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

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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
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Trade Data Archive
Technology Solutions – The Way Forward
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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

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Deluge of market data
Varied cost of trading
Market access
 Solution

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Streaming market data
In memory database
Store details, use aggregates
9
Technology Solutions – Smart Order Routing
 Smart Order Routing
 Impetus

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Best Execution obligation
Fast moving markets
 Challenges

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Requires COB
Speed and Efficiency
Ability to locate hidden liquidity
Ability to identify spoofing
 Solution
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Build COB
Direct access
Rules Based
Evaluate and Improve
10
Technology Solutions – Order Audit Trail
 Order Audit Trail
 Impetus
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To prove Best Execution
Ability to analyze
Compliance Requirement
 Challenges
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Multiple points of data capture
‘What time is it?’ – Ritchie
Data Storage
 Solutions
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Data tagged to executions
Market data history
11
Technology Solutions – Quoting and Reporting
 Quoting and Trade Reporting
 Impetus
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Quoting (Pre-Trade Transparency)
Reporting (Post-Trade Transparency)
Attract Order Flow
 Challenges

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

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

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Humongous Data
Compliance Specification
Incident Reporting and Follow-up
 Solutions

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Online Alerts
Workflow Monitoring System
13
Implementation Methodology
•
Four Stage approach – Spans life cycle of Firm’s MiFID compliance initiative
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Stage 1: MiFID Readiness Assessment

•
Stage 2: Implementation

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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?