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MiFID II made easy(er)
Industry legend and friend of The TRADE, Richard Balarkas – now member of the
advisory board for Compliance Solutions Strategies (CSS) – gives us his views on
becoming compliant with the complex and often overwhelming MiFID II regulations.
“I
n late 1996, I worked for
a large UK market maker
who needed to prepare
for the move from a quote-driven
market to an order-driven market.
The October ‘97 deadline seemed a
long way off, and no decisions had
been taken about what was naively
perceived by many as just another
IT project.
And so it was that I commanded
the full attention of the manage-
ment committee to firstly explain
that we were already months
behind where we should be from
a pure IT perspective. Secondly,
if you took into account the full
panoply of business re-engineering
that needed to take place - work-
flows, controls, procedures, train-
ing etc. - we were looking up to see
daylight. Finally, we either start
and catch up, or go out of business.
My reward for pointing this out
was to be told to go away and make
it happen. So I did, and after many
ups and downs we ended up being
the first firm to successfully test
and trade on the new market.
The bad news is that the complex-
ity of that project pales into insig-
nificance compared to the challenge
MiFID II, PRIIPS and MiFiR pres-
ent to fund managers, and if recent
surveys are to be believed, many
80
TheTrade
Summer 2017
small and mid-sized fund managers
now find themselves ill-prepared
for a hard deadline that is less than
six months out. The better news is
that there are nevertheless some
useful lessons from 20 years ago
that may help those preparing for
January 2018 and MiFID II.
Keeping the regulators happy
First, unless unavoidable, do not
build, but buy. Very little of what
firms have to do in order to become
compliant with MiFID II will
embellish a fund manager’s USP or
result in any competitive advantage,
at least in the short term. Most of
the data storage, capture, analysis,
and reporting that accompanies all
the main process changes associ-
ated with MiFID II has to be done
first and foremost to keep your
regulator happy and keep you out
of the sin bin. Fail to do it properly
and you increase regulatory risk and
with reputational risk. But being
compliant is unlikely on its own to
win business. So do it effectively by
outsourcing to experienced estab-
lished providers whose USP and
livelihood is all about high integrity
data capture, analysis and reporting.
Second, large scale regulatory
change has once again spawned a
host of new FinTech and RegTech,
“Start and catch-up, or
go out of business.”
and consequently C-suite execu-
tives at fund management firms, are
drowning in approaches from ven-
dors with single problem solutions
that address a limited subset of
their overall requirements. Should
you take a piecemeal approach to
implementing MiFID II solutions
your business will rapidly switch
from fund management to that of
a full-time vendor and outsourcing
manager. Wherever possible find a
solution provider who can address
as many of your requirements as
possible. Not only will you avoid
the incremental burden of man-
aging multiple relationships but
the complexities that arise from
integrating them with each other
as well as your existing systems.
Choose a provider who can address
multiple problems on your behalf
and then leave it to them to sort out
the integration issues.
Third, start now and start fast.
Back in 1997 we applied the
“Pareto rule” in that when it came
to selecting a supplier we would
have an 80% certainty of what
the outcome was likely to be 20%
through the process. That meant