MiFID AND DATA MANAGEMENT DOMINATE DEBATE AT TSAM 2007

The largest ever gathering of delegates at Technology Solutions for Asset Management found that the lack of clarity on detailed MiFID regulations was still an obstacle facing buy-side firms in reaching the November 2007 deadline.

Speakers at Osney Media’s fifth Technology Solutions for Asset Management conference and exhibition (TSAM) urged investment managers to act now in preparation for the new harmonized trading landscape that will descend upon Europe once MiFID and UCITS III comes into force over the next year.

Simon Morris, Partner at law firm CMS Cameron McKenna encouraged asset managers to make reasonable assumptions in keeping with the FSA’s Principle Based Regulation (PBR) approach and assess and alter procedures to become MiFID compliant. Morris emphasized that “firms cannot expect handholding by the FSA under the PBR regime” and Richard Balarkas, Managing Director at Credit Suisse agreed that the only realistic time frame is the one set by the FSA and warned that whilst the FSA may only start policing firms in 2008, clients are able to sue non-compliant firms from November 2007.

Keynote speaker, Jean-Baptiste de Franssu, CEO, Invesco Europe, addressing a packed exhibition floor, drew attention to the role of data management in achieving best execution in a Pan European investment market which will witness an exponential increase in the number of structured products with UCITS III coming into force. Adam Fergus of L T Biotech and Andrew White, Senior Consultant at Aquin Components reinforced the message that compliance is a data hungry process and the huge universe of securities being traded today demands that data management remains high on the agenda of the buy-side.

Explaining further, Andrew Knowles from JP Morgan Worldwide Securities Services said that firms need to manage data with a “fridge” approach in mind; centralising all external and internal data so that data integrity is maintained across the trade lifecycle and investment managers are able to extract subsets of data according to specific requirements. The focus on acquiring adequate technology and data have resulted in much of the buy-side suffering from desktop clutter and a centralised approach aims to avoid this whilst reducing costs and increasing efficiency.

However Balarkas also cautioned that market pressures were imposing more operational requirements on the buy-side than regulatory obligations. Marcus Hooper, independent industry consultant, added that asset managers should only invest in essential tools within a trading platform and leave additional capabilities such as latency for the sell-side to develop. In the long term, Hopper expects the pace of technology and cost implications to result in buy-side dealing desks being non-existent altogether. Therefore, in his view, the immediate concern for the buy-side should be focused on legacy systems dependent on paper trails and the slow adoption of algorithmic trading.

The overarching message from TSAM 2007 was that despite the ambiguity clouding the industry’s preparations for MiFID, firms should not hold back implementation. Whilst there appears to be no silver bullet for achieving compliance with requirements such as best execution and transparency, the core recommendation for the buy-side, as highlighted by Darren Purcell, Director of Securities Classifications, Standard & Poor’s, is to establish a holistic compliance framework that combines both centralised and integrated data management with the right balance of trading and risk technology.