Risk & Economy » Regulation » MiFID II – The start of the race, not the end

Jonathan Sharp, director at Brittanic Technologies, explores why the new regulation, MiFID II, is an opportunity to escalate business into the future

This year will see many organisations preparing for MiFID II and its associated legislative regulation, MiFIR, scheduled to become legal in January 2018.

MiFID II is one of the widest reaching changes to financial market regulation that the industry has ever seen. HM Treasury estimates that compliance costs will be anything between €512 million – €732 million and accounts for ongoing costs of between €312 million – €586 million. It will affect almost all firms dealing in or processing financial instruments across Europe, as legislators aim to promote increased transparency, competitiveness and financial stability.

The new regulation will overhaul Europe’s trading landscape, tightening the organisational requirements of investment firms and trading venues and introducing extensive changes to reporting around transactions and transparency requirements. These new requirements will cover many organisations operating in and around financial services that were previously exempt from legislation. The regulation expands the scope of transaction reporting covering all financial instruments beyond solely focusing on equities and changes the nature of reporting for those previously covered.

Despite the extension of the legislation until January 2018, there is a lot of work and preparation that needs to be done as the deadline rapidly approaches. Companies should not see the forthcoming culture of compliance as a burden or hindrance upon its business but should view it as an opportunity to escalate the business into the future. ‘Getting compliance ready’ should be viewed as a strategic move that will affect and benefit the business. It is the start of the race and not the end.

Harnessing the Opportunity

With the advancement of technology and the different methods used to communicate today, the legislation now requires companies to conduct stringent recording and store all telephone conversations and electronic communications to provide accurate evidence of what was said (or not said) during conversations between buyers, sellers and investment intermediaries. To achieve this level of compliance, companies will need to invest in a comprehensive call recording solution or upgrade their existing call recording solution to record and capture all transactions.

MiFID II extends the remit of recording, forcing companies to capture all voice calls and data created on all devices. This will provide a challenge for companies as many people not only use mobiles to make calls but also the applications within them, such as Facebook, WhatsApp or Linkedin, to communicate with clients. All data needs to be captured and stored for a minimum of five years. Companies will require a robust and reliant infrastructure to host the recording solution and to store the data. IT teams will also have to look at mobile device management strategy and prevent employees from ‘shadow IT’; stopping access to social networking communications and sites for client interactions.

In a market saturated with technology, deciding what recording solution you require can be quite a challenge. You need to decide whether you want an ‘out of the box’ solution that you can just plug and play, or whether you want to take this opportunity to invest in a solution that will grow with your business.

The legislation is mandatory and financial companies of all sizes need to invest in the technology. Now is the right time to utilise this prospect, understanding what your requirements are to be compliant and to step beyond these to help you to differentiate yourself in the market.

A solutions provider will take the time to understand your business, and not just strive to meet the compliance regulations but discover what your strategic objectives are and how technology can help you achieve them.

A highly robust and resilient call recording solution is critical, one that will encrypt data in transit, organise it and store it in an impenetrable online vault so there is no room for downtime or margin for error.

The objective is of course to be MiFID II compliant but it is important to realise that this should not be the end goal. It is in fact just the start of a digital transformation process that could improve business processes, services and customer satisfaction.

Big Data

The regulation is proposing that all data captured from recordings and transactions must be stored for a minimum of five years. This is a good opportunity to look at increasing your storage capability further to take advantage of the commercial gain from mining big data.

Harvesting customer interaction data en masse is a priceless commodity for organisations. Such data is a valuable currency that can be used to understand more about your customers and analysed in depth for business intelligence. Newly gleaned insights will enable you to tailor existing services and offer new ones. As the data is collected across several different devices and spans across the omnichannel, this will provide a comprehensive view of all conversations. However, it is of course crucial to remember that the data is not just collected and analysed, it should also be acted upon to deliver the required outcomes.

Companies will not only have to make significant changes to their IT infrastructure, business processes and data quality but it will also evoke a paradigm shift in the industry. Alongside the new levels of transparency and access to big data, companies will need to understand how to harness the power of their data to improve and offer new services. This in turn will create a new culture of knocking down the silos between departments where data must flow freely and people must work more openly and collaboratively. The industry will ultimately become more transparent than ever before, and that’s a good thing.

Jonathan Sharp is a Director at Britannic Technologies with 20 years experience in IT & Telecoms.