RegTech IntelligenceJWG analysis. We attended an august gathering of 400+ buy-side professionals last week. Not only did regulatory drivers get a healthy hearing, but the group discussed how they will impact the way business is going to be handled in the future. Clearly, margins are under pressure, brokers are not giving it away like they once
By Sam Tyfield and JWG. Here algo again … Yesterday, ESMA published a notice stating that supervision of automated trading across the EU (in compliance with the ESMA guidelines from 2012) was converging. We found that interesting – a closer look at the BaFin’s rules versus those MiFID II/R creates would appear to show less
Regulation is coming thick and fast. With predicted document count of 200,000 by 2018, dealing with the deluge in a page-by-page, regulation-by-regulation approach is becoming impossible as G20 commitments spread across many rulebooks. Firms trying to tackle the changes one-by-one will end up with sky-high implementation costs and conflicting priorities – unless they take action
JWG analysis. Regulations like FATCA, EMIR and Dodd-Frank have asked us to collect more information on our customers than ever before – but now it’s clear that was just the start of the story. New regulation finds regulators even hungrier for information on the firm’s relationship with its customer, together with details of how information
With the second round of MiFID II consultation now officially over, the time is right to get our MiFID II implementation training ready to fly on 24 March in London. We suspect that, soon, regulators will be asking tough questions about how you plan to be ready for system integration testing in a mere 350
JWG analysis. The second round of MiFID II consultation has officially ended. As we have previously noted, the tone from the recent hearing was that, despite more consultation due on some of the fine print, we are largely done discussing the standards and can now begin to start thinking about how to implement them. On
JWG analysis. This month, ESMA hosted a broad cross-section of market participants for a final ‘hearing’ on the MIFID II technical standards they will send to Brussels for approval this summer. Of course, many attendees were surprised to find that, while they were en route to Paris to sit for 10 hours with 350 of
JWG analysis. As we read the comments on our last article on the five tribes of regulatory reform, we were struck by the visceral reaction to the suggestion of sharing the agenda. “Hands-off, that’s my mortgage you’re messing with”, commented one lawyer. We wonder, can tribes achieve their overarching regulatory goals if they are NOT
By Robin Poynder, FMR advisory. Advancements in price distribution technologies and the advent of high frequency trading have forced firms’ IT departments to establish strict controls around best practice pricing for trades. CEO of FMR Advisory, Robin Poynder, explains the need for a standardised protection mechanism “last look”. “Some argue that last look is a
JWG analysis. It’s only February and we’ve laid out quite a programme of work for 2015. Digesting the 4,000-page Christmas gift, curing the KYC sickness, cutting a trail through MiFID II and taming your global trading troubles – and we’re not yet at the midpoint of the first quarter. Sadly, it is not a blip
JWG analysis. The chief of the CFTC pronounced from Japan this week that implementing regulatory reform means overcoming “legal traditions, regulatory philosophies, political processes, and market concerns”. Looking at the global trading regulatory climate that surrounds MiFID II, we couldn’t agree more. Those struggling to digest the MiFID II texts and get to Paris for
JWG analysis. The industry returned after the break knowing that it had fewer than 500 working days to implement MiFID II but found over 2,000 pages of new text to read. Even worse, the grapevine whispers that more is due out this month. As we’ve written before, organising and planning is the order of the
JWG analysis. 2015 will see a number of new regulatory requirements, long in the proposal or draft stage, crystallise into prescriptions for better customer data management. At a time when record fines for AML failures and new personal liability for senior managers have intensified the pressure to ‘get KYC right’, these ‘remedies’ pose significant challenges
