Thomson Reuters Enhances Velocity Analytics Platform with Mifid II Functionalities

Adopting the technology of Kx Systems, Thomson Reuters is gearing up for Mifid II, adding two new functionalities that aim to help end-users comply with two of the most critical areas of the upcoming regulatory mandates. 
 
Brennan Carley, global head of enterprise propositions and product frameworks at Thomson Reuters, tells WatersTechnology that a year ago, the vendor decided to modernize its legacy Velocity Analytics platform, looking at the demands of Mifid II.

“Mifid is a huge data management challenge for the industry,” he says. “It requires customers to do a lot of analytics to demonstrate things like best execution, to determine whether they are a systematic internalizer in a particular instrument.” 

This modernization was a process supported by technology vendor First Derivatives and its subsidiary Kx Systems, the technical know-how of which Thomson Reuters inherited and integrated with its content. “That’s everything from real-time feeds, pricing, and reference data,” Carley explains. “We integrate these in our historical database, which includes data from over 400 exchanges around the world, going back 20 years.” 

The vendor also integrated the technology with its Elektron managed services platform, the Thomson Reuters Enterprise Platform (TREP). “That’s software that our customers use to manage market data,” says Carley. “We did that because clients wanted to use their existing assets.”

He says this integration makes it possible for users to leverage their investments and apply analytics. “By offering this technology as part of our Elektron managed services platform, clients can take it as a service and access it immediately,” Carley says. 

Mifid Features 

Following this transformation resulted in producing two new functionalities, about to become available on the Velocity Analytics platform when Mifid II comes into force on January 3, 2018. 

For starters, clients will be able to ensure and demonstrate that they have achieved best execution, for equities, foreign exchange (FX), fixed income, and derivatives. “The feature will be able to take their trade data and benchmark, analyze and compare it with market prices across the entire market to demonstrate they have achieved best ex for their clients,” says Carley. 

As part of Thomson Reuters’ Mifid II program, the vendor is working with over 50 exchanges across Europe and a number of trading venues that currently are not providing pre- and post-trade transparency, such as dark pools from which Thomson Reuters will be taking prices and integrating them into its Elektron platform. 

“It is hard today to demonstrate best execution in corporate bonds because the underlying data is not available and it is difficult for the analytics to be able to demonstrate quality execution,” says Carley. “We are working with all those venues to onboard that content onto our platform and then integrate that in together with the Velocity Analytics technology, offering a multi-asset class best execution service.” 

End-users will still have to upload their trades and the platform will compare those trades against the market and produce reports and analysis showing the performance of those trades. 

SI Determination

The second Mifid service refers to the systematic internalizer (SI) determination. Under Mifid II, a firm automatically becomes an SI if it trades over a percentage of the daily volume of an instrument. If the quantity of the trade exceeds a certain number, then it is regarded as an internal trade execution, as opposed to being sent out to a public market. 

According to Carley, however, the problem with SIs is more complicated than that. “The tricky thing is that this threshold is not a fixed percentage. It depends on the asset class, on the volume that’s been traded and the amount of liquidity, among other things,” he says. “You have to do calculations across all instruments on a daily basis.” 

The new feature provides an early warning before a firm is about to become a systematic internalizer.  “If they get warned, they will need to change their trading activity so they don’t crash a specific threshold,” Carley explains. “It’s not just a day report; it’s a real-time analysis of data across a large volume of different instruments.”