Buy-Side Technology Awards 2015: Winners' Circle—Fidessa

How would you assess the state of buy-side compliance today, and what distinguishes Sentinel from other products currently on the market? 

Richard Hooke, Fidessa: Asset managers are under increasing pressure to juggle the demands of regulators with the needs of their clients, and all of this against a backdrop of challenging economic conditions. Consequently, these firms need a compliance system with the power and flexibility to address their requirements today, and, crucially, one that can scale and evolve to meet their needs in the future. Long-established in the portfolio compliance world, Sentinel combines flexibility, agility and performance in an intuitive package, providing a compliance framework that can respond quickly to today’s ever-changing world of regulation, while extending its pre- and post-trade performance leadership.

What recent enhancements have you made to the platform, and how do they integrate into Fidessa’s broader buy-side offerings? Also, what were the drivers behind those upgrades?

Hooke: Sentinel’s breadth of coverage has been expanded to encompass transactional rules. Fitting seamlessly alongside Sentinel’s portfolio compliance system, trading compliance provides the extensive operational risk controls that existing portfolio compliance systems alone cannot achieve. With operational risk an increasing area of focus and concern for investment firms, the recent addition of trading compliance functionality represents a marked shift in capability and introduces a whole new dimension of monitoring. The compliance function can now monitor operational risk factors such as concentration in brokers, traders and markets, as well as identify and restrict trading patterns, such as opposite direction trading, which can identify wash sales, inter-fund crosses, and more.

How do compliance challenges differ by region for investment managers today? Have we seen convergence, and where do they still remain very distinct?

Hooke: As investment firms adopt a more global outlook, they become subject to global regulations and investment standards. Sentinel’s ability to define libraries of rules that can be easily associated with new funds is one of the ways in which our clients optimize their compliance process. Sentinel’s analytic builder allows investment managers to respond quickly to new regulations and their increasingly complex asset mix. In addition, Sentinel’s auditing workbench provides transparency through accessing historic rule results, something that is a fundamental requirement of stakeholders today. In the post-financial crisis environment, there is convergence in the regulatory drivers worldwide that means compliance tests are structurally similar. There remain, however, distinct implementations in different regions and so the fundamental flexibility that Sentinel provides remains a key feature that users rely on.

To what extent is compliance now a data problem? How does Sentinel help firms manage that side of the equation?

Hooke: With data a key component of compliance checks, Sentinel has always had a robust “missing data” workflow that allows identification and separation of data issues from business issues, enabling the most appropriate resource to investigate the issue.

What do you see as the primary issues in buy-side compliance going forward? What is in the pipeline today that could prove crucial in two to three years from now?

Hooke: Fidessa is promoting ways to enable the compliance process to be closer to the investment process in order to eliminate wasteful investment decision cycles where ideas are proposed, but are rejected at the pre-trade compliance check. Sentinel’s concept of “active compliance” is about providing an investment environment where the compliance rules are a fundamental aspect of the investment decision rather than simply being a mandatory gate that an order has to pass through. An increasing number of our customers are choosing to centralize their entire guideline monitoring on Sentinel, spanning regions, business lines, and asset classes, allowing them to decommission disparate peripheral systems. Crucially, Sentinel allows them to demonstrate consistent best practice to both their clients and the regulators, and it is now an indispensable component of their business.