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The market surveillance tech firm is seeing increased interest from the buy-side as firms prepare for regulatory changes to sweep the market.
Capital markets compliance company, b-next, is supporting firms in managing risk and meeting their regulatory requirements under reforms and directives which can call for fundamental changes in how firms do business, with its CMC:eSuite of trading surveillance and compliance tech systems to help meet the new regulatory dawn.
Attention on market surveillance and compliance tech has jumped since the beginning of 2016, with companies working to ensure readiness for the impending market abuse regulation (MAR) in July, as well as sweeping European reform programme Mifid II in January 2018.
The rules represent expanded compliance requirements for many firms, b-next chief executive officer Wolfgang Fabisch told FOW, requiring planning and preparation.
“We are now so close to MAR coming into force but not all firms will be ready. While the FCA is aware of the challenge firms have faced in preparing for the rules – and so may show leniency to those that miss the July 3 deadline – companies will still need a demonstration of where they are in their preparation programmes,” said Fabisch.
“That being said, I think significantly more than 10% will ultimately miss the deadline,” he added.
While the rush to readiness can be a trying time for firms, b-next is also seeing a shift in interested parties. “We are seeing the buy-side become increasingly interested in MAR – in fact, we are moving to around 40% of inquiries coming from the buy-side, up from less than 10% a decade ago, so our potential client pool is expanding in line with the expanded regulatory requirements.”
Founded in 1989 by chief executive officer Fabisch, the firm is also working on its own expansion plans. As first reported by FOW, later this year it plans to launch operations in Singapore, adding to company headquarters in Herford, northern Germany and operations in London and New York.
When considering another looming regulatory focus, sweeping European directive Mifid II is set to be a game-changer for the derivatives market. “It remains clear that many market participants do not fully understand just how much attention they must pay to data under Mifid. Beyond reporting, there will be a huge amount of data that requires analysis, all under a more stringent regime of order requirements,” said the CEO.
“We are facing an ocean of data so are subsequently dedicating a lot of time with the industry on the ‘big data’ problem; it will hit all firms across the market in one way or another,” added Fabisch.
Under Mifid II, companies will be required to have a greater insight into their counterparties and business partners’ compliance activities. In line with increased data requirements, this is a potential stumbling block, warns Fabisch, with firms set to be “flooded with data”.
This comes against a back-drop of big trading firms having to make decisions over the technology they want to help them weather the regulatory storm, though this is where firms such as b-next can help. “It doesn’t make sense for huge organisations to build their own systems – they are unlikely to have specific expertise needed and have a big price tag. Standardised systems are part of the solution to this conundrum, especially as such tools can be tailored to meet exact business operations; this will only help to increase safety for firms as they get to grips with their new compliance checklists,” said the b-next head.
In line with tapping specific expertise for specific problems, the firm has partnered with a number of tech firms to meet certain issues. b-next works with Verint globally, utilising its voice and messaging analytics tech, and with Thomson Reuters - which provides content through Elektron - to support market manipulation monitoring tech.
Looking ahead the chief exec is positive that the market surveillance space will continue to be a compelling market to operate in, with technology set to play a key role. “There will be a number of exciting developments in the future; when considering the cloud, for example, the flexibility and cost-savings that this can offer is already compelling -- watch this space.”
B-next is a specialist Capital Markets Trading Surveillance and Compliance solution provider. Our vision is to enable you to meet regulatory obligations fully and to optimally manage your trading risk. Our powerful, scalable solutions cover the total spectrum of compliance requirements for capital markets, enabling you to identify suspicious trading while raising overall efficiency and driving competitive advantage.