Compliance: Tech's 'uncomfortable' future
Published: 20 Mar 2006 13:50 GMT
...to rework business processes and re-jig old systems or introduce new ones to support them, although there is no one-size-fits-all solution here and certainly no silver bullet.
"At the very least, IT can start reviewing systems and identify ones which are likely to run out of steam. For example, we know that a lot more market data will be circulated due to the new transparency rules and that firms will have to publish their trades and provide a quote for each stock before it's traded. So if those systems are already struggling now, they certainly won't cope under MiFID," explains Olivier Tardif, a senior consultant at Detica.
Other systems that are likely to need looking at fall under four broad categories. All customer databases will have to be tweaked to ensure they conform to the client reclassification regulations and companies will also need to keep records to show that they have undertaken up-to-date customer suitability and appropriateness checks.
Another essential is to ensure that front office systems are able to obtain incoming market data from all of the new execution venues and not simply traditional stock exchanges.
This will mean not only taking feeds from new sources, but also dealing with increased volumes of information so it is vital to ensure that current systems are up to handling this. It may also be necessary to introduce new order management or algorithmic trading systems, however, to automate more routine elements of the trading process and free up staff time to deal with more specialised tasks.
Meanwhile, if an organisation decides to become a systematic internaliser for the first time, they will need to be able to publish their prices and each trade that they undertake within a maximum of three minutes, which will require the purchase of a new system.
The obligation to report transactions at the end of each day to the FSA may likewise mean that there is an impact on reference data systems, which will need to be checked out.
Higher individual transaction volumes will also mean ensuring that straight-through processing using technology such as enterprise application integration software to glue different systems together is a given to guard against glitches in the clearing and settlement process.
All of this, however, is likely to require a review of the enterprise's infrastructure to ensure that networks are able to handle the strain and that storage and retrieval mechanisms are capable of providing records and other audit trails around orders, prices and trades.
"And when all these projects have been done, there'll be testing, migration and training to do as with any project," says Jenkins. "There's a shed load of work to do and not much time to do it in."
Therefore, it is crucial to establish what systems vendors are doing in terms of upgrades to help, but also to work out staffing needs and whether it will be necessary to hire in extra personnel to cope with spikes in workload.
Caldwell, for one, expects that demand for consultants will ramp up from the fourth quarter of 2006 to the early part of 2008, which means that it is likely to peak in the second quarter of 2007. As a result, he advises organisations to plan accordingly.
But all of this implies that life for IT managers is not going to be easy over the next couple of years as they struggle to cope with a morass of work and ever-tightening deadlines.
"The situation for IT is not going to be comfortable. They can't do much now because in most cases, the business hasn't decided how to move forward, but if systems aren't ready, they'll be the ones that are blamed,"concludes Detica's Tardif.
Previous
Did you find this article useful?
320 out of 526 people found this useful
- Share this article:
