The UK’s Financial Conduct Authority (FCA) has gone on record to express concern over the number of UK firms yet to prepare for the MiFID II reporting requirements. Set to come into force in January 2018, MiFID II brings with it a wide range of new reporting obligations for buy-side firms, and will demand a new approach to compliance. Speaking at a special MiFID II event hosted by WatersTechnology, Stephen Hanks, the FCA’s market policy manager, stressed the need for firms to put in place sufficiently robust transaction and trade data reporting systems as soon as possible.
MiFID II is the EU’s attempt to strengthen investor protection and increase transparency around financial instruments, and the venues where such instruments are traded. Buy-side firms will be significantly affected by the Regulation, as they will need to aggregate both pre- and post-trade data, increase transparency around record trade executions and enrich the data they collect for post-trade compliance reporting.
In his talk, Hanks stressed the pressing need for firms to decide on their Approved Reporting Mechanisms (ARMs) and Approved Publication Arrangement (APA) providers. In practice, this means buy-side firms will need to find and implement systems capable of reporting on transaction and trade data to the levels of accuracy and timeliness demanded by MiFID II. If not handled correctly, this could prove a costly activity, with some estimating firms will need to pay around $2.1bn this year alone in preparing for MiFID II.
As firms look to achieve compliance with this demanding Regulation, data reporting service providers will help lift some of the burden. In his talk, Hanks suggested the market for such services is developing fast in the UK, with some 12 applications for authorization from data service reporting providers having been received by the FCA as of July 3, 2017.
The emergence of such services, including RIMES’ own ‘RegTech’ services, will prove increasingly important as the deadline to compliance draws nearer. Unlike with in-house systems upgrades, managed compliance services, such as RIMES’ RegFocus®, can be deployed almost instantly and at a lower total cost of ownership. This approach allows firms to meet all MiFID II reporting requirements – and those of any other regulations such as the Market Abuse Regulation – completely and rapidly. In markets like the UK where MiFID II compliance remains far behind where it should be, the case for managed compliance services is now compelling.