Firms call for better data

In recent years, financial organisations have been attempting to pull more value from their data. Regulations – such as Mifid II – have provoked market participants to get a better handle on the information they store, but it doesn’t always come easily. bobsguide spoke with Tom Wieczorek, managing director, product management, and Hugo Belsey, UK …

by | July 6, 2018 | London Stock Exchange Group

In recent years, financial organisations have been attempting to pull more value from their data. Regulations – such as Mifid II – have provoked market participants to get a better handle on the information they store, but it doesn’t always come easily. bobsguide spoke with Tom Wieczorek, managing director, product management, and Hugo Belsey, UK partner manager, of UnaVista, to find out more.

Do you think as ESMA and the NCAs have made things clearer and the market has settled into MiFID II, disruption has dissipated?

Yes. You have to look at it as a journey. UnaVista has been operating as an Approved Reporting Mechanism (ARM) for MiFID I since 2007 so we already had a lot of experience in the space. For MiFIR we decided to go to market early and developed a product called the Accelerator. The tool allows firms to carry out a gap analysis to see what data they still need to collect allowing them to contact vendors and counterparties well in advance of go live. We made the Accelerator tool available to clients 17 months before MiFIR reporting go live which allowed firms to engage early.

At the time we realised that a lot of the data and infrastructure was going to come from other technology vendors, so we established a formal partner programme. This allows us to scale those relationships and UnaVista now has 52 various software companies in the programme, including OMS, EMS, Risk and Data providers.

Through the programme we provide partners with core regulatory specifications, access to our UAT environment and a rich document and video repository, which helps them understand our platform and assist their clients. Feedback from partners and the industry has been very positive and the programme continues to grow.

UnaVista is a leading ARM for MiFIR and that meant that we had to connect to 27 regulators as per the requirements of our clients. Each one of those – even though they were expected to use ESMA’s agreed standard for the data format all had different systems, and different approaches to connectivity.

How are you storing that data?

The ARM itself and how it functions is defined by the regulators. Ahead of MiFID II’s implementation we maintained a consistent dialogue with regulators to determine the data they would require us to provide. If they wanted our clients to submit all the data, this involved UnaVista adapting the data, putting it in the right format and validating it, before giving back to clients so they could manually upload it to the regulator.

While some regulators went down that route, others were still working on their systems. For them it didn’t matter how the data was uploaded. In these instances we held the data and back-loaded it at an appropriate time.

We are now looking at how we can help firms derive value from the data they send us. As one of the largest ARMs, UnaVista can help firms derive insight into the market itself. We provide anonymised benchmarking between the firms, which helps them compare their reporting measures against peers. Additionally, our transaction intelligence solution provides market abuse and behavioural alerts to firms. This supports compliance with Market Abuse Regulation (MAR) and can identify suspicious patterns of abuse and alert the firm early. We’re getting a lot of interest in this type of analytics solution from clients who already send us their transactional data.

Still data analysis has been a problem: one of the greatest hopes around MiFID II was that it would bring a huge amount of data that would enable investors to properly compare prices, benchmark their trades and gauge market liquidity by using ESMA and NCA datasets. But critics have been scathing of those data sets. Even though there's a huge amount of data to work through, do you think the regulators will be able to ever resolve the issue?

We have recently met with some of the regulators who are the main recipients of our data. Many of them are working to address the challenges they face related to scalability. Once this is completed they will be able to increasingly use the data for the intended purpose of supervising the markets.

Investment firms and banks have complained about the amount of workload involved in the transaction reporting obligations. Do you sympathise?

Of course we sympathise. Our experience is that MiFID II is complex and transaction reporting is one of many things that firms must now do. Firms in the UK had prior experience with MiFID I so complying with MiFID II wasn’t as onerous as it might have been. A majority of the industry was reporting on 3 January and we’ve had very few back-reporting exercises, where firms discovered that they had to make corrections and re-report.

Many were also concerned about the actual implementation of the new systems to meet the requirements. Were those concerns justified?

The one-year delay to MiFID II also gave a lot of larger firms that have multi-jurisdictional reporting requirements an opportunity to step back and review some of their business processes in preparation for MiFID II going live.

This regulatory train isn’t stopping, but even deregulation would mean more changes to IT systems and processes. As result, most of the larger firms and investment banks spent the additional year building data warehouses and infrastructures for all of their capital markets activity to prepare for future regulatory change.

