MiFID II-Repetitorium: Knackpunkt Artikel 51

Viele Firmen befürchten, dass sie am Artikel 51 der Markets in Financial Directive Instruments Directive (MiFID) scheitern könnten
Die Aufzeichnungspflicht bereitet Probleme – MiFID ist ein Marathon und kein Sprint

(24.10.07) - Artikel 51 der Markets in Financial Directive Instruments Directive (MiFID) regelt die Aufzeichnungspflicht für Wertpapierfirmen. Eine Untersuchung der JWG-IT Think-Tank ergab jetzt, dass 64 Prozent der von der MiFID betroffenen Unternehmen ein Problem mit den Erfordernissen des Artikels 51 vermelden: So sind diese Firmen in der Regel nicht in der Lage, die aufzeichnungspflichtigen Ereignisse in einem angemessenem Zeitraum bzw. zu einem angemessenen Kostenrahmen zu rekonstruieren.

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"64 percent of firms have a problem with MiFID"

Article 51 which says that regulators in Europe will have the right to reconstitute the key stages of the trade for each transaction
According to research by the JWG-IT Think-Tank 64 percent of financial firms identified that they have a problem with the Article 51 requirements, as they cannot reconstruct events after the fact in reasonable timeframes or cost levels
The Markets in Financial Directive Instruments Directive (MiFID) raises the heat to new levels on financial institutions in Europe with a little-hyped Article 51 which says that regulators in Europe will have the right to reconstitute the key stages of the trade for each transaction. According to research by the JWG-IT Think-Tank 64 percent of financial firms identified that they have a problem with the Article 51 requirements, as they cannot reconstruct events after the fact in reasonable timeframes or cost levels.

Under Article 51 the firm must prove that their actions conformed to what they said that they would do, and that they were unable to manipulate any of the information around the trade – for five years. Furthermore, it says that customer records that set out rights and obligations shall be retained for the lifetime of the relationship with the client. November 1st is the deadline for EU/EEA financial firms to comply with MiFID in what is expected to be one of the largest compliance issues the financial sector has seen in a decade.

If record keeping is done incorrectly it could falsely trigger or hide market abuse issues: "If you get caught out with it wrong, it could cost you hundreds of thousands of euro in fines. You now need to know more about the quality of the bullets in the gun you have handed over. If what you have given to the regulators, the market and your customers does not match what you hold internally for up to five years from 1 November you are exposing yourself to new risks. Record keeping is a big problem and we are working with the industry to make senior management more aware of their new responsibilities under a principles based regime." says PJ Di Giammarino, CEO of JWG-IT.

The JWG-IT TechSIG, has identified 10 record keeping scenarios to test a firm’s overall record keeping operating model readiness. Firms need to be able to demonstrate …

1. That they are capturing all customer classification information across all communication channels including print, SMS, IM, e-mail, phone and mobile.
2. Non-preferential treatment and best execution according to specific instructions for complex products was given.
3. Management review and supervision of non-structured and structured deals occurred. Keep order book data for best execution purposes by timeframe, including market context, algos, policy, and pre and post trade analytics formulae.
4. What happened, even if they no longer license a third party application and therefore cannot access the application logic or data.
5. That all communications, including promotions and research, with clients was "clear, fair and not misleading”.
6. That what was sent to regulators and the market matches their internal systems.
7. That they are following your own policies and procedures (e.g., conflicts of interest, firm governance).
8. Appropriate controls (e.g., escalation procedures, 4-eye / 6-eye control) of disparate information in different media and different departments were in place.
9. That changes to reference data (e.g., corporate actions, instrument) can be rolled back by time including both raw and dirty data.
10. That the trading environment’s policies, orders, executions, decisions, market data, responsible personnel and reference data can be rolled back in time.

It is clear that firms still have a lot of work to do, and as PJ Di Giammarino keeps saying, "MiFID is a marathon not a sprint".

MiFID will govern all transactions from core investment business, as well as some activities of retail banks and other organisations that have financial transaction elements. 2007 is a significant year for financial services, and this session will explore the impact of the latest swathe of compliance law that is coming into force. Information to date indicates that many organisations are behind the adoption curve on where they should be, with potentially catastrophic consequences for future trading operations. This lecture is not just for those in the financial sector – Compliance legislation, governance and liability affect every organisation – and where the finance sector leads, other markets follow. With detailed analysis and commentary from the leading experts in the field, this session will help you to understand the significance of the latest wave of compliance regulation and legislation.

Most firms are taking a long hard look at the existing infrastructure, making the necessary short term ‘tweaks’ and medium term plans to reduce business risk and minimise cost. These adjustments are never easy as years of investment have created distributed technology portfolios with high levels of complexity which are difficult to upgrade. Furthermore, in JWG-IT’s view, changing the way people work will present a significant challenge because:

>> Assigning ownership to the MiFID record keeping process will be hard as it is typically an under-resourced area that crosses all functions of the bank and in many organisations it is not the responsibility of any one individual
>> New process ownership will be complex as global overlaps need to be accounted for and policies put in place to manage conflicts
>> Senior management will need to consider which technologies are appropriate for each environment and the future of very common communication tools (e.g., IM, email) will be called into question.

The JWG-IT research indicates that a holistic approach to defining the future record keeping operating model is required. Leaders are focusing their attention on three questions across the enterprise:

1. Do underlying processes allow senior management to prove, for at least 5 years after trade execution, that they knew the customer, the market and the policy?
2. What operating model is required to show that the appropriate governance, policies and procedures were applied?
3. Can the existing MIS provide the dashboard needed to do the job?

To align stakeholders and suppliers across the bank and define the appropriate targets and actions, it is necessary to get a view of the ’relative heat’ of the record keeping operating model and potential technology solutions. This can be achieved by:

1. Defining the key requirements which fit your business model.
2. Agreeing the record keeping scenarios which will apply.
3. Aligning key stakeholders across the firm / supply chain to the major challenges.
4. Creating a specific benchmark scorecard for record keeping and analysing the resulting priority issues, relative needs and key differences (e.g., geographic)
5. Producing an implementation plan detailing priorities and future metrics.
(JWG-IT: ra)

Besuchen Sie auch unsere Schwerpunkte:
MiFID I-Repetitorium: Alles zum Thema MiFID
MiFID II-Repetitorium: Alles zum Thema MiFID