The deadline for implementation of the key MiFID II directive has been postponed to January 2018. financial market regulations, which are supposed to increase transparency and security of clients, often require rebuilding of IT systems. American financial institutions are not yet adequately prepared for this.
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– The aim of the new financial market regulations is to increase transparency so that the client feels safe – explains, a business analyst at GFT USA, in an interview. After their introduction, the client will have access to such information as the elements influencing the price of the instrument, as well as to the valuation. They will learn how much an instrument costs in one bank, how much in another bank and how much in a broker. He will also know exactly what kind of transaction he is making.
It concerns both the Payment Services Directive (PSD) implemented into national law two years ago and the Markets and Financial Instruments Directive (MiFID II), which is related to the implementation of the EMIR (European Market Infrastructure Regulation) on over-the-counter derivatives, central counterparties and trade repositories.
From the point of view of financial services, the key regulation, as assessed by, is MiFID II and other related provisions. They cover virtually the entire sector and affect all aspects of the operation of a financial institution and a bank. Their aim is to increase transparency, better protection of client’s interests and greater transparency of valuations. Initially, it was to be implemented by January 2017. But recently, by decision of ESMA (European Securities and Markets Authority), this date was postponed to the beginning of 2018. One of the reasons for this was the concern that the financial sector was not sufficiently technologically prepared.
– This is a very large regulation, so its implementation must begin as soon as possible due to the broad spectrum of application – advises. – It requires going through various business functions and collecting a lot of data. It applies to all financial institutions, including of course banks operating on the domestic market, universal, retail, with a corporate function, in a word – a very wide range of institutions.
However, additional time for implementation should not be a reason to slow down work on the reconstruction of IT architecture. According to GFT’s “The New Normal” report, 86% of global financial institutions use temporary technological solutions to cope with legal changes. More than half (58%) do so because they are afraid that they will not be able to adapt to the new regulations in time.
– Existing IT does not support many functions required by the regulator – explains. – Therefore, the regulations are an opportunity to refresh the technological stack and implement new, strategic solutions. On the one hand, it is connected with organizational costs, which include adjusting the company to new challenges, on the other hand – technological costs, i.e. costs connected with the implementation of new IT systems.
Abandonment in this area, as the authors of the GFT report specify, may deepen the so-called technological debt, i.e. increase the level of maladjustment of technology platforms to market realities. The decision-makers of financial institutions already know that in the future it will have to be compensated for. In the GFT survey, 42% of respondents admitted that catching up in technology will soon become a necessity for their organizations.
The implementation of the regulation, as emphasizes, will benefit mainly the clients. When buying a specific financial instrument, they will obtain information about what influenced its price, i.e. about margins or costs related to, for example, market research.
– The bank, on the other hand, will have to send a lot of information to the regulator. A part of even the same day on which the transaction took place.