is admitted for trading upon an EU venue must be published regardless of whether this is traded on or away from the EU venue. If a firm executes away from venue, then the regulation requires the firm to report the trade to an APA. Trade reporting differs to transaction reporting as only one party of the trade is obliged to publish. If the trade is undertaken on venue, then the venue will publish. In the event the trade is undertaken off venue then the seller must report unless one party to the trade is an SI who will be responsible for the publication of the trade. Equity-like instruments bring ETFs, depository receipts, certificates and similar instruments under the equity requirements umbrella. This creates a real-time publication obligation with a maximum delay of 1 minute from execution for publication. Non-equities relate to bonds, structured finance products, emission allowances and derivatives with real-time reporting and the maximum delay of 15 minutes which will reduce to 5 minutes after 3 years. 4

5 2. Finding a Simple Solution Choose NEX Regulatory Reporting s award-winning platform Through NEX Regulatory Reporting s agile, end-to-end solution clients benefit from seamless reporting, future proof compliance and resource optimisation. NEX Regulatory Reporting Hub Controlled from a single, secure and intuitive user interface, clients can submit their transactional data, into the NEX Regulatory Reporting Hub in multiple formats and from multiple sources, for data normalisation, enrichment, determination, reconciliation and validation. It is then delivered to the relevant regulatory end-point. The Hub and the accompanying user interface has been designed to offer full transparency of the transaction lifecycle process along with powerful insights into underlying reporting timeliness and data quality. Our high-performance reporting Hub exceeds industry standards, demonstrating a 99.9% uptime performance. Cloud based Hub technology enables seamless processing of high data volumes, flexible cross-regime and cross-asset class reporting, making it the ultimate end to end reporting solution for banks, brokerage houses, hedge funds and asset managers. Asset Managers File Formats Reporting Hub Data Ingestion MiFID ARM Executing Brokers Prime Brokers Trading Venues Trade Respositories FIX Swift Excel PDF Streaming Data Batch Data Reports Determination & Eligibility Enrichment Validation Exception Mgmt ARM APA EMIR TR SFTR TR REMIT RRM CCPs CSV Routing DFA / CAN Hedge Funds XML Reconciliation by ASIC MAS / HKMA Execution Venues MIS FinfraG / Bank of Israel 5

6 Service & Support Customised Regulatory Advice A unique element of NEX Regulatory Reporting is the upfront provision of expert consultancy to assess individual client reporting requirements within the context of reporting regime. The team of expert consultants carry out a thorough evaluation of the reporting requirements of each client depending on its geographic jurisdiction, client classification, transaction types and technology infrastructure. The NEX Regulatory Reporting Hub automatically determines the reportability of trades, which are then enriched, validated, reported to relevant regulatory endpoints and, if needed, reconciled. Your Regulatory Reporting Partner > Dedicated service teams are there to ensure seamless onboarding, go-live and post go-live support: > Regulatory experts team > On-boarding specialists team > Relationship management team > 24/7 support and operations team > On-going notifications of upcoming regulatory changes provides insulation from change > Shared responsibility for potential misreporting > Dedicated seasoned technology and data science teams specialising in big data management and processing Future-Proof Compliance Regulatory requirements Data gap analysis Training Solution design Onboarding Implementation Regular reconciliation Exception input Completeness checks Continuous Monitoring Service Audits Improvements Service Baseline Assesses systems, controls and processes at beginning of onboarding 6

7 3. Meeting the Deadline NEX Regulatory Reporting demonstrates credible track record Implementation: NEX Regulatory Reporting are here to help you through the process Find Data Ommissions and Agree Gap Closure Plan Produce Pilot File and Testing Data Validation Adapt to any prelaunch phases Beta Testing Production Testing GO LIVE Consultancy, Build, Test & Deploy NEX Regulatory Reporting client wokring group Application of working group and regulator clarifications Timeline: NEX Regulatory Reporting will ensure you are ready If you have not already chosen your provider, you should finalise now. Venues and SIs register with MDP for commodities position reference data. Begin APA testing SIs register for your MIC code July August September October November December Go-live Start client/ ARM endto-end system testing Start resilience and load testing Production conformance testing NEX Regulatory Reporting Streamlined Onboarding Replacing alternative providers with NEX Regulatory Reporting s agile platform reduces clients total reporting costs by, on average, 25%. Contract signed NOW Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Choose one end-toend solution for all regulatory reporting requirements Onboarded within a month. Our experts will hold your hand through implementation and beyond NEX Regulatory Reporting will guide you through testing ensuring you are ready well ahead of the go-live. We use cloud-based technology to ensure rapid deployment and totally scaleable architecture, with a separate virtual environment created for each client We will continue to hold your hand through any validation failures and other issues that may arise Go-live 7

