By Sacha Fellica, Global Product Manager, Trading Products, Bloomberg L.P.
When embarking on projects needed to achieve MiFID II compliance, it is important to focus on the positive outcomes that these efforts will bring to regulated firms. For example, when tackling compliance to the MiFID II Best-Ex regime, a firm should take this as an opportunity to deeply embed TCA (transaction cost analysis) in their main business process by covering the whole lifecycle of a trade. A potential solution could be the creation of a feedback loop that links the TCA Review and Evaluation process with the strategy and algo selection and the execution management of an order. The solution should have multi-asset coverage and should allow the firm to test their order execution policy by analysing order execution performance through different angles and using different benchmarks. By taking such an approach, a firm would not only achieve compliance to the BestEx requirements but also improve their core business process.
When looking at MAR (market abuse regulation) compliance specifically for investment recommendations, it is clear that the new recommendations are heavily impacting the way that recos are issued and used. A likely consequence is the electronification of recommendations and a drop in the number issued (could there be an increase in quality as a side effect?). When looking at solutions to comply with MAR for Investment Recommendations, it would make sense to implement a move to electronic templates that are easy to complete and to attach to all relevant electronic distribution channels. The templates would have hooks to the related disclosures and recommendations history. As new recommendations are issued, these are captured and integrated in the firm’s surveillance systems in order to create a onestop-shop Enterprise Surveillance System. The goal should be to incorporate both the Best-Ex and MAR processes into a single system which is in turn tightly integrated with the regulated firm’s OMS (order management system).
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