A major new study by independent financial regulatory think-tank JWG, in partnership with Inforalgo, confirms a growing appetite for a more repeatable approach to regulatory reporting, as financial institutions struggle to cope with soaring international trading transparency requirements. Inforalgo’s CEO, Jordan Ambrose reports.
Trying to collate everything manually, when detail exists in different formats across numerous data silos, is no longer sustainable. In any case, many firms lack the budgets to keep investing in new IT projects each time demands change or a new standard is issued.
There must be a more sustainable way forward. Indeed, the research suggested that firms had a new approach in their sights for transaction data management and reporting.
But, as they review their options, here are 3 important considerations:
1. This not a one-time fix
There is no single software product that can cater for all regulatory reporting requirements. Between the substantial demands of MiFID II, now almost a year into its implementation; EMIR, which is currently being re-written; Dodd-Frank; FINRA TRACE which is increasing the scope of reportable instruments; SFTR, which is due to go live this year; CAT, now due next year; and MAS, due to be upgraded in 2020, the global regulatory environment continues to be fluid and subject to change.
At the same time, with restricted budgets in place for compliance, institutions need a budget friendly approach, the JWG study confirmed.. “(The) business is fed up with investing in regulation! Instead, we need to slash costs,” said one project manager from a major German bank currently adapting to the needs of MiFID and MAS.
Instead of looking for a one-stop solution, financial organisations now realise they need to capture, manage and prepare transaction data in a different way. Increasingly they are opting for approaches that are smarter – that is, transformable through the use of intelligent automation.
2. Global complexity needs to be contained and managed
Unable to devote unlimited skilled resources to preparing and validating transaction data for each regulatory body, financial organisations must find a more sustainable approach to regulatory compliance across regions, even though respective requirements may differ in the detail.
Time pressures are a very real concern and if firms wait until the end of the day to reconcile all of their transaction data and generate reports, this can cause bottlenecks – especially where query resolution spans different time zones.
A better option would be if trading teams could reconcile and validate transaction details on the fly, in real time, enabling exceptions to be managed ahead of time.
3. Visibility’s importance applies internally too
Relying on manual processes and spreadsheets prevents a clear line of sight across trade activity, and can hinder potential useful insights – for example, into the relative cost of transactions.
A priority then must be to routinely amalgamate data and get it into a robust, readily deployable and centrally viewable format – wherever information has come from, and whatever form it takes.
To avoid having to start again for each different use case, firms are now looking to rules-driven workflow to automate reporting according to each authority’s respective eligibility rules – i.e. the specific detail they want to see included.
Having a rules engine capable of assessing data’s fit, accuracy and completeness, without writing or embedding code each time requirements are revised or added to, was high on interviewees’ wish lists in the research – as was being able to re-use rules for other regulations, where there is a close match between requirements from one authority to another.
Looking ahead: data automation as a means to strategic advantage
More forward-looking financial organisations are beginning to take a more holistic approach to automation of trading data management, the JWG/Inforalgo research found. Having a centralised window for viewing all transaction data, via an online hub, is proving a popular approach here.
Encouragingly, most believed this approach offered them strategic business advantage as well as presenting a cost-efficient aid to global reporting compliance.
The full JWG research analysis, Regulatory reporting: time for a rethink? A 2019 approach for Capital Markets, can be downloaded here.