Making Sense of MiFID II
By George Ralph, Managing Director, RFA UK
In my rather demanding role as Managing Director of a thriving IT services partner, I have to do all sorts of things that I don’t necessarily want to do. The week before last does not count as one of those things. Along with my esteemed colleague, Oliver Blower, CEO of Voxsmart, I hosted lunch every day at a rather splendid private dining room in a very smart and very famous hotel, which just happens to be situated directly over the road from the RFA London office.
Every day saw a group of interested technology and operational leads from a range of financial services organisations, from prime brokers to hedge funds, to strategic technology partners, all trying to make sense of the MiFID II regulations in time for its implementation in January 2017.
Oliver gave a succinct overview of the regulations in relation to the recording of all communications that pertain to actual or possible transactions, both for clients and on the firm’s own account. The records must demonstrate any terms of any orders placed and will be used to detect any market abuse and kept for at least 5 years.
The main concern in the room did seem to centre around the scope of the legislation, that it covered all communications, including electronic and mobile. The legislation seemingly rules out compression of the data files too, which could mean that internal systems are unable to cope with the volume of data generated. The cloud could be a solution here, with a hierarchical storage system moving all but the most recent files offsite into cloud storage. It is clear that most firms will need to have a thorough review of their entire infrastructure when evaluating recording solutions.
I think for most of those who attended, we provided clarity on the correspondence that needs to be recorded and also highlighted the often overlooked benefits that firms could see following the implementation of MiFID II. Primarily that cases of market abuse will be identified quickly and that only firms operating legally and with integrity will be able to survive. This does create a more level playing field, with more safeguards to protect investors. For me, this can only be a good thing.
We will be running a similar week of discussion-based lunches each Quarter, totally driven by the issues that face the sector, so look forward to finding out what keeps you up at night.