8 4. Future-Proof Compliance 5. Keeping your Data Safe NEX Regulatory Reporting will guide you through the ever-changing regulatory landscape. You will receive on-going notifications of upcoming regulatory changes. Dedicated team of seasoned regulatory experts and relationship managers provide on-going regulatory updates, notifying clients of any regulatory changes and actions that need to be taken at any given situation. Additionally, NEX Regulatory Reporting provides intelligence and solutions across other regulatory regimes globally: EMIR Rewrite As well as working towards robust and compliant MiFIR reporting solutions, we haven t forgotten that many clients will be more immediately impacted by the major re-write of EMIR reporting which comes into force on 30 October We have produced a revised specification and guidance to accommodate these changes and are ready to advise clients in the preparation of files and testing of solutions to adapt to the new obligations. SFTR Coming hard on the heels of the MiFIR implementation will be a completely separate requirement for firms to report repo and equity finance transactions to a Trade Repository under the SFTR regulation. We have been tracking the development of this regulation for some time and will develop solutions to integrate client reporting seamlessly into their submissions for other reporting regimes. ASIC, MAS, HKMA, FINFRAG Regulation is constantly evolving and many countries are still in the process of implementing the recommendations of the G20 accord which inspired both the Dodd-Frank Act and EMIR reporting. Beginning with European clients who have additional obligations in other jurisdictions, Nex Regulatory Reporting has begun to roll out a series of solutions to these other demands. Our direction of travel is to consolidate our global coverage, by leveraging the presence and client relationships of existing Nex Group businesses in all parts of the world, in order to become a truly international service provider in the regulatory reporting space. Performance and security NEX Regulatory Reporting s core technical stack resides in Amazon Web Services (AWS) and, thus, has robust business continuity management plans. NEX Regulatory Reporting encrypts all data, both in flight and at rest. We maintain control of all aspects of encryption, choosing the specific cryptographic algorithm we use to encrypt the data, and using tools provided by AWS to define, and control access to, our encryption keys. NEX Regulatory Reporting are committed to protecting client data and take a holistic approach to information security, the scope of which covers all areas across the organisation. With more than 2 billion UTIs reported to date, the company is at the forefront of regulatory reporting innovation. NEX Regulatory Reporting is currently responsible for over 25% of all UK MiFID reportable transactions. NEX Regulatory Reporting currently services more than 130 banks, brokerage houses and investment managers. All the Support You Need Get in touch now and be guided through from now to go-live and beyond advice@abide-financial.com London 78 Cannon Street London EC4N 6HL 8

9 Disclaimer This document contains proprietary and confidential information belonging to Abide Financial Limited ( Abide Financial ). The recipient of this document agrees to hold all information presented within as confidential and agree not to use or disclose, or allow to use or disclosure of the said information to unauthorised parties, directly or indirectly, irrespective of the acceptance or rejection of the presentation or at any time before, during or after an agreement has been reached, without prior written consent. Descriptions of software and systems provided by Abide Financial are representative and not necessarily exact. Descriptions of software may represent future product plans and directions, and the existence of such descriptions does not constitute an announcement regarding the availability or the scheduling of availability of such software. You are cautioned not to place too much reliance on such forward looking statements. Abide Financial does not undertake any obligation to publically release the result of any revisions to forward looking statements to reflect events or circumstances after the date hereof to reflect the occurrence of unanticipated events. The material in this document is for information only and should not be considered as advice and Abide Financial reserves the right to make changes in product design, functionality and installation without reservation. Contact NEX Regulatory Reporting For a free consultation please contact NEX Regulatory Reporting: E: advice@abide-financial.com T: +44 (0) NEX Regulatory Reporting 4th Floor 78 Cannon Street London EC4N