MiFID II: Are you listening?
January 25th, 2016
As MiFID II requirements begin to rollout and are enforced, you can’t help but notice that a large chunk of the legislation addresses certain technical standards which could change the landscape of the European financial markets. Buried within this rather large directive is a small section that discusses record-keeping requirements. When you dig deeper into this part of the directive you will discover something really interesting. In fact, you will discover that most of the technical requirements clearly suggest the need for a complete communication surveillance program. While most firms are already doing some sort of surveillance on e-communications, they may be lulled into false security that they already have this requirement solved, and so they forget about one important aspect – “but wait, what about voice”?
Voice communication will always play a crucial role in the financial industry regardless of how electronic the markets become. Most major financial institutions are already recording, archiving, and running surveillance on a large percentage of its traders and employees, but with MiFID II, the scope of this need will expand tremendously. But are they fully aware of how and what it takes to ensure they are recording the correct population? If they are asked by regulators to provide reports evidencing that they comply with the new rules, are they able to provide them quickly and accurately? I think we are all expecting that the answers to these questions are that readiness isn’t where it should be. Therefore, what should firms prioritize as they prepare for MiFID II’s finalization?
First, firms need to be able to capture the call data. This in itself suggests the question, “who needs to be recorded, and what device types do they use for business?” Once this is determined, than the firm needs to monitor the recording system in real time to ensure its status and provide reports. And lastly, firms need to determine if they are actively surveilling the content. It’s great to show that you have it, but the regulators will want to know what you are actually doing with it. They will ask these and many more questions. When enforcement comes around to ask the hard questions, you will need to provide the proof, and do so in a timely manner. Or, perhaps, suffer the consequences.
So, buried deep in this massive initiative, is a little piece that deserves massive attention by the firms that fall under MiFID II, requiring the need to come up with a detailed plan to achieve these new recordkeeping requirements. The good news is that the technology and tools are out there that can do this quickly, as is the expertise and experience firms will be looking for to help them get through this debut period. This undertaking and integration of MiFID II requirements is something that very few firms, if any, can do on their own. In setting their organization’s priorities, we feel they would definitely benefit from working with technology service providers in their quest for an efficient path to achieving compliance.