MiFID - Technology Solutions

Pradeep HardikarDirector & Practice Leader Banking and Financial Services

MiFID - Technology SolutionsIn Search of IT Excellence

Pradeep HardikarDirector and Practice Leader

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Key MiFID Directives

Impact on Stakeholders

Impact on Systems

The Way Forward

Questions

Agenda

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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

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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!!

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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

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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

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Order Processing Flow – Systems View

Communication System (COMS) (Parser, Config file, Formatter)

Trade Processing

Engine

Rules Engine

Broker / Alternate Venue

Market Data system

In Memory DB

Re route To Venue

Exchange / Alternate Venue

Market Data Provider

Position Mgmt Exchange / Data Aggregator / Proprietary

Internalize

COMS Open Order DB

Open Order

Processing Logic

Combined Order Book In

Memory

Order Processing Engine

Order Audit Trail

Smart Order

Routing

Market Data Archive Order Data Archive Trade Data Archive

Compliance Reporting Engine

Reporting

Quoting

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Technology Solutions – The Way Forward

Combined Order Book Smart Order Routing Order Audit Trail Quoting and Reporting Compliance Reporting Engine

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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

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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

Technology Solutions – Smart Order Routing

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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

Technology Solutions – Order Audit Trail

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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

Technology Solutions – Quoting and Reporting

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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

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Implementation Methodology

• Four Stage approach – Spans life cycle of Firm’s MiFID compliance initiative

• Stage 1: MiFID Readiness Assessment

Impact Analysis, Gap Analysis & Compliance roadmap

• Stage 2: Implementation

Construction to address gaps identified in Stage 1

• Stage 3: Rollout

Audits on systems modifications implemented in Stage 2

• Stage 4: Continuous Improvement

SLA based Maintenance services

Thank you

Questions?