MiFID - Technology Solutions Pradeep Hardikar Director & Practice Leader Banking and Financial Services

MiFID - Technology Solutions In Search of IT Excellence Pradeep Hardikar Director and Practice Leader

Agenda Key MiFID Directives Impact on Stakeholders Impact on Systems The Way Forward Questions

Key MiFID Directives Investor Protection – Articles 18, 19 Best Execution – Articles 21, 22 Coherent Framework – Article 69 Transparency – Articles 27, 28, 29, 30, 44 & 45 Integrity – Article 25 Passporting – Articles 31, 32, 33, 34

Impact on Stakeholders Venues Regulated Exchanges – Increased competition MTFs & Internalisers – Increased opportunities + Increased obligations Investment Firms Increased opportunities Tighter controls needed Investors Gains & Increased protection Data aggregators & Publishers Increased traffic Increased opportunities (new Interfaces) Across The Organisation!!

IT Impact – Investor Protection , Best Execution & Coherent Framework Suitability & Appropriateness – Changes to CRM / KYC systems Track & record client communications Customer data, prices, Instruments, Size of trades, Time stamps Increased protection = Increased paperwork Best Execution Smart order routing Combined order book Internalising engine – Continental EU impacted Order audit trail Proving Best Execution? Reporting! Coherent Framework End to concentration rules Changes to OMS/ORS

IT Impact – Possible approaches? Reference Data Generic reference data framework required Customers, Venues, Instruments Messaging Adopting open interfaces to message management Common standard needed Architectures Multiple interfaces, Volume increase, Complex messaging, Complex biz logic SOA – Allows best of breed components to be used Order Management Engines Further complexity to algorithmic systems – Real time decision making Best Execution – Complex biz logic

Combined Order Book In Memory Order Processing Flow – Systems View Market Data Provider Combined Order Book In Memory Market Data system Rules Engine In Memory DB Open Order Processing Logic Order Processing Engine Order Audit Trail Smart Order Routing Re route To Venue Communication System (COMS) (Parser, Config file, Formatter) Quoting Broker / Alternate Venue Exchange / Alternate Venue Internalize COMS Trade Processing Engine Open Order DB Reporting Position Mgmt Exchange / Data Aggregator / Proprietary Compliance Reporting Engine Market Data Archive Order Data Archive Trade Data Archive

Technology Solutions – The Way Forward Combined Order Book Smart Order Routing Order Audit Trail Quoting and Reporting Compliance Reporting Engine

Technology Solutions – Combined Order Book Impetus No concentration rules Advent of MTF and Internalisers Best Execution obligations Challenges Deluge of market data Varied cost of trading Market access Solution Streaming market data In memory database Store details, use aggregates

Technology Solutions – Smart Order Routing Impetus Best Execution obligation Fast moving markets Challenges Requires COB Speed and Efficiency Ability to locate hidden liquidity Ability to identify spoofing Solution Build COB Direct access Rules Based Evaluate and Improve

Technology Solutions – Order Audit Trail Impetus To prove Best Execution Ability to analyze Compliance Requirement Challenges Multiple points of data capture ‘What time is it?’ – Ritchie Data Storage Solutions Data tagged to executions Market data history

Technology Solutions – Quoting and Reporting Quoting and Trade Reporting Impetus Quoting (Pre-Trade Transparency) Reporting (Post-Trade Transparency) Attract Order Flow Challenges Venue? Mechanism? Format? Infrastructure? Cost? Solutions Industry Utility Proprietary

Technology Solutions – Compliance Reporting Engine Impetus Best Execution Obligation Proof Stop Abuse Ahead of Time Challenges Humongous Data Compliance Specification Incident Reporting and Follow-up Solutions Online Alerts Workflow Monitoring System

Implementation Methodology Four Stage approach – Spans life cycle of Firm’s MiFID compliance initiative Stage 1: MiFID Readiness Assessment Impact Analysis, Gap Analysis & Compliance roadmap Stage 2: Implementation Construction to address gaps identified in Stage 1 Stage 3: Rollout Audits on systems modifications implemented in Stage 2 Stage 4: Continuous Improvement SLA based Maintenance services

Thank you Questions?