JWG analysis. In our last article on this topic, we spelt out our views on regulatory implementation standards. And the first standard that needs to be defined is how you’re going to organise your work programmes. The shape of your MiFID II programme MiFID II is far beyond just a few ‘tweaks’ to MiFID I. So much
JWG analysis. This summer, we took a look at the emerging MiFID II/MiFIR technical standards and concluded that the ‘hearing’ that they were getting would result in a war of many parts. Since the summer, over 700 MiFID II/MiFIR responses have been submitted, the FCA has run a conference crying for action and JWG is
JWG analysis. As the sun slips back into hibernation, schools reopen and autumn looms, regulators, lawyers, risk specialists, change managers and compliance professionals are returning to their desks. Here at JWG we have been busy tabulating the enormous level of movement in the regulatory space during the summer. For those of you lucky enough to
JWG analysis. This summer, regulatory pressure on financial services firms has ratcheted up to unprecedented levels. Many may have breathed a sigh of relief as Dodd-Frank rule-making slowed … but the respite was only fleeting. Since July, the industry has been bombarded with 39 new consultation papers (in the EU and UK alone) just as
JWG analysis. ‘What is proportional?’ is a question that firms may well find themselves pondering in the coming months as they begin implementation planning for MiFID II … and the same question is going to be asked by risk and compliance specialists on a regular basis once MiFID II goes live in 2017. This is
JWG analysis Europe has two key market abuse rule-sets being introduced in 2014/15 – The Regulation on Energy Market Integrity and Transparency (REMIT) and the Market Abuse Directive (MAD) and Regulation (MAR). This month, 4 consultations have been released; two from the Agency for the Cooperation of Energy Regulators (ACER) and two from the European
JWG analysis. At the turn of the century, the framers of the UK’s financial infrastructure rulebook enshrined four fundamental concepts into systems and controls practice. The rulebook in question is the Financial Services and Markets Act 2000 (FSMA), which created the FSA. (The FSA was then subsequently split into the FCA and the PRA in
JWG analysis. We learnt something this month. The reason Europe calls it a regulatory ‘hearing’ is that it is an opportunity to hear views from both regulators and the market. Of course, that’s just part of the experience as many other senses are triggered when 400 people are locked in a basement for 2 days,
By Jon Watkins, The TRADE. European regulators opened their doors to market participants this week, who had their voices heard on the key points of MiFID II relating to the derivatives markets. Trade reporting, open access to clearing houses and high-frequency trading were just a handful of the contentious topics discussed during an two-days of
By Anna Reitman, Automated Trader. Public hearing was a marathon run for industry questions and comments on every aspect of upcoming MiFID II and MiFIR reforms. We highlight a few issues, including market making obligations and requirements that could find direct market access providers identifying clients’ proprietary algorithms. Paris – As the financial industry prepares
JWG analysis. The desire for tighter controls on algorithmic trading is growing globally. Trading rules in the major financial centres will quickly set new minimum thresholds. As described in our previous piece on how algos are defined and controlled, Europe is again leading the pack and would appear to have serious intent to change the
JWG analysis. Regulators across the globe appear divided on the question of whether tighter control of algorithmic trading is necessary. The Australians are pretty laid back about it, the Germans are ahead of the game, whilst political debate rages in the US. Regardless, while the value of algo trading to global markets is generally considered
By Dominic Hobson, COOConnect. If you are a hedge fund manager, it is always tempting to believe that you are too small to be of interest to regulators. Or not the intended target of regulation at all. The fact that resources are too short to understand the detail of every regulation tends to encourage this (potentially ostrich-like) approach.
