Subscribe to Itiviti Talks

MiFID II: The implications for trading systems and infrastructure

By Richard Bentley, Chief Product Officer , Itiviti
August 14, 2018
Share:

MiFID II marked a sea change in the approach to the handling of order, trade and transaction data. Rigorous new requirements around data capture, analysis, reporting and record-keeping made the communication of data a central theme in ensuring trading systems were MiFID II compliant, and connectivity – between external and internal systems, databases and processors – the foundation stone.
The implications for financial firms’ trading infrastructure are extensive. From an external standpoint, firms need to be able to engage with constantly changing API connections to the growing number of trading venues – whether Regulated Markets, Multilateral Trading Facilities (MTFs), Organised Trading Facilities (OTFs) or Systematic Internalisers (SIs). They also need to deal with the various new order types and market models on offer, including Large-in-Scale, Continuous Auction and others.

From an internal perspective, as part of their post-trade process, firms need to ensure that their internal OMS records match the venue’s (or broker’s) view of the trade. For this to happen, market participants require post-trade (or ‘drop copy’) connectivity to their trading venues or counterparties, and they must normalize the trade data to facilitate an internal reconciliation / validation task. Firms must also be capable of handling trade and transaction reporting to the new Approved Publication Arrangements (APAs) and Approved Reporting Mechanisms (ARMs).

MiFID II also requires firms to deploy connectivity to data repositories, trading systems and other sources of information, including real-time or intraday data required for best execution and other reporting obligations. Firms must bring together information on all orders, including child orders, to create a single, coherent record or ‘biography’ of each order.

This is complicated by the need to draw upon the various sources of reference data required to understand how to classify the firm’s activities at any given point in time. For example, the firm may need to draw upon a range of data to determine who has responsibility to report a trade for a specific instrument involved in a transaction, which may depend on counterparty, instrument, buyer or seller, or whether it qualifies for deferment. The resulting trade record then forms the basis of regulatory reporting, and is also part of the evidence that supports the firm’s best execution policy and processes, as well as its response to regulatory queries about potential market abuse.

The extent of the trading infrastructure upgrades needed to ensure the right data is accessible at the right point in the trading workflow at the right time, means that for many firms there is still a long way to go to achieve full and sustainable MiFID II compliance.

Central to sustainability is a consistent approach and a coherent strategy when it comes to connectivity, messaging and data management. Solutions such as Itiviti’s UL Bridge can assist firms in implementing centralized data management processes, thereby scaling up the trading technology stack to handle the volume of messages and governing message traffic to and from the core trading system, and external to that system itself. It also provides comprehensive support for developing, testing and deploying FIX connectivity, and can assist in meeting all MiFID II trade reporting and reference data requirements.

Download the white paper

Related Content

The need to take an enterprise approach to testing

The need to take an enterprise approach to testing

FIX Infrastructure It goes without saying that it’s imperative for trading technologists to thoroughly test their systems before the put them in a production environment. Clearly, building a market-beating trading platform requires a high level of uptime and a propensity for failure that’s as close to zero as possible. And for years technologists have used a range […] November 5, 2018

Exploring the business side of Systematic Internalisation

Exploring the business side of Systematic Internalisation

Risk & Compliance Nine months into the MiFID II era, it’s time to look beyond the compliance issues and start considering the business opportunities presented to firms operating under the Systematic Internaliser regime. With the support from a value-adding regulatory solution, SI status can be used for competitive advantage, suggests Jonas Lindqvist, Principal, Trading and Trade Execution, Itiviti. […] October 9, 2018

Industrializing the trading technology stack: the benefits of UL Bridge

Industrializing the trading technology stack: the benefits of UL Bridge

Risk & Compliance Trading firms across the board are discovering that operational and regulatory requirements increasingly demand a consistent approach to connectivity, messaging and data management. To industrialize their response to these emerging requirements – to address the challenges in a streamlined, consistent and scalable way – firms need to put in place a centralized connectivity and messaging […] September 25, 2018

MiFID II in action: half-year review

MiFID II in action: half-year review

Risk & Compliance Roughly six months after the introduction of MiFID II, Johannes Frey-Skött – VP Apps Engineering, Itiviti – talks to The TRADE about the short-term impact of the regulation on European market players, looking at both the positive and negative effects witnessed so far. He also outlines current pain points in MiFID II compliance and the […] July 17, 2018

Itiviti Talks

Itiviti Talks is your source for the technology perspective on the global capital markets. We have created this to be an engaging forum for sharing ideas with our clients, partners and other industry professionals. You will find videos, blog posts, white papers and more that deal with the needs and challenges of brokers, market makers and trading executives.
 
Watch, read and enjoy for new inspiration and insights.

By submitting this form, you acknowledge that data collected by us will be handled in accordance with our Privacy Notice.

Itiviti Talks

Get our view on global capital markets

Subscribe

Subscription successful

Thank you for subscribing!

Close window

Itiviti Talks

Get our view on global capital markets

Weekly email

    Trends in global capital markets from a technology perspective.

By submitting this form, you acknowledge that data collected by us will be handled in accordance with our Privacy Notice.