MiFID, smjernica EU-a o tržištima financijskih usluga, najsloženija je direktiva koja će temeljito izmijeniti pravila i percepciju tržišta kapitala kod svih sudionika. Zanimljiva rasprava može se voditi na temu što nam MiFID donosi te kako se investicijska društva pripremaju za njegovu implementaciju. Pozivam sve Forumaše da sudjeluju u “virtualnom okruglom stolu” na tu temu…
MiFID and the European financial services sector
http://www.b-next.eu/MACOC-MiFID.1029.0.html?&L=1
Best Execution Policy (BEPO)
The Modul BEPO supports the structured creation and maintenance of best execution policies within the MACOC:MiFID module. The application enables mapping, maintenance and record keeping for an unlimited number of policies.
Best Execution Check
The compliance of actual order execution with the stated policy is checked by Best Execution Check. The results serve as an essential basis for optimizing the policy as well as valuable competitive tool.
Efficiency Check
With the Efficiency Check module, alternative trading venues may be monitored and the results of order execution compared on the basis of various parameters. Alternative policies or the policies or competitors can likewise be backtested and analyzed.
Conflicts of Interest (COI)
MiFID requires that conflicts of interest be recognized and remedial actions taken at an early stage. Conflicts should be proactively avoided. This is only possible through organizational change, supported by a strong infrastructure.
Is IT Mifid-ready?
http://db.riskwaters.com/public/showPage.html?page=661763
With the European Union’s Markets in Financial Instruments Directive now in force, banks must have IT systems in place to publish trade and transaction reports, be able to prove they traded according to best execution guidelines, and store data post-trade. Are banks ready? Ryan Davidson reports
Compliance with the Markets in Financial Instruments Directive (Mifid) has been a constant headache for investment firms. Banks have pumped millions of euros into improving IT systems and infrastructure to deal with requirements around trade reporting, providing best execution to clients and data storing, to ensure they were ready for the November 1 implementation date.
While some have turned to third-party vendors to help with Mifid compliance, others have decided to develop systems in-house. Either way, the costs have been substantial, and the tight deadline for compliance has meant many firms have had to fix any unpredictable bugs that arise with testing new systems on the fly.
"We’re still finalising what the total cost has been for ABN Amro, but it has been substantial. We have worked hard over the past two years to implement Mifid in seven business units spread over 21 countries and over 50 legal entities, profiling more than 1 million clients and training 25,000 staff," says Vicky Bruce, head of ABN Amro’s Mifid programme in London.
The extensive preparation – and investment in IT – is a consequence of the sheer scale of the regulations. Mifid replaces the previous Investment Services Directive (ISD), and aims to create a level playing field for financial services companies across Europe, as well as provide greater protection for investors against mis-selling. At the heart of Mifid is a requirement for best execution, designed to ensure clients are obtaining the best possible deal. Best execution, as defined in Article 21 of the regulations, states that financial services firms carrying out transactions on behalf of their clients "must take all reasonable steps to obtain the best possible result, taking into account price, costs, speed, likelihood of execution and settlement, size, nature or any other consideration relevant to the execution of the order".
That means banks need to decide what factors should be given priority for each individual customer when executing a trade. The directive states that price should be the most important factor for retail clients, but this should include costs such as exchange fees, taxation, commissions, and clearing and settlement fees, as well as indirect costs, such as market impact and implementation shortfall.
The bank then needs to identify all the available execution venues, including exchanges, multilateral trading facilities or market-makers, and ensure it is able to execute client orders on these venues. The execution policy for each client has to be periodically reviewed, and all this information must be recorded and stored for a minimum of five years.
As if this isn’t enough, financial institutions are required to conduct appropriateness and suitability tests for their clients, and publish pre- and post-trade data on a close to real-time basis.
This has posed significant challenges for banks in terms of infrastructure, data storage and automated pricing and trading systems – not least because of the tight deadline for compliance. Even though the main principles of Mifid were agreed by the European parliament in April 2004, the final amendments to the regulations were only accepted by the European parliament and European Securities Committee in June 2006. The deadline for European member states to transpose the measures into national law was on January 31 this year – leaving banks just 10 months to finish their preparations and test IT systems. …
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In fact, several European regulators have still to finalise their approach to Mifid. According to the European Commission’s Lamfalussy League Table, which tracks the progress of European regulators in adopting the rules, the Czech Republic, Spain, Hungary, the Netherlands and Poland had not transposed all the regulations as of November 13. Consequently, many firms have been unable to complete and fully test their Mifid compliance programmes.
