A recent article published in the Financial Times calculated the cost of Asset Managers implementing MiFID II. While many sell side firms have already spent of millions of euros attempting to meet the regulatory requirements, the full estimate is a staggering €2.5 billion across the industry. This equates to an average of €10.3 million for the top tier companies. The article noted that the majority of this cost will come from the technical requirements around transaction reporting.
While many may wonder why the price tag is so high, the practical implementation of the reporting requirements are tricky to say the least. Unlike MiFID I which many could handle in-house, the revised regulation encompasses a greater number of financial instruments and affects a wider group of financial service companies.
Then there is the data problem itself. Key to understanding the challenge are the issues around data control. Contrary to what many might think, many companies struggle with centralising their transactional data. Banks and larger asset managers are likely to have multiple front and/or middle office systems. Combining the transactional data from these can be a complex and time consuming task in itself, but once centralised, a series of validation rules must then be applied to ensure that the reporting is accurate.
The requirement under MiFID II is to report up to 65 fields ranging from transactional economics to the buyer or seller’s personal information (e.g. name, age and national ID or passport). In addition, a complex set of rules is to be applied to determine which transactions are in scope, and in which format they are to be reported to the FCA.
Taking the above into consideration, many companies will be looking for options to ensure that they are fully compliant. Given the January 2018 hard deadline, it is now unlikely that a home-built system could be ready in time. Additionally, it is likely that ESMA or the FCA will refine the technical requirements in the first year as they sift through the gargantuan data volume. Any in-house build will struggle to accommodate those changes without significant cost and effort.
Tackling MiFID II Transaction Reporting does not need to be an uphill struggle. Contact us at AutoRek to see how we can help you become MiFID II compliant and reduce the financial burden of implementing MiFID II.
Our robust, automated financial control regime helps investments firms ensure readiness for the significant changes MiFID II/MiFIR will have in respect of Transaction Reporting requirements.
We adopt a 5 step approach to Transaction Reporting, from data extraction through to the management control reporting and report submission to the FCA’s Approved Reporting Mechanism (ARM).