Will the emergence of the FinTech Industry and the subsequent disruption really change the world of Finance?
Part 3 – Regulatory issues
This is the third of a series of 3 articles about FinTech written by Torsten Miland, Managing Partner AIMS Denmark, Global Head of Financial and Professional Services Practice of AIMS International (click here for part 1 or part 2)
Regulatory issues are being addressed – Perhaps this will be the next FinTech?
Andrew Saks-McLeod from FinanceFeeds.com tells us: “In 2016, Corvil, a company that provides network data analytics company for today’s modern, real-time digital industry, concentrating on MiFID II, market infrastructure, security, trading systems and big data, forged a strategic partnership with Abide Financial, which develops automated regulatory reporting systems for EMIR and MiFID II.”
Speaking to FinanceFeeds, Chris Bates, Chief Commercial Officer at Abide Financial explained “Regulatory reporting is effectively a tax on firms, and therefore the value is in getting it right first time, and helping firms avoid investigation, fines and getting publicized for transgressions.”
Taking a look at how technologically advanced the regulatory reporting sector is these days, Mr. Bates said “It has been mentioned more than a few times that RegTech is the new FinTech.”
“With regard to MiFID, we were licensed in November 2011 to become an Approved Reporting Mechanism (ARM) and are now processing more than 20% of all MiFID transactions. As soon as the window opens we will be applying for ARM2 status which is the MiFID II ARM approval status. There is currently a lot of onus on ARM2 to make sure that everything that we are processing is correct before it gets to the FCA, or other regulatory jurisdiction that a firm may be licensed by. Abide also processes approximately 50% of all EMIR FX transactions.” – Chris Bates, Co-Founder, Abide Financial.
Many regulatory reporting technology companies have recently sprung up in major jurisdictions, those being Cyprus (MAP S Platis), Israel (Cappitech), London (Abide Financial) and New York (Corvil). Corvil is an established technology firm but RegTech is a new theme for them.
Liquidity aggregation and prime brokerage
Is London the place to be – or?
In London the establishment nestles among the financial giants of the Square Mile, and has done so for a substantial period of time – in some cases for decades, however this year, a torrent of newly established prime brokerages and firms offering liquidity has made its way to London.
Hardly surprising, of course, as London is the global centre for Tier 1 bank liquidity provision, as well as for non-bank aggregated liquidity delivered via electronic communication networks such as Thomson Reuters FXall, ICAP’s EBS, or Currenex.
Retail brokerages have never had so much choice with regard to order processing, liquidity management and trade execution methodology.
Many firms, including Danish FinTech and electronic trading company Saxo Bank, have designed a series of tools to optimize their flow to the market and then using that technology to benefit corporate clients which are brokerages. Companies that do this are able to show the brokerages that use their Prime of Prime service what their flow looks like and how the liquidity providers that they are accessing view their flow. Many firms in this sector have regular conversations and understand what metrics the sources of liquidity use to evaluate flow and have built similar reporting and analysis themselves so that they can show clients how their flow will be viewed and handled by liquidity providers.
As we look from the outside at the disruption of the Financial industry it might be easy to think, that if you want to build a bank you can just start a FinTech company and make an app.
But of course this is not what’s going on. Banks have always been able to adapt to the changes in their business environment. They have perhaps not always done it swiftly, but they have survived.
From the standpoint of our business in the talent acquisition and talent management world, we believe the financial institutions will need more IT-bright talents and the FinTech industry will need more financial-bright talents.
Article from AIMS International, Head of Global Team for Financial & Professional Services, Torsten Miland with significant input from FinTech industry expert Andrew Saks-McLeod from FinanceFeeds.com