A report on the readiness of investment firms, published in August by JWG-IT, a London-based Mifid think-tank, stated that only 31% of respondents had well-managed programmes and communications in place in preparation for Mifid. Some firms said they were not ready at all, with 14% reporting no formal change in policy.
"Most UK firms are ready for Mifid and their preparations have worked out quite well. Some smaller firms may not be ready, but are ISD-compliant already, which is close to Mifid rules," says Anthony Belchambers, chief executive of the Futures and Options Association in London and chairman of Mifid Connect, an organisation designed to support member firms and simplify the UK implementation of Mifid.
The JWG-IT report also shows that firms are taking different approaches to Mifid compliance: 20% of respondents say they are seeking to create an advantage over their competitors through Mifid compliance; 40% say there may be potential opportunities from complying; while the remaining 40% are doing the bare minimum for Mifid.
ABN Amro, for instance, has focused on those areas where it thinks compliance with Mifid will give it a competitive edge. "We have taken a more comprehensive approach to Mifid implementation where it could gain a competitive advantage, such as the area of cash equities," says Robert Speirs, Mifid analyst at ABN Amro in London. In this area, Mifid is encouraging competitive changes in the market, such as the development of viable competitors to the incumbent exchanges. "The rapid growth in market share in some top European stocks gained by the new Chi-X Exchange is a good example, and we’re investing in our systems to ensure we can react and take advantage of those changes," adds Speirs.
In preparing for Mifid, ABN Amro has enhanced a range of IT systems, both from third-party software vendors alongside its own in-house systems. Speirs says the storing of trade data was not a big problem for ABN Amro, noting that the various rules and regulations the bank operated under before Mifid meant it already retained most of the data the directive requires it to store. "The incremental data storage required for Mifid is not as massive as some commentators (and IT vendors) like to suggest," Speirs adds.
However, the bank needed to make significant changes elsewhere – for instance, to the systems it used to provide quoting and trade reporting for equities. "The number of IT systems that have been impacted at the bank has been huge. In the equity business it is almost easier to think of areas where we haven’t had to change IT systems than where we have," says Speirs.
The bank experienced no major problems when the Mifid systems went live on November 1, according to Speirs. However, there were some bugs that caused minor difficulties: in the first batch of transaction reports that were submitted under the new rules, two out of 15,000 reports failed. This was because a few bonds the bank traded were priced in French francs and Deutschmarks, but the Financial Services Authority (FSA) transaction reporting system will only accept currencies that appear in the International Organisation for Standardisation (ISO) currency codes. As the euro legacy currencies have been de-listed by the ISO, those reports were rejected by FSA. Other investment firms were also caught out by the same problem, says Speirs, adding that ABN Amro has now fixed the bug. …
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Other banks, including Barclays Capital, Citi and UBS, refused to comment on the readiness of their IT systems. However, JWG-IT has been working with many investment firms for their preparation for Mifid and reports there has been plenty of activity in the testing of IT systems.
"Firms have been taking a pragmatic approach, fixing problems as they arise. It has been and will continue to be up to each firm to apply due diligence in their testing," says PJ Di Giammarino, chief executive of JWG-IT in London.
Nonetheless, the extent to which smaller investment firms have tested their systems is questioned by some working in the IT systems industry. Banks have facilities in place to test normal IT operations, and additional testing for Mifid may have put pressure on testing departments, says Colin Slight, sales and marketing director for Cheshire-based IT performance testing company Facilita.
"I have not seen any major technology companies doing a lot of Mifid testing for investment firms. It has yet to be seen how rigorous their testing has been until clients or regulators start asking questions," says Slight.
Along with a lack of clarity from some European regulators on how the rules will be implemented, this is also a function of cost. The extra resources devoted to testing, coupled with IT systems upgrades, retraining staff and examining company policies has been massively expensive for investment firms. "While Mifid is universally seen as a positive initiative by banks that have a strong focus on execution, compliance with reporting requirements commands heavy investment, especially in terms of data," said Guillaume Lemarchand, co-head of global execution services at BNP Paribas in Paris in a statement on June 7.
The JWG-IT survey reports that 15% of respondents had a budget of more than EUR10 million, 31% had a budget of between EUR2 million and EUR10 million, and 52% of investment firms had a budget of less than EUR2 million.
