Implications of MIFID II on Financial Technology Infrastructure and knowledge Warehouses
While implementation isn’t likely until 2014 or 2015, the consequences of MIFID II happen to be eliciting mixed responses from market gamers. Some industry government bodies like the United kingdom&rsquos Fsa (FSA) has expressed concerns on substantial liquidity withdrawal in the United kingdom&rsquos types market because of provisions that stop brokers and bankers by using their very own capital throughout buying and selling.
But even while market gamers grapple using the benefits and drawbacks from the new regulation and just how it requires their business processes, an area that’s unlikely to flee major impact underneath the new regime may be the technology infrastructure and knowledge warehouses of monetary organisations.
The MIFID II headache for financial firms mainly lies using the scope of items that come under the brand new regulation&rsquos umbrella. A few of the resource classes within the MIFID II basket include types, goods, pollutants considerations and structured deposits.
Whereas some financial organisations and knowledge companies may curently have were built with a harmonised data warehouse infrastructure that may adequately capture these disparate items, many more will have to execute extensive changes for their systems. The &lsquounlucky&rsquo ones are looking at simply an entire system overhaul to be able to reorganize the way they manage information.
Not So Good News for many, Great News for other people?
No financial organization which will by any means huged by MIFID II regulation will escape taking on some type of technology cost to be able to comply. But whereas compliance (including transaction confirming and posting transparency information) will hit the financial institution&rsquos and knowledge companies handbags, the IT industry however is going to be drooling at the possibilities of start up business possibilities.
Overhauling data warehouse infrastructure won’t only be great news for that IT service companies. It will likewise enhance the profile from the financial organization&rsquos CIOs because they lead the charge to have their organisations ready. Also joining the gravy train is going to be staff who curently have proven experience of effective change management in addition to demonstrable knowledge of back-office integration/migration. IT personnel that have a very good knowledge of real estate markets and process flows is a highly desired skill too.
The reign of MIFID I continues to be short (implemented in November 2007) however, many financial services gamers had already aligned their process flows, programs and infrastructure to conform with this particular initial directive. For such organisations, obtaining the technology ready for MIFID II is most likely likely to be simpler compared to individuals beginning on your own.
But it won’t be a walk-in-the-park either. For example, a financial institution which was already compliant with MIFID I might have developed a MIFID II-relevant subsidiary that places new regulating confirming and risk management demands onto it. A re-evaluation from the items the new organisation handles is going to be necessary to guarantee the current data warehouse infrastructure can effectively handle MIFID II needs.
Commodity traders are alternatively extreme they do not enjoy the advantages of falling under MIFID I. Establishing the requisite technology infrastructure on your own may appear like your best option. That being stated, goods buying and selling firms might also have the ability to shorten the information warehouse and technology infrastructure implementation process in ways that banks reasonably cannot.
In comparison to banks, goods possess a relatively homogeneous product offering which is certain to reduce the amount of format conversions and connects necessary to help make the enterprise data ready for that data warehouse.
In-House versus Delegate – 3 Factors
To state that lots of banks, goods traders and knowledge companies have both IT and regulating competence to attempt the implementation of the MIFID II-compliant data warehouse and technology infrastructure is basically factually correct. But implementation is a factor – first class implementation is entirely another.
Ultimately, financial organizations must execute a candid assessment of the current staff to find out when they have been the wherewithal to carry out a MIFID II technology infrastructure towards the preferred standard. Three factors will state a company&rsquos decision if you should look outdoors for help. First, existing staff might not possess all of the abilities which are needed for any project of their complexity. Tapping an established consultant to assist steer the ship would within this situation be considered a achievable alternative.
The 2nd trigger for sourcing exterior support happens when employees are highly competent in most respects but they are so bogged lower with daily duties that it might be impractical to anticipate these to effectively perform both their BAU (Business-As-Usual) obligations in addition to give quality focus on the MIFID II implementation project.
The 3rd factor is how simply the entire overhaul of existing systems is required for that organisation to become MIFID II-ready. Within this situation, the competence of internally staff alone won’t be sufficient. Guidance in the vendor(s) from the new system(s) and knowledge warehouse throughout and merely after implementation is going to be key prior to the organisation remains to navigate the waters alone.
Controlling Technology Implementation Costs
Obtaining the technology infrastructure ready for MIFID II will definitely cost money. But it doesn’t mean the expense need to get out of hand. Sticking to best practice project management software and process improvement standards for example PMBOK, PRINCE2, ITIL, CMMI and 6 Sigma might help shoreline up implementation efficiency and produce lower immediate and ongoing expenses.
Another tactic is always to stay with the procedure preparation only for the time being without moving much capital into establishing a brand new data warehouse along with other connected technology infrastructure. Using the ongoing debate around the merits versus demerits of MIFID II and implementation hanging around 2015 (maybe beyond?), it’s still too soon to take a position an excessive amount of money in new data warehouse technology.
It can make more business sense to hang about until just a little nearer to the implementation date once the regulation&rsquos provisions may have crystallized with no radical changes are required.