In this special series, we’re reporting on the highlights of the RIMES II Client Conference EMEA 2018, which took place in London on May 2.
In the penultimate session of the RIMES 2018 Client Conference, Danielle Tierney and Virginie O’Shea, respectively Senior Analyst and Research Director at analyst house Aite Group, presented on the subject of trade surveillance and compliance. Their session focused on what MAR and MiFID II means for trade surveillance and outlined the priorities and challenges for financial sector firms.
The first half of the presentation was underpinned by research conducted by Aite Group towards the end of last year, when it surveyed compliance technology experts at capital markets firms. As Virginie explained, Aite Group’s research reveals that financial sector firms are largely taking a tactical approach to compliance, with only 4% claiming to employ an entirely strategic approach. As Aite Group put it, firms’ regulatory teams are spending most of their time ‘firefighting’ as new regulations emerge.
Next, Virginie explained the main compliance challenges faced by firms. The biggest pain-point identified in the survey was the time it takes to support new requirements, cited at ‘extremely difficult’ or ‘difficult’ by 33% of respondents. This consideration is increasingly important, Virginie argued, as regulators become more aggressive in their supervision of the market.
Looking at the vendor support market, Virginie explained that firms are increasingly spending on vendor technology and consulting as they look to achieve compliance. Additionally, when it comes to the wider technology market, Aite Group’s survey showed that cloud and data management tools now top the investment lists of capital market firms.
Next, Danielle presented the findings of a second survey. For this study, Aite Group asked senior compliance professions in firms from across the sell- and buy-sides about their surveillance technology priorities and challenges.
This survey revealed that understanding regulations and their implications is a primary concern for firms. As Danielle explained, this trend has been mirrored in a new focus on technological capabilities during this last pre-MiFID year: firms are now focused on creating technology strategies instead of being concerned only with understanding regulations. As Danielle put it: RegEd is giving way to RegTech.
So what effect is this change having? Looking at trade surveillance challenges and solutions, Danielle highlighted that the firms Aite Group spoke to reported that technology deployments have led to significant improvements in identifying false positives. Meanwhile, data integration is taking center-stage in trade surveillance, and firms are increasingly looking to buy-in solutions rather than build them in-house.
Next, Danielle looked at the role of e-comms monitoring in trade surveillance. While the survey points towards dramatic improvements in e-comms monitoring adoption, it still lags other surveillance systems. This is particularly true of buy-side firms, despite e-comms monitoring being central to insider trade detection – a key pillar of MAR.
Finally, Danielle looked at spending patterns around compliance systems. According to the survey, 56% of companies increased spending on compliance between 2016-17, with large spends surpassing previous expectations. Importantly, surveillance technology was consistently reported as the most popular budget allocation area.
Danielle concluded by looking at the European perspective. In the region, firms are, unsurprisingly, prioritising EU-centric regulations, but are maintaining a watch over global regulations too. Moreover, European firms appear to be more proactive than US firms in their attempt to comply with regulations, putting them ahead in terms of preparedness.
In the next and final blog in this series, we will hear from Octavio Marenzi, Co-Founder and CEO of Opimas who presented further on the topic of RegTech – so please swing by again.
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