For Financial Institutions (FIs) across the financial spectrum, the Markets in Financial Instruments Directive II (MiFID II) represents a significant change. Its drive to increase transparency across the industry is forcing FIs to transform their business processes and technology. The regulation is also impacting several areas of FIs’ operations, requiring them to focus more on pre-trade transparency, best execution and post-trade reporting. For FIs, this will create a multitude of new challenges – not least in the amount of disparate data they will have to access and analyze, often in tandem with other complex system adaptations demanded by other regulations. These include testing requirements and accounting standards such as International Financial Reporting Standard 9 (IFRS 9) and the European Banking Authority (EBA) stress tests in Europe; and Current Expected Credit Loss (CECL), Comprehensive Capital Analysis and Review (CCAR) and Dodd-Frank Act Stress Tests (DFAST) in the US.
FIs can address these challenges by focusing on their data management, and enriching the quality of the data they use for their reporting. Smaller FIs – in many ways the ones that are struggling most with compliance – can also learn valuable lessons from their larger counterparts, many of which have had to prepare some way in advance.
Nevertheless, overconfidence and unrealistic expectations have affected the general progress of MiFID implementation. Regulators – themselves increasingly affected by geopolitical forces – are likely to forgive a lack of full compliance to some extent, but will continue to penalize those FIs that simply don’t make the required effort to comply.
Those FIs that have built or adapted systems for MiFID II tend to take their own approach to finding the right solution – and a fragmented, almost saturated market could cause problems for many vendors attempting to offer distinct solutions. The growth in importance of Project Sentinel – a collaboration of FIs aiming to create a unified system to tackle the implementation challenges – could also pose a serious threat to more established vendors, by giving FIs themselves more control over their systems and solutions.
Against this fast-moving and complex background, this report provides an overview of the key trends and dynamics in the market for MiFID II reporting solutions. It analyzes the complexity of the regulation, the impact it is likely to have, the challenges it will create for FIs, and how they and the vendors are responding. Note that we analyze MiFID II reporting, an area that relies heavily on surveillance, best execution and data management, which we will also examine. Research unbundling within MiFID II, however, is a separate discipline to MiFID II reporting and is omitted from this report.
This report uses Chartis’s FinTech Quadrant™ to explain the structure of the market. The FinTech Quadrant™ uses a comprehensive methodology of in-depth independent research and a clear scoring system to explain which technology solutions meet an organization’s needs. The FinTech Quadrant™ does not simply describe one technology solution as the best MiFID II reporting solution; it has a sophisticated ranking methodology to explain which solutions would be best for buyers, depending on their implementation strategies.
This report covers the leading vendors offering MiFID II reporting solutions, including: Asset Control, AxiomSL, BearingPoint, Bloomberg, Charles River, Droit, Fidessa, Finastra, FIS, GoldenSource, Gresham Computing, IHS Markit, Kx, Message Automation, Nasdaq, OneMarketData, OpenLink, Project Sentinel, RegTek Solutions, Sapient, SS&C, Thomson Reuters, UnaVista, WKFS.