Investor protection with PRIIP-KID regulation: time pressure increases Point de Presse Robert Jeanbart, Division CEO SIX Zurich, 30. August 2016
SIX who we are and what we do our contribution to the financial industry The rise of the investor protection agenda PRIIP: what s the news? PRIIP-KIDs at a glance Meeting the challenge of KIDs for PRIIPs Page 2
SIX who we are and what we do Page 3
Serving the Swiss financial market Swiss Exchange Payment Services Securities Services Page 4
Providing key financial market infrastructure the backbone of the Swiss financial center systemically important stable and reliable AA-rated by Standard & Poor s innovative Page 5
our contribution to the financial industry Page 6
SIX at a glance Founded in 1930 Core business is reference data SIX FINANCIAL INFORMATION Swiss brand with deep and longstanding roots in continental Europe Essential piece of the SIX Swiss value chain International player with global focus and local expertise Unique data universe in terms of information depth, breadth and structure Award-winning provider of internationally sourced data Trusted client and industry partner Page 7
We have 85 years of experience in delivering high-quality financial information to the global financial industry. We are the 4th biggest data vendor in Europe, the Middle East and Africa. (Source: Global Market Data Convergence 2015, Exchange Market Data + Traditional Vendor Market Data by Burton & Tayor). KEY FIGURES Our database includes reference and market data, corporate actions, regulatory data and pricing information for over 20 million instruments. We provide data in support of around 60 national, regional and global regulatory, compliance and tax requirements. Our IT infrastructure delivers over 100 terabytes of data to our clients monthly. In 2015 we issued 1.177 billion financial instrument price updates. Page 8
THE ROLE OF DATA VENDORS Ensuring a continuous flow of high quality information ISSUERS EXCHANGES Market seeks capital RAW DATA SENT: in different formats & structures with diverging fields with errors & gaps at different frequencies RAW DATA DATA VENDORS Data vendors contribute to the functioning of the financial market DATA DELIVERED: in a consolidated format with a uniform structure with accurate & complete information at desired frequencies including uniform prices & asset classes READY TO USE DATA INVESTORS Investors offer capital Page 9
SIX FINANCIAL INFORMATION Our data is present in many touch points in daily life Trusted one-stop-shop for top-quality global information Year-end prices for tax reporting Financial information & news on TV (SRF) Share prices in newspapers like Neue Zürcher Zeitung Product information sheets for investor protection Investment information on websites like cash.ch and Google Finance Page 10 Online brokers Financial information & news on the radio (SRF)
We provide data and services so that the Swiss financial market can comply with an ever growing number of regulations. REFERENCE DATA MARKET DATA REGULATORY SERVICES Our core business. We deliver timely and accurate: Static data Corporate actions Evaluated pricing Tax and regulation data Support of our reference data business. Comprehensive real-time database of global market data. Comprehensive services for tax reporting and regulatory requirements. Current topics: investor protection tax transparency economic sanctions Page 11
The rise of the investor protection agenda Page 12
Banks need to face the investor protection challenge US$33-66M Average spend on capital markets reforms across major European banks* SIX services help financial institutions meet regulatory requirements with data and know-how Page 13 *Source: EY European Capital Markets Reform
The background to investor protection MiFID II requirements & the regulatory environment MIFID II: 03.01.2018 PRIIP: 01.01.2017 Transparency Micro-structural Issues Data Publication and Access Requirements Trading Venues Investor Protection Post-trade Issues Market Data Publication Commodity Derivatives PRIIP UCITS AIFMD EMIR MAR FINFRAG FIDLEG Page 14
PRIIP INFO SHEET Packaged Retail and Insurance-based Investment Products PRIIP Key Information Document for Financial instruments Packaged retail investment products, e.g combine exposures to multiple underlying assets ( packaged ). Sample: structured products, derivative instruments Insurance-based investment products Marketed to private individuals (retail investors) Entail a degree of investment risk and costs Page 15
What does the EU seek to achieve with its investor protection agenda?* Make the retail investment market easy to understand for consumers (i.e. non-professionals) Ensure consumers fully understand risks and costs of investments to avoid buying the wrong products Boost and invest in confidence in the retail investment markets, increase market efficiency and encourage growth *according to Regulation (EU) Nr. 1286/2014 Page 16
