Software Solution for MiFID
Addressing MiFID Compliance
The Markets in Financial Instruments Directive, or MiFID II, is set to be in effect 3 January 2018. The stated aim of the MiFID is for all EU members to share a common, robust regulatory framework that protects investors. Effecting organizations offering investment products, these financial reforms have a mandate to, among other things, make European markets safer, more transparent, and efficient, rebuilding investor confidence after the financial crisis nearly a decade ago. The new rules cover nearly all trading aspects within the EU, even those that have an underlying product listed in the EU or purchasing shares of a company that may be listed in a second exchange in Europe. This also includes the marketing and distribution of products.
Governance, Risk, and Compliance (GRC)
The result puts increasing emphasis on compliance teams, front office staff, as well as the underlying technology and software. MiFID’s reach extends to some non-financial aspects that suits GRC software well. At a high level, these include: product governance, reporting, and suitability and appropriateness.
The technology that is frequently already used by organizations to assure there are the right levels of management to specific clients, MiFID will require new data to be collected, and other data attributes to be augmented. Other risk data that is part of MiFID, such as remuneration, electronic (including telephone) communications recording, client classifications, and product definitions, can be brought into the GRC software as a means of providing evidence of conformance.
Nasdaq BWise offers solutions to facilitate, substantiate, and sustain compliance with MiFID. Illustrative activities and benefits include:
Risk assessment process
The assessment of risk is one key task to understanding the controls related to the organization’s activities within the scope of MiFID. Evaluating the efficacy of the control environment will necessitate collecting control data, storing it in a central place, challenging the results, analyzing how it may be changing, and reporting on the results. The GRC software efficiently facilitates these activities.
Continuous monitoring is another core competency of Nasdaq BWise’s GRC solutions. This process integrates into the end-to-end risk management process to evaluate whether, and how, the risk and control environment may be changing. This alleviates manual intervention, reduce resources (e.g., segregation of duties), and provide confidence that processes within the business are within established thresholds. This helps assure that processes linked to MiFID are in compliance.
Data in the system is fresh, which assures that any issues are addressed before a scheduled review takes place. Given the frequency in, for example, trading, knowing whether a control has failed quickly adds support for management action. This information can be presented in a variety of forms, including portlets, dashboards, and reports. These data can be meaningful to the front office, an individual’s role, the legal and compliance function, audit, executives, and regulators alike.
GRC software can also use tools like XML and RSS to automatically bring in data feeds to the system. This creates connectivity with the other systems that enable client facing activities that MiFID has required. Analytics and metrics within the software can then monitor how the management and control environment may be deteriorating.
Implementing MiFID is not purely compliance’s responsibility. It requires a unified approach across the organization to inform a picture of conformance. With January 2018 just around the corner, there is only a short period of time to put the appropriate activities into place. Investing in a GRC solutions can lay the foundation to make it all possible.