MiFID - Cognizant
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Transcript MiFID - Cognizant
MiFID - Technology Solutions
Pradeep Hardikar
Director & Practice Leader Banking and Financial Services
MiFID - Technology Solutions
In Search of IT Excellence
Pradeep Hardikar
Director and Practice Leader
Agenda
Key MiFID Directives
Impact on Stakeholders
Impact on Systems
The Way Forward
Questions
2
Key MiFID Directives
Investor Protection –
Articles 18, 19
Best Execution –
Articles 21, 22
Coherent Framework –
Article 69
Transparency – Articles 27,
28, 29, 30, 44 & 45
Integrity – Article 25
Passporting – Articles 31, 32,
33, 34
3
Impact on Stakeholders
Venues
Regulated Exchanges – Increased
competition
MTFs & Internalisers – Increased
opportunities + Increased obligations
Investment Firms
Increased opportunities
Tighter controls needed
Investors
Gains & Increased protection
Data aggregators & Publishers
Increased traffic
Increased opportunities (new
Interfaces)
Across The Organisation!!
4
IT Impact – Investor Protection , Best Execution & Coherent
Framework
Investor Protection
Suitability & Appropriateness – Changes to
CRM / KYC systems
Track & record client communications
Customer data, prices, Instruments, Size of
trades, Time stamps
Increased protection = Increased paperwork
Best Execution
Smart order routing
Combined order book
Internalising engine – Continental EU impacted
Order audit trail
Proving Best Execution? Reporting!
Coherent Framework
End to concentration rules
Changes to OMS/ORS
5
IT Impact – Possible approaches?
Reference Data
Generic reference data framework required
Customers, Venues, Instruments
Messaging
Adopting open interfaces to message management
Common standard needed
Architectures
Multiple interfaces, Volume increase, Complex messaging, Complex biz logic
SOA – Allows best of breed components to be used
Order Management Engines
Further complexity to algorithmic systems – Real time decision making
Best Execution – Complex biz logic
6
Order Processing Flow – Systems View
Market Data
Provider
Combined
Order Book In
Memory
Market Data
system
Rules
Engine
In Memory DB
Open
Order
Processing
Logic
Broker / Alternate
Venue
Communication
System (COMS)
(Parser, Config
file, Formatter)
Order Processing
Engine
Order
Audit
Trail
Re route To
Venue
Quoting
Smart
Order
Routing
Exchange /
Alternate Venue
Internalize
COMS
Trade
Processing
Engine
Open Order DB
Reporting
Position Mgmt
Exchange / Data
Aggregator / Proprietary
Compliance Reporting Engine
Market Data Archive
Order Data Archive
7
Trade Data Archive
Technology Solutions – The Way Forward
Combined Order Book
Smart Order Routing
Order Audit Trail
Quoting and Reporting
Compliance Reporting Engine
8
Technology Solutions – Combined Order Book
Combined Order Book
Impetus
No concentration rules
Advent of MTF and Internalisers
Best Execution obligations
Challenges
Deluge of market data
Varied cost of trading
Market access
Solution
Streaming market data
In memory database
Store details, use aggregates
9
Technology Solutions – Smart Order Routing
Smart Order Routing
Impetus
Best Execution obligation
Fast moving markets
Challenges
Requires COB
Speed and Efficiency
Ability to locate hidden liquidity
Ability to identify spoofing
Solution
Build COB
Direct access
Rules Based
Evaluate and Improve
10
Technology Solutions – Order Audit Trail
Order Audit Trail
Impetus
To prove Best Execution
Ability to analyze
Compliance Requirement
Challenges
Multiple points of data capture
‘What time is it?’ – Ritchie
Data Storage
Solutions
Data tagged to executions
Market data history
11
Technology Solutions – Quoting and Reporting
Quoting and Trade Reporting
Impetus
Quoting (Pre-Trade Transparency)
Reporting (Post-Trade Transparency)
Attract Order Flow
Challenges
Venue?
Mechanism?
Format? Infrastructure?
Cost?
Solutions
Industry Utility
Proprietary
12
Technology Solutions – Compliance Reporting Engine
Compliance Reporting Engine
Impetus
Best Execution Obligation Proof
Stop Abuse Ahead of Time
Challenges
Humongous Data
Compliance Specification
Incident Reporting and Follow-up
Solutions
Online Alerts
Workflow Monitoring System
13
Implementation Methodology
•
Four Stage approach – Spans life cycle of Firm’s MiFID compliance initiative
•
Stage 1: MiFID Readiness Assessment
•
Stage 2: Implementation
•
Construction to address gaps identified in Stage 1
Stage 3: Rollout
•
Impact Analysis, Gap Analysis & Compliance roadmap
Audits on systems modifications implemented in Stage 2
Stage 4: Continuous Improvement
SLA based Maintenance services
14
Thank you
Questions?