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MiFID - Technology Solutions

MiFID - Technology Solutions. Pradeep Hardikar Director & Practice Leader Banking and Financial Services. MiFID - Technology Solutions In Search of IT Excellence. Pradeep Hardikar Director and Practice Leader. Agenda. Key MiFID Directives Impact on Stakeholders Impact on Systems

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MiFID - Technology Solutions

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  1. MiFID - Technology Solutions Pradeep Hardikar Director & Practice Leader Banking and Financial Services

  2. MiFID - Technology SolutionsIn Search of IT Excellence Pradeep Hardikar Director and Practice Leader

  3. Agenda Key MiFID Directives Impact on Stakeholders Impact on Systems The Way Forward Questions

  4. Key MiFID Directives • Investor Protection –Articles 18, 19 • Best Execution –Articles 21, 22 • Coherent Framework – Article 69 • Transparency – Articles 27, 28, 29, 30, 44 & 45 • Integrity – Article 25 • Passporting – Articles 31, 32, 33, 34

  5. Impact on Stakeholders • Venues • Regulated Exchanges – Increased competition • MTFs & Internalisers – Increased opportunities + Increased obligations • Investment Firms • Increased opportunities • Tighter controls needed • Investors • Gains & Increased protection • Data aggregators & Publishers • Increased traffic • Increased opportunities (new Interfaces) Across The Organisation!!

  6. IT Impact – Investor Protection , Best Execution & Coherent Framework • Investor Protection • Suitability & Appropriateness – Changes to CRM / KYC systems • Track & record client communications • Customer data, prices, Instruments, Size of trades, Time stamps • Increased protection = Increased paperwork • Best Execution • Smart order routing • Combined order book • Internalising engine – Continental EU impacted • Order audit trail • Proving Best Execution? Reporting! • Coherent Framework • End to concentration rules • Changes to OMS/ORS

  7. IT Impact – Possible approaches? • Reference Data • Generic reference data framework required • Customers, Venues, Instruments • Messaging • Adopting open interfaces to message management • Common standard needed • Architectures • Multiple interfaces, Volume increase, Complex messaging, Complex biz logic • SOA – Allows best of breed components to be used • Order Management Engines • Further complexity to algorithmic systems – Real time decision making • Best Execution – Complex biz logic

  8. Order Processing Engine Order Audit Trail Smart Order Routing Order Processing Flow – Systems View Market Data Provider Combined Order Book In Memory Market Data system Rules Engine In Memory DB Open Order Processing Logic Re route To Venue Quoting Communication System (COMS) (Parser, Config file, Formatter) Broker / Alternate Venue Exchange / Alternate Venue Internalize Trade Processing Engine Open Order DB COMS Reporting Position Mgmt Exchange / Data Aggregator / Proprietary Compliance Reporting Engine Market Data Archive Order Data Archive Trade Data Archive

  9. Technology Solutions – The Way Forward • Combined Order Book • Smart Order Routing • Order Audit Trail • Quoting and Reporting • Compliance Reporting Engine

  10. Technology Solutions – Combined Order Book • Combined Order Book • Impetus • No concentration rules • Advent of MTF and Internalisers • Best Execution obligations • Challenges • Deluge of market data • Varied cost of trading • Market access • Solution • Streaming market data • In memory database • Store details, use aggregates

  11. Technology Solutions – Smart Order Routing • Smart Order Routing • Impetus • Best Execution obligation • Fast moving markets • Challenges • Requires COB • Speed and Efficiency • Ability to locate hidden liquidity • Ability to identify spoofing • Solution • Build COB • Direct access • Rules Based • Evaluate and Improve

  12. Technology Solutions – Order Audit Trail • Order Audit Trail • Impetus • To prove Best Execution • Ability to analyze • Compliance Requirement • Challenges • Multiple points of data capture • ‘What time is it?’ – Ritchie • Data Storage • Solutions • Data tagged to executions • Market data history

  13. Technology Solutions – Quoting and Reporting • Quoting and Trade Reporting • Impetus • Quoting (Pre-Trade Transparency) • Reporting (Post-Trade Transparency) • Attract Order Flow • Challenges • Venue? • Mechanism? • Format? Infrastructure? • Cost? • Solutions • Industry Utility • Proprietary

  14. Technology Solutions – Compliance Reporting Engine • Compliance Reporting Engine • Impetus • Best Execution Obligation Proof • Stop Abuse Ahead of Time • Challenges • Humongous Data • Compliance Specification • Incident Reporting and Follow-up • Solutions • Online Alerts • Workflow Monitoring System

  15. Implementation Methodology • Four Stage approach – Spans life cycle of Firm’s MiFID compliance initiative • Stage 1: MiFID Readiness Assessment • Impact Analysis, Gap Analysis & Compliance roadmap • Stage 2: Implementation • Construction to address gaps identified in Stage 1 • Stage 3: Rollout • Audits on systems modifications implemented in Stage 2 • Stage 4: Continuous Improvement • SLA based Maintenance services

  16. Thank you Questions?

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