By Chris Kentouris. EMIR, it’s short for European Market Infrastructure Regulation. It has also become a four-letter word for fund managers struggling to fulfill reporting requirements. About five months after the effective date for fund managers and broker dealers to send details of trades executed on exchange-listed and over-the-counter swap transactions to recognized trade repositories, fund managers are
With the release of ESMA‘s MiFID II Discussion Paper on 22 May, we received confirmation that transaction reporting is set to get 300% bigger. The discussion paper outlines 93 fields to be included in reporting, with the addition of algo, trader and client IDs. For many in the industry, transaction reporting is one of the
JWG analysis. When we talk to people about MiFID II, they tend to focus on what they need to tell the regulator: transaction reporting, transparency and algorithmic trading often come up {see here for more}. It’s clearly a big deal in terms of firms’ balance sheets and an important part of the regulatory plumbing to
JWG analysis Last week, long after the news of Super Tuesday which reshaped the EU regulatory landscape, Europe made MiFID II, MAR, CSMAD, DGSD and the BRRD law of the land. The final Markets in Financial Instruments Directive (MiFID II) , weighing in at a slim 69% fewer pages thanks to repagination, appears to be
JWG analysis. This month the Japanese Financial Services Agency published their latest FAQ on the Financial Instruments and Exchange Act (FIEA). The current version of FIEA was approved and enacted in June 2006. It aims to: make Japanese financial and capital markets more adaptive to environmental change; promote investor protection and improve competition; ensure that
JWG analysis. Depending on whom you listen to, Europe’s trade repositories either popped in for a chat with ESMA, or were hauled in for a stern reprimand last week. Whichever it was, the resulting discussion was pretty explosive. ESMA made themselves very clear; trade repositories must work harder to address low levels of inter-trade repository
In our previous article we looked at the current surveillance regime in Europe and the challenges of extending it. See here for more background on the 860 questions that need to be answered by 1 August. While not comprehensive, this will help describe three issues that should be on your checklist: context, identification and linkage.
As debate rages across the Atlantic today over controlling HFT in Chicago, we’ve been digging into ESMA’s 42 pages on transaction reporting in its MiFID II discussion paper. See here for more background on the 860 questions that need to be answered by 1 August. Years after Dodd-Frank upgraded the surveillance capability of the US,
JWG analysis. MiFID I was all about creating a common set of rules for the single market. Along the way, it asked regulators to track market abuse. They duly set up a system of transaction reporting that all feeds into Paris – 70% of it via the UK. Seven years and millions in fines for
JWG analysis. The continent was rocked by far more than parliamentary elections on 22 May. Early reports from major financial centres confirm the impact from the 844 pages of text released by ESMA on MiFID II / MIFID to be about a 9 on the Richter scale – so high that ESMA’s website gave up
JWG has extracted the following questions from ESMA‘s Consultation Paper on MiFID/MiFIR Technical Advice. ESMA needs to deliver this advice to the European Commission by December 2014 and is therefore subject to a condensed consultation process for this paper. For more on MiFID/MiFIR see here. Q1. Do you agree with the proposed cumulative conditions to be
[accordion] JWG has extracted the following questions from ESMA‘s Discussion Paper on MiFID/MiFIR draft RTS/ITS. This paper will provide the basis for a further consultation paper on the draft RTS/ITS which is expected to be issued in late 2014/early 2015. For more on MiFID/MiFIR see here. Q1: Do you agree that the existing work/standards
JWG analysis. Our jaws hit the floor when it was revealed at our CDMG meeting last week that ESMA’s MiFID II technical standards are expected to be in excess of 800 pages with more than 800 questions to be answered by August 2014. And this is just the start. ESMA’s 2014 work plan has over
JWG analysis. The idea of KYC compliance has traditionally been associated with AML, PEP checks and international sanctions, however the new wave of regulations that is to begin rolling out in 2015 will place a whole new set of pressures on businesses to ‘know their clients’. Rachel Wolcott, writing for Accelus’ Compliance Complete, has highlighted
JWG analysis. As the European Parliament adopted MiFID II/ MiFIR on 15 April, the financial services industry was left wondering what exactly the new transparency regime is going to mean. Despite a curiously low EC estimate of compliance costs, at between €512 and €732 million, it is clear that MiFID will have a large impact
