MiFID II will come into effect in just one year. This wide-ranging legislation is being put in place to strengthen investor protection and increase transparency around financial instruments, and the venues where such instruments are traded.
With the implementation deadline drawing near, the financial implications for buy-side firms of compliance are beginning to become clear. Earlier this month, management consultancy Opimas suggested in its research report that the financial industry will have to spend at least €2.5bn to comply with MiFID II. Opimas believes that 83 percent of this total will need to come from banks and 14 percent from asset managers. However, Opimas contends that asset managers will have to overcome a unique set of challenges, as most will have to implement entirely new infrastructures.
These findings are in line with what RIMES has been predicting for some time now. With MiFID II, asset managers are confronted with a sea change in their reporting duties. For the first time, asset managers 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. Optimas’ findings underline the challenge facing buy-side firms: they need to ready themselves for MiFID II without incurring excessive costs.
From RIMES’ perspective, this challenge calls for a new approach to data management and governance. The sheer scale of the required technological upgrade means the traditional in-house model is no longer cost-effective. Moreover, finding the right skilled data management and compliance officers to build and operate an in-house system is increasingly difficult.
Rather, we believe asset managers need to evaluate managed service providers such as RIMES. By taking data governance and management as cloud-based managed services, asset managers can immediately achieve compliance with MiFID II (and with all other future regulations) without having to invest in a large-scale infrastructure build.
Moreover, platforms such as RIMES’ require only minimal technological expertise to get up and running, so can help firms struggling to find the skilled technology professionals they need to operate effectively. Indeed, the managed services approach helps solve skills shortages by providing instant access to the service providers’ data and compliance experts.
With the implementation date for MiFID II now only a matter of months away, asset management firms that have not started preparing need to do so immediately. By choosing the managed service approach firms will be able to make the compliance deadline with ease, and at a cost-point that works for the business.