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Buyside Firms Must Make IT Investments to Realise MiFID II Compliance Savings

  • Investment in new IT systems and processes a must for buyside firms in order to handle data volumes associated with MiFID II compliance
  • Prudent IT investment to meet regulatory obligations will also improve existing operations and provide the opportunity for new functions and revenue sources

A new report from GreySpark Partners, a leading global capital markets consulting firm, explains how strategic IT investment in pursuit of compliance with the second iteration of the Markets in Financial Instruments Directive (MiFID II) will allow buyside firms to quickly and cost-effectively adapt to future regulatory change.

GreySpark believes that asset managers and institutional investors can use these investments to further support the improvement of operational and strategic functions within their organisations, including liquidity sourcing, surveillance and monitoring. These investments will also allow firms to engage in the provision of detailed insights from large data sets and to monetise the information contained within.

Asset managers and institutional investors must develop a framework to handle the data volumes that will result from their compliance with MiFID II, which will be much larger than the data volumes they currently handle in complying with MiFID I. From January 2018, MiFID II will demand buyside firms collect, process, transmit and store large amounts of data on an unprecedented scale, which will be costly and require new data handling capabilities on the part of the firms. Combined with investment in modular and flexible IT infrastructure, the affected firms can leverage this data-handling expertise to improve their operational performance.

MiFID II is one of a growing number of regulations that increase business and operational transparency, a key regulatory theme that has emerged since the financial crisis and shows no sign of reversing. How to comply with the regulations in a manner that both future-proofs long-standing business and operational models, and which creates new opportunities, is a pressing matter for buyside firms. Recognising that they must excel at data management, investing in flexible and modular IT infrastructure and analytical capacity for MiFID II compliance positions the firms to derive a range of operational, technological and business benefits.

Willis Bruckermann, GreySpark Analyst Consultant and report author, said: “Capital markets firms are in a period of immense transformation as the approach to and volume of regulations change following the financial crisis. Going forward, firms must be prepared to adjust to new mandates quickly and cost effectively. Using MiFID II as a starting point, buyside firms can begin implementing smaller IT projects that will support their long-term strategy to thrive under the new market conditions.”

GreySpark Partners is a business, management and technology consultancy specialising in capital markets. GreySpark Partners works with investment banks, hedge funds and asset management firms to deliver solutions that work across all asset classes, with a particular focus on risk management and electronic trading.