The directive was perhaps the base. Although quite complicated it allowed them to build the infrastructure and operations. As soon as those systems were built a lot of firms started to look for vendors who could reflect that on the delivery side. There were very few vendors on the market like UnaVista who could say that they are a central regulatory reporting hub and can help firms fulfil their MiFIR reporting obligations. UnaVista is one of the largest EMIR trade repositories and we are accustomed to helping firms fulfil multiple global reporting obligations. 

No one wanted to build a tactical system just for MiFIR. Most firms used their time and resources to build something more comprehensive that will continue to serve their needs in future.

Specifically, how does your firm make MiFID II transaction reporting easier?

We have a unique offering which combines the technical capabilities of UnaVista and the regulatory experience of London Stock Exchange Group. LSEG has a well-established compliance function and expertise that pre-dates the introduction of MiFID. UnaVista has a strong track record of providing regulatory technology and reporting solutions. For a lot of firms that combination of technical and regulatory expertise is what’s appealing.

In practical terms we went to market early so firms could start testing, and we could start a community of firms working together. Working together provides a forum where firms can ask their peers – or UnaVista – for an opinion on how they can get something done. I think firms have appreciated this.

As well as regulatory reporting we have a suite of services from reference data to educational courses, reconciliation, analytics, eligibility which provide the systems and controls. UnaVista provides a holistic solution for firms’ regulatory reporting and analytics requirements, or they can pick the pieces they need.

UnaVista is a trade repository for EMIR, an ARM for MIFIR and will be a trade repository for SFTR we are able to offer a common interface for clients to fulfil their reporting obligations. It benefits our clients commercially, functionally and from a regulatory perspective to use one system. 

For MiFIR, from the outset we recognised the breadth and sensitivity of the data that was required and decided we needed a scalable way to engage with other vendors. In order to make things as easy and as seamless as possible we’ve pre-packaged the ways firms can work with us. We have different models for software firms to engage with us that make everything clear from the outset for both the vendor and the client.

We are also leveraging the Partner Programme for SFTR. There is a lot of speculation in the market that much of the information required for SFTR is currently missing. We will work with our ecosystem of vendors to help clients collect and aggregate data for our SFTR offering.

The programme was launched in February 2017 and we have just signed our 52nd partner.  We have found that a lot of our clients who were using UnaVista for transaction reporting were going to their software vendors and asking if they were a member of the partner programme. It wasn’t only UnaVista promoting the programme to vendors. Clients were asking for it too, which has contributed to its successful growth in the 18 months since launch.

We have recently launched a Consultant’s module. As well allowing as consultants to become subject matter experts in UnaVista products and services, the module enables them to offer advisory and operational services to our mutual clients, helping to further streamline the reporting.

Our focus in the coming months is going to be on SFTR. We’re also very excited about the analytics functionality that we are broadening and will offer for all regulations beginning with MIFID II. This will move us from being a back-office processing firm to providing a lot of value to the front office. The analytics can be used to inform investment decisions, risk decisions and bank capital requirement decisions. That very much raises the stakes in terms of the relationship that we have.

There’s a lot we can do to help firms derive additional value and insight from the immense amount of data they’re reporting. It’s a very exciting time for us.

What's your gauge of the market sentiment around the delays?

I think what’s happened is the MiFIR project teams are starting to transfer off the MiFIR projects, and the BAU people are starting to take over the MiFID infrastructure. Those same consultants are now moving onto the next regulation, which for most big banks is SFTR. So, they’re kicking off their analysis, and we are receiving several RFPs and RFIs in addition to a lot of questions about our pricing models etc.  

At the same time, because there is still uncertainty about the go-live date people have started to feel a little bit like they’re in limbo. A lot of the preparatory milestones – choosing vendors, starting to think about data are not established until the go-live date is set. Some firms have chosen to use this period to thoroughly prepare their data by using UnaVista’s SFTR Accelerator tool. The tool allows firms to carry out a gap analysis to see what data they still need to collect allowing them to contact vendors and counterparties well in advance of go-live. 

It does give firms a little more time, to do their due diligence better, to do their vendor selection better, and consider their business and their infrastructure. So, one the other hand more time can be positive. But from a project momentum and project cost perspective delay can be detrimental.

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