One way banks have been dealing with the substantial cost of compliance is by forming consortia to share the burden of funding IT development programmes. One such consortium was formed in September 2006 to create Boat, a Mifid-compliant trade reporting platform. The consortium consists of nine investment banks: ABN Amro, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, Merrill Lynch, Morgan Stanley and UBS. Boat has attracted 15 trade reporting clients since, including Barclays Capital, BNP Paribas, Dresdner Kleinwort, JP Morgan and Royal Bank of Scotland. London-based financial information company Markit is the consortium’s business partner for Boat.
Boat was designed to meet firms’ pre-trade quoting and post-trade reporting obligations for their European over-the-counter equity trades. The platform collects, collates, validates and stores OTC trade data from investment firms and publishes it in real-time via data vendors such as Reuters and Thomson. Boat stores trade data for five years, and users can retrieve the data from the platform at any time. The subscription fee for the trade reporting service is EUR40,000 per year and includes a rebate component. The platform also offers a data service that gives users a comprehensive view of the European OTC equity markets. This service is free until January 1, 2008.
"Boat went live on November 1 and the launch went as smoothly as we had hoped," says Will Meldrum, London-based managing director and head of Boat at Markit.
The platform was built by Stockholm-based software company Cinnober. The company carried out user-acceptance testing between August and November, and any bugs found were fixed quickly, says Meldrum. …
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Some banks are also using third-party vendor systems to comply with Mifid, either installed on their site or subscribed to remotely. Reuters offers a product to tackle data consolidation, trade reporting, Mifid instrument classification, tick data storage/retrieval and transaction cost analysis tools to meet best execution policies.
The Reuters Transaction Cost Analysis Service (RTCAS) is a Reuters-hosted service that uses tick data from the market to calculate a series of benchmarks relevant to a firm’s individual trades. This bureau service requires financial institutions to provide Reuters with files containing their order and execution data on a real time, daily, weekly or monthly basis. Customers will then be able to run their own reports from Reuters’ web-based reporting tool and download these into spreadsheet applications.
This service leverages an existing Reuters database containing more than 10 years of market data, which is accessible to customers through a service called Reuters Datascope Tick History. Using RTCAS, firms can specify how many pricing venues they want to include for creating the price for their trades. The service allows firms to ensure they have been applying their best execution policy by comparing the execution quality of the chosen venues versus what could have been achieved across all venues. Reuters had nine clients using the service as of November 21, and claims more are signing up.
"RTCAS went live on November 1 and was well received from both buy and sell sides. Our clients for this product range from small investment firms to the largest global investment banks," says Andrew Allwright, head of marketing, exchange-traded instruments at Reuters in London.
Although the initial focus for RTCAS is on equities, coverage of other asset classes would be possible if comparative trade and pricing data were made available, says Allwright. But he acknowledges there may be difficulties in applying the same system to markets where there may not be enough liquid fungible products to get price comparisons. "The RTCAS system is not appropriate for bespoke structured products," he remarks.
Not all third-party vendors report that firms are ready to meet best execution requirements. Enterprise infrastructure company BEA Systems, in conjunction with London-based IT services provider ASPone, has developed joint IT systems for trade reporting, transaction reporting and best execution. The trade reporting system went live on November 1, but the software to address best execution requirements is still in its testing stages.
"Some investment firms have not been focusing on best execution software – their priorities have been trade reporting and transaction reporting for the November 1 deadline," says Andy Woollard, Mifid lead at BEA Systems in London.
While most firms agree with the aims of Mifid – to create a level playing field for financial services across Europe – the tight deadline, along with regulatory uncertainty in some jurisdictions, has left many struggling to implement and fully test systems to meet the deadline. Rather than trying to meet all criteria from November 1, complying with Mifid may be more of a long-term goal for many firms. However, there are dangers with this approach. If financial institutions are unable to provide best execution for clients – or prove they achieved the best possible result for clients if challenged – they could face legal action, both from customers and regulatory authorities. "The courts will have some interesting cases to deal with next year. There will be a big penalty for those not prepared to prove that they have followed the new and detailed rules of the game prescribed by Mifid," says Di Giammarino.
O MiFID-u je bilo rasprave na konferenciji ZSE 2006. u Rovinju, a spominjao se i na Hvaru 2007. Na žalost imam premalo podataka o tome da bi raspravljao,a iskreno ne nalazim da će ova tema naići na neki odjek na ovom portalu.
Tko vam je taj Mifid?
Ja sam samo čuo za Buffeta