Key Information Documents are like patient information leaflets for financial instruments Explains the product in a standardized way that is easy-to-understand and comparable Lists the ingredients i.e. the costs, risks and description of a financial instrument Must be available in at least one official language of any EEA country where it is marketed Page 17
PRIIP: why is it a talking point? Page 18
Why are we talking about PRIIP today? PRIIP is one of the biggest regulatory challenges facing the industry but has low media awareness 10 Trillion PRIIP market within EU* The financial industry is under great pressure to meet investor protection rules. Due to their game-changing nature, the investment market may look different in the future Unusually high time pressure: only four months to go Banks will need to rely on utility providers like SIX to focus on their core business Page 19 *Source: European Banking Authority
Affects institutions that offer banking, insurance and fund products throughout the European Economic Area (EEA) MARKETS SCOPE RESPONSIBLE Retail investors located in the 28 EU countries plus Norway, Liechtenstein and Iceland (EEA) Investment products for retail clients with at least one underlying asset (e.g. structured products & structured deposits, funds and derivatives) Insurance investment products: investor receives insurance benefits as well as investment returns. The product manufacturer is responsible for creating the key information documents (KIDs). When advising or selling such products the PRIIP KID has to be provided to the retail investor before a sale can take place. (e.g. via the relationship manager) Not in scope of the regulation: investment products without derivative components, e.g. equities and simple bonds Page 20
123 Days for implementation, testing and training the organization 7 April 2016 First draft of Regulatory Technical Standards published 123 DAYS Jan 1 2017 Less than 9 months Creation: The product manufacturer has to provide a KID for every product or deal Distribution: The updated KIDs have to be made available to all distribution channels to enable transactions Obtaining: A distributor needs access to all relevant product manufacturers Page 21
What do banks need help with? CREATE OBTAIN RECEIVE Product Data & data mapping Aggregate Distribute KID Legal text ISSUER RESELLER RETAIL INVESTOR Page 22
ISSUER / GENERATION CHALLENGE Are Issuers able to create and update KIDs? Content & language mapping Automatically generate up-to-date KIDs on demand Standardized yet customizable templates Distribute documents to retail network Calculate risk / performance scenarios Send the right documents to the right distributor (entitlement) Deal with complicated products e.g. OTC derivatives Data to display the product Page 23
DISTRIBUTION / RETAILER CHALLENGE Where will investment advisors download their regulatory documents from? Most distributors sell products from multiple manufacturers PRIIP KID must be available also for execution only Need to hand out the latest version Retail advisors must make documents available in presale to retail investor Tracking & 10 years archiving KID for audit Page 24
Meeting the challenges of KIDs for PRIIP Page 25
SIX offers a full-service solution that ticks all the boxes on the task list. ISSUER RESELLER INPUTS GENERATE DISTRIBUTE & OBTAIN TRANSLATIONS DATA TEMPLATES LEGAL TEXT CALCULATION DATA MAPPING UPDATE ENTITLE RETRIEVE DOCS AUDIT TRAIL ENTITLE SUPPORT - the one-stop shop for PRIIP Page 26
- the one-stop shop for PRIIP Regulatory Document Generation Service AVAILABLE NOW FOR TESTING Product information and trade-specific data from customer Regulatory Document Hub Data mapping including calculations of risk and performance figures Legal jurisdiction terms and conditions 3 rd Party Document Generation (uploading 3 rd party documents) EU regulatory documents are generated Doc Hub Regulatory documents are available for download and archived for 10 years Advisors use a single interface to retrieve all regulatory documents Uploading documents generated by 3 rd parties Page 27
What s in a PRIIP KID? Page 28
What s in a PRIIP KID? PAGE 1 WHAT IS THIS PRODUCT A description of the product Product type What is the purpose of the product (objectives) Intended retail investor Insurance benefits Page 29 9/6/2016
What s in a PRIIP KID? PAGE 2 WHAT ARE THE RISKS & RETURNS Risk indicator Performance scenario Page 30 9/6/2016
What s in a PRIIP KID? PAGE 3 ADDITIONAL INFORMATION What happens if manufacturer is unable to pay out What are the costs How long should I hold it and can I take money out early? How can I complain as a consumer? Page 31 9/6/2016
A snapshot of existing and upcoming regulatory services MiFID II FIDLEG CISA FinfraG Sanctions PRIIP FATCA / 871(m) EU Financial Transaction Tax Basel III Solvency II Common Reporting Standard (CRS) Page 32
Your questions? Page 33
If a question comes up later, please do not hesitate to contact us Additional documents can also be found on our website Page 34
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