COMMENT
IBS Journal March 2017
43
FIs can’t afford to put all eggs in the MiFID II basket
Volker Lainer, VP of Product Management, GoldenSource
With so much deliberation and debate about the best approach to take in order to be MiFID II ready, it is easy to put aside the other compliance requirements facing FIs this year. From the big banks to brokers and asset managers of all sizes, the underlying problem is trying to keep pace with a flurry of different compliance and governance demands, including AIFMD, BCBS 239 and Solvency II.
The problem is that in response to an increasingly more complex regulatory landscape, many of these firms have looked to deploy individual solutions to meet different requirements. Unfortunately, this approach has only created silos of duplicated effort, data spend, infrastructure and governance. And there is a bigger problem around the corner if firms continue down this path. For example, under Basel 239, banks are required to house all their information in one place, with tight governance frameworks wrapped around the data. However, if at the same time, a bank is solving MiFID II issues through a separate data repository, they will be, by definition, moving further away from Basel 239.
The industry is also waiting for clarity around another data repository – Financial Instruments Reference Data System (FIRDS). FIRDS, which covers the full range of financial instruments under MiFID II, is a brand-new feed that every FI will have to either contribute to or consume from. In this case, the challenge will be trying to keep all their records up to data as and when the feed comes through. To date, while there is important information about what needs to be submitted to the APAs and the consolidated tape providers, the rest of the industry is still somewhere in the
dark about how detailed the feed will be. Once more, the issue of duplication rears its ugly head. On the one hand, banks will be sourcing FIRDS information directly from ESMA, but on the other, it will also be receiving the similar information from the likes of Bloomberg and Reuters who will be augmenting the data intra-day.
All this raises the question, can FIs realistically rely on a fragmented approach to regulation? It would seem that transforming data on the fly and shaping it for individual requirements is too light touch – requiring constant out-of-the-box fixes to ascertain a single view of the truth. In addition, absorbing new data and moving it to more destinations, as with FIRDS, also compounds this problem. This prompts an even more pertinent question, if the current tactical approach isn’t working, is it not wiser to take a less is more approach going forward?
It certainly can be, but only with better data practices alongside solutions that scale. The good news, for those seeking an alternative approach, is that fragmented data management point solutions can also be consolidated through a flexible data model. This is combined with a common approach to governance that, crucially, can, be applied across all regulations. This should make life a whole lot easier for FIs – as it is much easier to locate the right information, at the right place, at the right time when it is fully understood, documented, and instantly comparable and available for modelling and reporting on demand.
Regardless of the regulation in question, those that have one way to comprehensively cover the data management aspects of all regulations will be better placed than those who continue to adopt a more fragmented approach.
www.ibsintelligence.com
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