SIA Technology Management Conference
Sell Side Pours Dollars Into Capacity, Connectivity | Market Data Needed--And Faster, Please | Hedge Fund Asset-Class Demands Raise Stakes for Servicers | SIA, BMA Quiet About Merger; Some Open Questions Remain | Matching People and Technology | Elsewhere in Town: Thain, Nazareth at the Big Board's Regulatory Show | Business Is Looking Up, Vendors Act Accordingly | Sybase: Can Breadth Trump Specialization? | Platform's Latest Version Goes Real-Time | Intel: Wanting to Be Noticed--Up to a Point | Smart Searches Find Their Way to Wall Street | Asset Manager Ixis Using Pyxis' mWholesaler | Vendors Combine Real-Time and Historical Analytics | Bracing for MiFID
Bracing for MiFID
Vendors see a classic case of regulatory pain and complexity yielding opportunity
June 19, 2006
As buy- and sell-side firms scramble to keep up with the operational and IT burdens of pending European best-execution rules, vendors on both sides of the Atlantic are gearing up for the challenge--and a potential revenue bonanza.
Chip manufacturer Intel Corp. and data management systems companies Kurtosys of London and GoldenGate Software of San Francisco came forward last week as founding members of JWG-IT, a commercial venture addressing the front-, middle- and back-office technological ramifications of the Markets in Financial Instruments Directive (MiFID). JWG-IT converted from nonprofit status in January--it was launched in May 2005 as one of six committees under the umbrella of the MiFID joint working group.
JWG-IT chief executive and founder P.J.
Di Giammarino describes the organization as a think tank that aims
"to fill the vacuum between policy debates on what is MiFID and how
to implement it." Since many European Union financial firms will
experience some of the same IT challenges to comply with MiFID, it
only makes sense that knowledge on the new measure be shared.
For an up-front fee of EUR150,000 ($189,000), each founding vendor can participate in the brainstorming and presumably gain plenty of marketing credibility. Over the next three years, they can contribute their viewpoints on MiFID--along with product descriptions--on the JWG-IT Web site (www.jwg-it.eu), which will receive regular updates about MiFID, from JWG-IT meetings to interpretation of regulatory pronouncements.
JWG-IT will charge other members annual subscription fees of EUR25,000 to EUR125,000 to gain access to a number of workshops and online updates on 24 topic areas. These include business-related issues such as best execution by instrument type, pre-trade price transparency and systematic internalization. JWG-IT held its fourth workshop in London last Thursday on pre- and post-trade transparency. Another workshop, on customer data and classification, will be held June 23.
The 25 EU countries and three others that have opted in to MiFID--Norway, Iceland and Liechtenstein--have until January 2007 to enact the MiFID provisions and November 2007 to implement them. Some of the measures are rules-based--they must be adopted by the 28 countries--while others are subject to interpretation.
Di Giammarino believes it could take buy- and sell-side firms until 2009 to get fully up to speed on all of the key provisions of MiFID. Of the 73 articles covering six aspects of trading, the two most important involve price transparency and investor protection.
Cross-Border Goals
The aim of MiFID, which replaces the Investment Services Directive of 1993, is to help EU firms easily do business across borders. That involves improving transparency and depth of liquidity across EU securities markets, which reinforces the need for financial firms to execute orders in a way that provides the best results for the client. "Because most investors often do not have access to off-exchange market data, they can never know if they are getting the best deal," writes Tom Price, senior analyst with research firm TowerGroup in Needham. Mass., in a report on market data released last month. "MiFID forces the integration of on-exchange and off-exchange data to ensure that investors get the best execution."
Complicating MiFID compliance is that it is only one of many regulations requiring firms' attention. Others include the Basel II capital accords, clearing and settlement directives and anti-money-laundering initiatives. Larger, pan-European organizations may have the resources needed to prepare for MiFID and in doing so can more easily expand their businesses geographically than second- and third-tier organizations, which could be at a disadvantage. Hence, explains Di Giammarino, a former chief operating officer of IT for Barclays Capital, there is a crying need for information sharing.