Our latest edition of the members-only newsletter, RegBeacon, is now available here. In this issue we’ve looked at the key issues to be aware of as we head into summer, namely: – EU trading on the boil with EMIR and MiFID II – Top ten trends to watch out for – Membership update – RegTechFS update –
JWG analysis. When MiFIR is implemented in 2016, all of the pain experienced in preparing for EMIR’s transaction reporting regime, which went live earlier this year on 12 February, is likely to be rekindled. Thankfully, at least this time around the industry has significantly more time to get prepared. Hopefully, that means enough time to
By Sam Tyfield, Vedder Price. Algo flagging is currently only the concern of direct members of German venues. But it’s going to have a much broader application under MiFID / MiFIR and become of concern to the buy-side too. Yesterday, the good Doctor Voigt of Fidessa published a blog about algo flagging. It is well worth
JWG analysis. While the US HFT debate rages and the FBI launches its investigations, Europe is quietly preparing to set a hard-hitting set of new rules for technical standards. When ESMA begins its consultation around MiFID II / MiFIR tech standards this summer, market participants will need to have their ducks in a row and
JWG analysis. Earlier this month, New York Attorney General (NYAG), Eric Schneiderman, set out his stall with a scathing attack on high frequency trading firms and their practices. Describing HFT firms as ‘parasitic’ and comparing their strategies to “Insider Trading 2 .0”, the NYAG’s statement would have been music to the ears of financial luddites
JWG analysis. Last week, Nasdaq OMX became the first infrastructure provider to be authorised as a Central Counterparty (CCP) under the European Markets Infrastructure Regulation (EMIR). The decision sent waves of mild panic rippling through the OTC markets, putting the focus back on an issue that was already predicted to pose problems for European banks
JWG hosted a jam-packed CDMG meeting last week for the first sneak-peek of what MiFID II holds in store for 2016. The big conclusion: a lot of work still needs to be done to scope out the operational implications of MiFID II / MiFIR and firms will need to coordinate responses quickly once the consultation
By Sam Tyfield and JWG. We asked a prominent city lawyer what current EMIR reporting issues could mean if the regulators chose to get nasty. The bottom line: big fines could appear on the cards years down the line. Given where we are with current data quality efforts, this might have an impact on the
JWG analysis. Once MiFIR is enacted over the coming months, there will no doubt be a lot of concern about one little word that threatens to have a serious impact on the commercial operations of many service providers in Europe. That word is ‘reasonable’. By itself, the word reasonable seems harmless. But when used as
JWG co-hosted a webinar earlier this week, along with Banking Technology and the DTCC, examining the recently launched EMIR trade reporting regime. The conversation tackled a range of issues, including challenges faced by industry participants in getting ready for the 12 February launch date, and a look ahead to future milestones in the reporting regime.
JWG analysis. There is a new film making the rounds where the evil ‘Lord Business’ locks up all the master builders in a think-tank and uses them to design his empire. Quite apart from giving JWG analysts a lot to laugh about, it’s a useful theme when exploring what is going on with OTC trade
JWG analysis. If you’re reading this post, then it’s more than likely you are in one of the many job roles that are impacted by financial regulation. Whether you are directly involved as COO or a legal, compliance, governance or risk officer, or indirectly involved in an operational, IT or business capacity, it’s clear that
JWG analysis. When the requirement brought about by the German high frequency trading act to tag algorithms comes into force in April of this year, market participants may well feel hamstrung by the complexity of the regime. And while the regulatory goal of improving market surveillance and reducing systemic risk may be valid, some might
JWG analysis. The road to mandate trading of OTC derivatives on electronic trading platforms will be long but, without a harmonised approach on both sides of the Atlantic, the process will be fraught with challenges. Although the core principles and requirements for Swap Execution Facilities (SEFs) were articulated by the CFTC at the beginning of
JWG analysis. The first 700 of 18,000 pages of MiFID II texts have now been published, a little more than a month after the European Commission announced agreement in the trilogue process, but this milestone foreshadows a confused standards landscape that will stretch forward to implementation of the regulations and directives in 2016. For those
