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The technology challenges to implementing MiFID II

Banks can work to master their technology capabilities to meet MiFID II compliance requirements.

Overview

Banks and capital markets institutions responding to Markets in Financial Instruments Directive (MiFID) II legislation may want to begin their preparations early. Finance and risk functions should be poised for change.

Understanding the business impact of the new requirements is one thing. Preparing for implementation is another—particularly when technology is an area of significant focus. MiFID II affects many areas within many institutions, but one of the biggest effects is within technology, where MiFID II implementation calls for carefully-considered technology solutions.

The draft of MiFID II technical standards were published in December 2014, with the implementation draft to be submitted January 2016, just one year before MiFID II’s go live date of January 2017. That gives financial institutions limited time to work through the technology impacts.

With two years until compliance is mandatory, banks and capital markets providers face a short window for making technology changes that will help them meet MiFID II requirements.

Key Findings

MiFID II requirements touch on several areas that reach into all aspects of a bank
or capital market institution’s business. They include themes such as:

  • Investor protection

  • Trade Execution

  • Algo trading

  • Transparency reporting

  • Data

MiFID II requirements will impact technology in each of these areas. Some of the
requirements, for example, involve:

  • An enhanced client portal, allowing client reports, costs and charges

  • Automated pricing, using various external data sources and tiered according
    to client bracketing

  • Algo trading controls and enhanced testing scrutiny

  • A multi-phased deal booking model to allow required pre-trade transparency
    within the desired timeframe

  • Enhanced lifecycle event (straight-through processing) to reduce trade reporting
    breaks and manual intervention

  • Data provision from new sources to determine instrument and venue status.
    Legal entity data to be accessible via an Application Program Interface

Recommendations

Banks and capital markets can consider a multitude of actions to kick off the technology changes they may need for MiFID II compliance.

Work can touch on several business areas, including:

  • Building a robust client classification and related client data repository

  • Launching or reconfiguring a customer-facing portal to increase client interaction

  • Migrating trading activities to more transparent exchanges or electronic platforms

  • Developing “post trade transparency” approaches and reporting

  • Supporting algorithms to determine trading decisions

Banks and capital markets providers face a short window for making technology changes that will help them meet MiFID II requirements. Beginning now, with a comprehensive approach, financial institutions can position themselves to make the transition.

DOWNLOAD REPORTDOWNLOAD ADDRESSING THE KEY TECHNOLOGY IMPACTS FROM MiFID II [2.13 MB]

Authors

Peter Beardshaw
Managing Director, Accenture Finance & Risk Services

Based in London, he leads the UK and Ireland Finance and Risk Management consulting practice.

Alan Perrin
Associate, Accenture Finance & Risk Services

He has extensive industry experience across a number of areas within several leading financial institutions.