The FIX Trading Community, a nonprofit standards body that is industry-driven, recently held its second annual France Trading Brief. The body touched on several themes from its fall briefing that are still relevant in the financial trading sector today.
The wake of MiFID II
MiFID II continues to be a huge force in the global market. Because of its significance, the impact of the regulations on liquidity providers, their operational landscapes and their business models – in addition to the law’s constant evolution and its influence on the trajectory and pace of tech innovations – will continue to be areas of strong focus for many months to come. One particular exchange at the brief involving Head of Quantitative Unit for Market Surveillance Julien Leprun raised some strong points about the varying levels and lack of automation of MiFID II compliance across European firms, which leads to concerns about the context of regulatory changes in the future.
Standardization and data reign supreme
Regulatory reporting is already in the midst of evolution and this is likely to continue, so firms must acknowledge and embrace this evolution. Data is still a major pain point for firms when they are fulfilling their reporting obligations in the new regulatory environment, so FIX is focused on playing its role within these standardization efforts, particularly when it comes to reference data.
Wider existing FIX reference data usage for parties, entitlements, indices and related entities would help facilitate standardization at the level of integrating reference data providers for post-trade activities. This includes collateral management, regulatory reporting and trade confirmation, and this is essential when it comes to increasing the level of data standardization within and between firms.
The overwhelming wave of International Securities Identification Numbers (ISINs)
The increasing number of ISINs in the OTC derivatives sector was also a hot topic at the briefing, with millions of these numbers being generated because of the need to create one for each swap termination date. This tsunami of new ISINs has the potential to overwhelm the processes, and a solution has not yet been found.
Automation is still significant
The highly manual nature of the bond issuing process is another challenge in the industry today. Further automation is clearly needed here and in the asset management space to more effectively manage orders across varying asset classes and in trade confirmation. Issuance automation may be addressed by creating ISINs before the issuance, including the usage of dummy numbers. The FIX Trading Community is currently working on the workflows needed to make these processes happen.
Where the UK stands today
Of course, Brexit and the potential consequences attached to it loomed large at the briefing. Matters of particular interest include the uncertainly still surrounding the data requirements and standardization, in addition to the possibilities of regulation in the future.
Staying on top of news in all areas of the financial sector is crucial to firms, and this includes technology. As regulations change and evolve, so will the technology used in the financial space today.