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Firms will need to invest in building data analytics and operational efficiencies through automation, system consolidation and industrialization, as well as develop robust technology infrastructures and risk frameworks. “Firms are looking at trying to use the infrastructure that they have put in place for all the regulations since 2007 since MiFID I, and with Dodd-Frank and Emir coming up the last couple of years, it’s been very challenging for firms to get all the data that they require for trade-reporting purposes,” Paul Gibson, a consultant with Sapient Global Markets.
“The things that firms are looking at this year are how can they minimize the cost and effort for MiFID II on the transaction-reporting side of things by leveraging what they’ve already got in place for both MiFID I and also Dodd-Frank, EMIR and all of the others stemming from the G20 commitments.”
MiFID II creates a fourth category of trading venue-Organized Trading Facility-that will encompass broker crossing networks and dark pools, to go along with the three existing categories (Regulated Markets, MTFs, and Systematic Internalizers).
“The new OTFs will bring additional rules and regulations in the OTC market that we’ve seen only in the US so far,” said Gibson. “While people don’t quite know what the long-term impact of that’s going to be, it’s certainly going to change potentially the way firms do business with each other. While the lead time around the implementation of that type of change is potentially more far-reaching than reporting, any required changes to business models could be something that is implemented once a new strategy has been agreed.”