FPL News Dec 2011

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Daniella Baker | FIX Protocol | December 15, 2011

FPL News Dec 2011

Working with the Trading Community to Create a More Financially Stable Environment

2011 has presented many challenges for the global economy, with multiple markets experiencing increased volatility and investor confidence in sharp need of an injection of faith. Achieving increased transparency and sustained long-term financial stability has become the Holy Grail for politicians and regulators globally. It may seem an unlikely fit for those unfamiliar with the scope of activities pursued by FPL, but market participants working closely with the organisation, will understand the growing relevance of FPL’s work in helping to achieve these goals.

FPL is an industry-driven organisation, it is independent and neutral, and all initiatives are ultimately focused on supporting the evolving business needs of the trading community, to enable firms to optimise efficiencies and reduce costs. As the markets seek to further mitigate risk and support regulatory reforms, aimed at effectively addressing the needs of the real economy and protecting the end investor, FPL has worked hard to help its members understand the implications on their businesses and how they can seek to achieve these goals. In doing so, the organisation has also ensured the wider needs of the trading community continue to be effectively addressed, meeting the requirements of emerging trading trends and ensuring new geographies benefit from educational opportunities. Here are some highlights explaining how FPL has worked towards these goals in 2011 and an insight into some of the initiatives FPL will be seeking to deliver as we move into the New Year.

Supporting the Development of Regulation

FPL works closely with regulators around the world to encourage the use of non-proprietary, free and open industry standards that enable all sectors of the financial community to benefit from the resultant consistency and transparency that facilitates ease of surveillance. The standards promoted are those that achieve mass adoption by the trading community, enabling firms to more easily meet new requirements by leveraging their existing investments across additional business areas and generating significant cost and resource savings. As an organisation, over recent months, we have started to see results from these efforts, as regulators have begun submitting documents to the market requesting participants use open standards that offer these elements to meet emerging requirements.

This approach is consistent with the recommendation in the 2010 released Investment Roadmap, which FPL produced in collaboration with other leading standard bodies to provide the industry with clear guidance as to which standards should be used to support business processes throughout the trade life cycle. The transparency and consistency offered by using standards in this manner, is becoming essential in furthering regulation while restoring investor confidence.

FPL has provided representation at a number of regulatory related initiatives throughout 2011. A few examples include the annual IOSCO conference in South Africa, a meeting of the FSB (Financial Stability Board) in Basel and attending a Regulatory Data Workshop coordinated by the Office of Financial Research (OFR) in DC as a chance for data experts within the federal financial regulators to share common concerns, best practices and promising ideas.

Throughout 2011, FPL’s regulatory efforts in Europe have focused on the Markets in Financial Instruments Directive (MiFID) review. This has included contributing to discussions and responding to consultations focused on the development of a European Consolidated Tape and encouraging the adoption of FIX for this initiative. As FPL’s membership represents the cross section of firms that will be using the consolidated trading data, FPL has played an active role in the group providing advice on how the new standards could be applied to deliver the greatest industry wide benefit.

The MiFID review also raised important concerns around posttrade transparency and in response to this the Market Model Typology (MMT) initiative was launched by the Federation of European Securities Exchanges (FESE), with strong support from a number of leading data vendors. The MMT initiative aims to reduce the level of complexity of equity market data, which will generate processing cost savings, and significantly improve market transparency. The initiative will seek to achieve these goals by standardising trade flags across trading venues in Europe, including lit, off book, dark and OTC trading. The standardisation of post- rade data will prove to be a pre-requisite for effective data consolidation.

Additionally, FPL member firms in Europe continue to be invited to participate in the MiFID Forum, which is supported by a range of industry standard bodies and associations. The forum provides an opportunity for open discussion and debate amongst senior market practitioners on the regulatory issues affecting the financial markets.

As an independent and neutral stakeholder, FPL continues to respond to regulatory consultations. To ensure that these responses are submitted in a manner that reflects the broad interests of its membership, in December 2011 FPL invited members from the region to join the EMEA Regulatory Subcommittee. The organisation looks forward to working with group representatives in 2012 to further this effort.

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