Transcript dublin97

Christopher Bond MSI
Senior Adviser to SII on Compliance
Operations P.I.F
2 February 2006
www.sii.org.uk
This [MiFID] proposal is a cornerstone
of the Financial Services Action Plan.
If we want a true internal market in
financial services, with all the
enormous benefits that will bring, we
need investors large and small to be
able to invest across borders easily
and with confidence
Fritz Bolkstein EU Internal Markets Commissioner on MiFID in
November 2002 when the proposal was launched.
MiFID at a Glance
Scope of MiFID increased
e.g. Investment advice
Regulated Markets and
Alternative Trading Systems
e.g. MTFs
MiFID
Conduct of Business e.g. home
country rules
(separate slide)
Internal Organisation e.g.
Conflicts of Interest
(separate slide)
Which Firm Functions are Affected?
Front Office
e.g. Sales, Trading and
Investment Management
e.g. Conduct of Business
HR
Operations
e.g. Training
e.g. trade reporting
Senior Management
MiFID
I.T. Technology
e.g. data collection
Legal
e.g. Client Agreements
Internal Audit
Compliance
e.g. authority
MiFID – IT/Operations Perspective
Account opening
eg new client
classifications
Best Execution venue
analysis and
monitoring
Post trade reporting
including new
products
5 year record keeping
– 1 year phone
recording
Pre-trade price reporting
for equities from S.I.s
and MTFs
IT/Operations
Instrument data problem
eg ISIN contrast RIC
Order execution and
routing systems
Increased product scope
eg OTC Derivatives
NOTE: The Capital Requirements Directive preparation is at the same time.
Static Data
Client Static
Instrument Data
New Requirements
New Requirements
• New client classifications
eg divide Intermediate Customers
between professional and retail clients
• Standard internal and
external approach
to identifying instruments
• Different order handling rules
• Change instrument codes
(RIC) v machine readable
(ISIN/SEDOL/CUSIP)
• Full suitability test for advisory and
managed clients
Commercial Opportunities
Static
Data
Commercial Opportunities
• Managed client expectations
• Smooth transition
• Use grandfathering where
available
• Algorhymic trading
• STP
Price Reporting
Pre trade price reporting
Post trade price reporting
New Requirements
New Requirements
• Systematic Internalisers (SI’s)Collect
and distribute pre-trade equity prices
internally
• Post trade price collection and
external reporting (including for
new products)
• Publish unexecuted limit orders
• Provide for deferred reporting
of largest trades
• Commitment to deal limited to
standard sizes in liquid securities
Commercial Opportunities
• Consider speed of reporting
Price Reporting
Commercial Opportunities
• Any uncompetitive prices or costs
more transparent
• Better access to competitors’ prices
and new liquid markets
• Possible charges for pre-trade
information
Analyse profit of individual
traders, products and market
segments
Booking Names
Some of the New Products
Cash settled
Exotic
Commodity
Derivatives
Financial
Contracts for
Difference
Credit Default
Swaps and
CDOs
Units in
Collective
Investment
undertakings
Money Market
Instruments
Cash settled
Exchange Traded
Commodity
Derivatives
New Countries
Commodity
Derivatives
settled through
clearing house –
includes OTC
Multi Market Single Format
27 EU Countries
3 EEA Countries
Not multi format domestic
market
Best Execution
New Requirements
Opportunities
New test including full cost,
speed, probability of execution
and settlement (including for
professional clients)
Receive and distribute
internally information
received from other
sources
Breakdown of trading
cost to achieve and
monitor best execution
Order routing/
algorhymic trading
Best Execution
Access to
new liquid
execution
venues
Gain/protect
market share
MiFID for Investment Managers – Relations with Customers
Retail Customer Agreements
Permitted
investments
including limits
Method and
frequency of
valuations
Objectives and
permitted levels
of risk
Reporting percentage of
loss
Reporting to Retail Customers
Frequency
eg quarterly
Investment
Management
No prescription on
content or frequency
for professional clients
Best Execution
responsibility
Transaction execution
details
eg venue
Breakdown of
commission fees and
charges
Information on
Corporate Actions
Record Keeping
New
Requirements
Five years for
record keeping
1 year phone records
Record Keeping
Commercial
Opportunities
Website Reporting
Accessibility of
information
MiFID-Related CPs and their planned publications dates
Planning for MiFID - overview
November 2005
Treasury authorisation consultancy document
December 2005
Main MiFID CP
April 2006
System and controls CP
April 2006
Financial promotions CP
May 2006
MiFID follow-up CP
H2 2006
Non-scope MiFID-dependent CPs
Disclosure
Q1 2006
Simplifying the retail COB regime
Q2 2006
Standards for non-MiFID scope wholesale firms
H2 2006
Systems and controls for non-MiFID, non-CRD firms
H2 2006
Expected deadlines
MiFID implementing rules and guidance made
31 January 2007
Firms to be complying with MiFID requirements
1 November 2007
The Competitive Position of London as a Global Financial Centre
“ More than 90% of respondents viewed availability of skilled personnel as Very
or Critically Important. London and New York both scored highly on the
availability of skilled staff, with 98% of respondents giving a rating of Good or
Excellent. London appears to have a marginal advantage with an Excellent
rating of 75%,compared with 66% in New York.”
100% Primary Location
50% Primary / 50% Secondary
10% Primary / 45% Secondary /
45% Tertiary
Cost per
Person
Trades
processed per
Person
Estimated
Person Cost
per Trade
$128,312
$77,851
$58,607
41,226
23,267
18,394
$3.11
$3.35
$3.19
Source: Report of Corporation of London of November 2005
How Firms Address MiFID
Benefit
from group
knowledge
Establish Firm
wide
Central team
Alter Firms’
strategy to take
opportunities
Communicate
to all staff
Budget for
outside costs
eg IT, Compliance,
Legal
Knowledge
“Tsars” in each
department
Involve Senior
Management
Revise internal
procedures
What is the Regulatory Update?
Members’
new benefit
Recent and future
changes and
trends in UK
financial regulation
Coded for individual
sector application
For senior and
junior
professionals
Hard and soft copy
3 levels of
information