JWG analysis. EU and US taxpayers scratched their heads in disbelief this week as the regulators made it painfully clear that they have squandered both years and billions with little to show for it. The politicians that gathered in Pittsburgh were quite explicit – they want OTC transparency. Did they expect that, nearly five years
JWG analysis. When G20 leaders met in Pittsburgh back in September 2009, there was clear consensus on the direction that the financial industry needed to take in the aftermath of the global financial crisis. Transparency was a key theme. The view was that, by mandating industry-wide reporting obligations for OTC derivatives, regulators would be armed
JWG analysis. With the 12 February EMIR trade reporting deadline just around the corner, the atmosphere in the derivatives industry suggests just as much turmoil as ever. Issues surrounding LEI registration, UTI reconciliation and trade repository affiliations persist as the rush to comply with mandatory reporting rules begins. The industry is still grappling with issues that
By Conor Foley, Hume Brophy. This alert summarises the key provisions of the proposed Regulation on structural measures improving resilience of EU credit institutions (SBR proposal) and the proposed Regulation on reporting and transparency of securities financing transactions (TSFT proposal). Both proposals were published on 29 January by the European Commission and follow the 2012
By Tristan Dehaan, Market Data Vendor Manager Following a robust market data discussion on RegTechFS, we asked Tristan, a Market Data Vendor Manager at a European Asset Manager, to tell us about his efforts to help the industry get to more client-friendly market data contracts. At the end of 2012, speaking as a well-placed member of
JWG analysis. With 9 working days to go before compulsory reporting of derivatives trades becomes a daily reality, firms are in the final phases of implementing their individual solutions. These differ from firm-to-firm, for example some are planning to report in real-time (as in the US), while others plan to report later within the T+1
Working late into Tuesday night, European lawmakers concluded a compromise over the new Markets in Financial Instruments Directive (MiFID II). The final text has not yet been made public, and is not expected for several days. However, some details have emerged. Concessions had to be made on both sides, with the Parliament advocating for robust
2013 was a huge year in the development of alternate and decentralised ‘crypto-currencies’. Some countries have so far taken relaxed stances on them, despite obvious money-laundering and tax evasion risks. Meanwhile, others have taken the opposite approach and seen fit to ban crypto-currencies outright. Either way, we are now beginning to see a clearer picture
Trade reporting for EMIR begins in February 2014 and firms are beginning to register their entities (and their clients) for LEIs in order to meet the deadline. However, registration volumes are set to increase as the EBA’s recent consultation paper indicates that the LEI will be used for CRD IV risk reporting, significantly expanding the
Big changes are happening at the CFTC: With the departure of Gensler, and the swearing-in of acting Chairman Mark Wetjen, everyone knew that there would be a change of approach. However, the scale and speed of that change has come as a surprise to many. In fact, almost the moment Gensler stepped out of the
By: Sam Tyfield Just in time for your holiday, December has seen a cascade of reporting work from ESMA and the EU Commission on EMIR. On December 20, 2014, ESMA release an updated Q&A on EMIR. Specifically on ETD reporting, see towards the bottom of the page at the link here (I have cut and pasted the relevant paragraphs below,
Today, a final version of the long-awaited Volcker Rule has been published by the five US agencies involved in its drafting. The rule as finalised is something of a victory for banks owing to multiple broad exemptions and an extension of the timeline. However, there are many questions still outstanding, and implementation will be a
On 6 August, ESMA updated its Q&A guidance on the implementation of EMIR (read here). Firms should pay particular attention to these Q&As as they have been known to overturn some common assumptions in the past, and this edition is no exception. In particular, the new answers spell bad news for the future cost of
How will the PRA, FCA, and CMA manage conflicting competition mandates? On 24 July, during the second reading of the UK’s Banking Reform Bill, it was stated that a new competition objective will be given to the PRA. UK banks now find themselves with three national competition regulators jostling for position, not to mention those
