MiFID II ‘a regulatory barrier to innovation’

European asset management firms should pay urgent attention to their technology ahead of the introduction of the new Markets in Financial Instruments Directive (MiFID II) – which will take effect from 3 January 2018 – warns Linedata.

Patricia Regnault, Europe head of asset management at the international software and technology provider, has submitted the firm’s interim findings to UK regulator the Financial Conduct Authority’s (FCA), which published the interim findings of its asset management market study in November 2015.

Focusing around barriers to entry, innovation and technological advances within the market, the FCA has requested feedback ahead of next week’s deadline of February 20 for the consultation period.

“Increases in the overall burden of regulation present an ongoing barrier for those asset management firms looking to invest in product development or improve efficiency to keep up with fierce competition in the industry,” comments Regnault. “There is no other choice but to dedicate time and money to implementing forthcoming regulations, which require both organisational and technological change to be compliant.

“MiFID II has implications for processes through the entire value chain: from data requirements, to commission unbundling, and reporting. Without a robust and agile technology strategy, asset management firms simply won’t survive. The only option is to adapt and change IT platforms to ensure MiFID compliance; a substantial investment which leaves little room to focus on other areas of the business when it comes to innovation and technological advances.

“Understanding and adjusting to evolving regulatory requirements also demands a significant time investment. For MiFID II this is acutely enhanced by the grey areas that still exist. Even though its scope is now better defined, ongoing questions bring nothing but confusion and, in many cases, a last minute scramble to comply. For small and mid-sized players it’s particularly challenging to keep up, with limited resources dedicated to compliance and employees already overwhelmed by day-to-day operations.

“With no apparent end in sight when it comes to the increasing regulatory burden on firms, a move towards regulatory technology (regtech) platforms that can offer an all-in-one integrated and flexible solution should address the significant time and cost burden on the buy-side. Modern platforms built upon next-generation technology will address present and future regulatory obligations, and will equip asset managers for digital transformation”.




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