MiFID II: The Latest Buy-Side Data Management Challenge

While the application date of MiFID II has been delayed until 2018, it is now clear that we are nearing the end of what has been a lengthy and complex process to overhaul the European Union’s (EU) market rules. As the process enters its final stages it is becoming increasingly clear that MiFID II will add further to the complexity surrounding data management and governance within buy-side firms, and businesses must act now to ensure they are prepared for when the regulation comes into force.

Earlier this month, the impact of MiFID II on data management was once again in the headlines when a group of post-trade industry experts pointed out that the regulation will significantly increase reporting requirements; specifically, when it comes to the amount of data firms must report to newly-created entities.

For the buy-side MiFID II really does represent a major step up in terms of reporting obligations across the entire investment cycle: from the pre-trade and trading stages through to the operations stage. Asset managers will be required to collect and aggregate pre- and post-trade data, increase transparency around record trade executions and enrich the data they collect for post-trade compliance reporting. In the light of these demands it is little wonder that the expert panel warned that firms will need to upgrade their systems to cope with the additional data and reporting burden.

Leading up to the implementation of the rules, firms need to make a decision about how they update their data management and reporting capabilities. One approach will be to build internal data management and reporting systems to address the requirements. This is a significant task and will require the upgrading of data management systems across the entire investment workflow process. Many firms might find that the complexity and cost associated with such a large technology upgrade prove prohibitive.

For such businesses there is a second option available: to outsource the new data governance requirements to managed service specialists such as RIMES. The benefits of this approach are clear: firms can ensure compliance with MiFID II immediately without the need for a disruptive IT overhaul. Crucially, such an approach will ensure compliance not only with MiFID II, but with all other relevant regulations; not least the impending EU Benchmarks Regulation.

Whichever approach businesses choose; it is now clear that MiFID II will require a new approach to data management. 2018 will be here before we know it, and given the scale of the changes MiFID II will demand our advice to buy-side firms is simple: start readying for the regulation sooner rather than later.

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