Counterparty classification regimes, such as CRD IV and EMIR, give banks a good reason to centralise their reference data, and the BCBS’ Risk Data Aggregation Principles provide a clear framework for doing so. From 1 January 2014, under CRD IV, firms will need to calculate CVA and hold additional capital on all derivatives contracts. However,
It is common knowledge that the central clearing and risk mitigation requirements apply to any third country firm trading with an EU entity. However, it may come as a surprise that these requirements can also apply to trades purely between two third country entities where such trades have a ‘direct, substantial and foreseeable effect with
Before ESMA left for their summer holidays, they made it abundantly clear that EMIR will apply in one form or another outside of the EU. This threatens to disrupt trading flows globally as early as 15 September. By this date, parties trading derivatives must agree in writing the arrangements under which OTC derivative portfolios will
Today, 22 July, marks the day that the Alternative Investment Fund Managers Directive (AIFMD), must be transposed into national law. With the rules now technically in force, UK-based firms have a year to become compliant and apply for authorisation with the FCA. However, this apparently generous deadline disguises the fact that many managers may need
The Australia has produced final implementing regulation that will implement their derivatives trade reporting regime. ASIC consulted on rules for trade repositories and trade reporting in March and April 2013, and expects these rules to be finalised and enter into force in July. These draft regulations include restrictions on ASIC’s rule making power in relation
The proposal for Cross-Border Guidance and accompanying exemptive phase-in order has been approved by the CFTC in a 3-1 vote. Regulators have broken a worrying stalemate between the CFTC and the European authorities; worrying because it threatened to split derivatives trading along jurisdictional lines, with US entities unable to clear through European infrastructure and vice
US and EU regulators have announced a ‘path forward‘ on approaching cross-border derivatives regulation that will allow firms operating internationally to comply with only one set of OTC trading requirements, rather than implementing both Dodd-Frank and EMIR. For a long time it seemed that there would be no agreement on the ‘equivalency’ between Dodd-Frank and
The scope of the Alternative Investment Fund Managers Directive has been a big grey area since the first draft. This carries with it primary problems for funds, who may not be certain whether they are AIFs or not, but also secondary problems for those selling derivatives to the buy-side. Firms that are uncertain of their
Recent developments give firms some reasons to celebrate but be prepared for a long engagement With lots of different regulatory benchmark efforts now underway, the industry could be forgiven for not taking a common stance. With IOSCO set to issue final principles in July, ESMA and the EBA are simultaneously consulting on a European set
The new legislative package contains some surprises for those engaged in ‘risky’ trading MiFID II is almost upon us. This month, the Council of the EU agreed their general approach, meaning that the draft of MiFID II/MiFIR is free to advance to the European Parliament. If all goes according to the current plan, the new
The UK’s Foresight Commission report on HFT has finally heard the industry’s call for clear, shared data standards across the financial system. However, it remains to be seen whether Europe – or the world – has the stomach to realise this vision. After a series of dramatic computer trading glitches across the globe, most recently
The industry has been waiting for the “high-level” opinions of the Liikanen Report, and its prescriptions for reform of the turbulent European banking sector. The reforms, while suggestions rather than binding Policy (as Barnier continues to remind everyone) call for huge changes to how European banks operate. The biggest development of these is a Volcker-style
The Office of Compliance Inspections and Examinations (SEC, FINRA, NYSE) has released an assessment of 19 firms regarding their controls to prevent misuse of material, non-public information. While not legally binding, this development is important because this is the first comprehensive statement in years regarding a regulatory view of a firms systems and controls for
Thanks to technological hiccup after technological hiccup, High Frequency Trading (HFT) remains a permanent fixture in the financial press. With each blip, regulators and politicians promise to regulate HFT, but how they are going to put effective controls in place is still an open question. Despite the noise, the issues with HFT remain the same.