Michael Shashoua: Question Time for Mifid II Opponents

The apparent delay of the compliance deadline for Mifid II beyond the current January 3, 2017, deadline, raises more questions about the introduction of the rules in the first place: Was the 2017 deadline set by the European Commission realistic? Did it give the industry enough time to meet the requirements of Mifid II, including its associated Mifir rules and Recommended Technical Standards (RTS), which flesh out the data transparency requirements and ways that data management will be affected by required market infrastructure changes?

The European Securities and Markets Authority (ESMA) was lax and late in issuing specific technical guidance—only issuing the aforementioned RTS this September. So it’s hard to argue that the industry’s push to delay the Mifid II deadline for as long as a year, into early 2018, was made because the industry had dragged its feet.

However, with more than a year before the original 2017 deadline, it is hard to believe the industry can’t get the work done in that amount of time. After all, as Linedata’s Matt Gibbs told Sell-Side Technology, his company has already implemented a lot of the necessary changes for electronic trading.

The issues that others cite, such as the need to re-evaluate technology budgets and figure out technology solutions that can work for managing data across multiple regulatory compliance areas, are the sort of thing firms should already be doing on a regular basis, rather than just realizing that they’re necessary when regulatory compliance deadlines are near. Being unprepared isn’t a credible reason to demand that deadlines be postponed.

Hub and Spoke

Perhaps firms can look to an idea proposed by Anastasia Dokuchaeva, director of regulatory solutions at FactSet, as a way to relieve the regulatory burden from Mifid II. She proposes a “hub and spoke” approach to managing data needed for compliance with several regulations, including Mifid II. This model groups together data relevant to different regulations, whether that data is symbology, taxonomy, instrument and entity reference data, relationship information, or hierarchies, and locates it all in a hub. Addressing compliance with Mifid II, BCBS 239 stress tests, AIFMD or other rules, sets out each of these responsibilities as spokes, and distributes the common information outward. As Dokuchaeva says, this turns big data into “smart data.”

Leveraging the data that firms already have available for compliance with other regulations and standards is a valuable shortcut that can reduce the time firms need to comply with Mifid II in particular. And hub and spoke is just one possible inventive approach that could raise firms’ confidence in their own ability to be ready by 2017.

However, before firms can leverage data to meet multiple compliance requirements, they ought to be sure the data is of the highest quality possible. A new survey of buy-side data professionals suggests that about 70 percent of them lacked confidence that their firms can ensure data quality on a par with the importance they place on it.

Prevalent data operations strategies, using complex application architectures requiring vast data integration and system reconciliation efforts, are creating data quality issues, says Marc Mallet, a vice president at SimCorp, which conducted the survey. Hearing of these kinds of issues, especially with data integration, which is where firms could get leverage and efficiency that would be useful for compliance, it’s more evident that many firms may have a lot more work to do, and it’s off target to blame only the regulators for delayed compliance specifications.

Hub and spoke could be a solution to these data integration issues. Those who cite the need to manage data relevant to compliance with different regulations could turn to this approach or invent their own way to simplify tangled data architectures. Either way, the questions about Mifid II’s postponement should be answered with hard work, not excuses.