The FinanSer

Exchanges fight over speeds and feeds misses the point

It is fascinating to watch the fight that is going on between the traditional exchanges – Deutsche Bourse, Euronext and London Stock Exchange (LSE) – and the new guys – Chi-x, BAT, virt-x, PLUSMarkets, Boat, Turquoise, NYFix Millennium, NASDAQ OMX, Equiduct …

The fight is over liquidity, trading, order execution, pricing, clearing and settlement.

In fact, on that note, we should throw in LCH.Clearnet, Clearstream and Euroclear in their battles with EuroCCP, Rainbow and friends.

There is no doubt that MiFID has been a trigger for change, although the resulting changes are yet to be seen. In other words, we are seeing change, but just do not know the long-term landscape, winners and losers as yet.

The reason for mentioning this today is two-fold.

First, LSE came out yesterday saying that the new guys had to fight on some other ground than latency. Second, Turquoise’s leadership – Eli Lederman, CEO and Adrian Farnham, COO – are addressing the Financial Services Club next Thursday with their views of what it takes to win in the future.

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JWG-IT TechSIG ready for the MiFID marathon

Despite some uninformed comment of late, investment firms are scrambling to get to the MiFID starting line for 1 November, just one month from today. 70% of the EU market volume is currently MiFID ready in the 40% of member states that have formally adopted the Directive, and JWG-IT predicts the EU will have over 80% of the market in the MiFID zone within the month. Jitz Desai, Director of JWG-IT commented, “The firms’ priorities have remained customer-centric with best execution, client classification, transaction reporting and record keeping topping the list, however, we expect priorities to shift as the regulators flex their muscles. For example, the FSA have indicated outsourcing and conflicts of interest are hot issues, despite the firms ranking these as bottom quartile concerns this summer.”

The JWG-IT TechSIG has been gearing up for the MiFID race with a tailored approach to meet firms’ needs. Nigel Woodward of Intel and Chair of the group commented “We have heard the firms loudly and clearly - there is no silver bullet to MiFID. We are now working together in smaller ecosystems to tackle difficult issues and develop collaborative solutions. Some of these solutions are already in the market and the first of our RFIs will be available to firms soon for their use in compliant and competitive solutions. Our approach is working and this is reflected by our rapidly growing membership that is now up to 29, on track to our target of 50 by year end”.

Business Objects, EMC, FRS, Gemstone, Kalido, SGI and Symantec have joined JWG-IT in the last 2 months. Ken Won, director, Enterprise Marketing, SGI said “As a JWG-IT TechSIG member, we look forward to sharing our expertise in collaboration with other industry innovators to define a solution stack aimed at addressing the broad requirements of MiFID. The end result should provide financial services companies with a framework for IT solutions that will help them comply with MiFID, as well as Regulation NMS in the U.S., while keeping pace with soaring data volumes, escalating transaction processing demands, and growing pressures to implement IT resources that are cost-, space- and power-efficient.” More significantly, the firms appreciate the vendors’ collaborative approach as Parm Sangha of Cisco and Vice chair, TechSIG explained. “We received a very complimentary 4 to 4.3 out of 5 from firms attending our recent record keeping seminar held in conjunction with the Investment Banking Records Management Forum. We will be continuing to work with firms as well as issuing new whitepapers from our three workgroups: Doing the Trade Right, Reporting the Trade Correctly and Storing and Retrieving Records”.

JWG-IT TechSIG also announced the launch of their new website, www.MiFIDgroup.com where 7 new podcasts are available for free download.

P J Di Giammarino, CEO, JWG-IT, summed up, “MiFID is not a sprint or a quick fix. This is a marathon and only those with robust plans will see the finish line without penalty. Firms need to pick the right MiFID support team, intelligence and race strategy carefully. We continue to see great take-up of our benchmarking services, to establish 1) how far off the curve a firm is, 2) their relative degree of MiFID “readiness” and 3) the appropriate action plans to safely navigate the course.

To learn more please contact:
PJ Di Giammarino, CEO, JWG-IT pj@jwg-it.eu
Nigel Woodward, Chair, TechSIG nigel.woodward@intel.com

JWG-IT MiFID TechSIG model applauded by investment firms as critical gaps remain days away from implementation

from PJ Di Giammarino of JWG-IT: The Financial Serivces industry think-tank

Industry has the potential to save EUR millions through a new approach

London – July 2007. JWG-IT Group Limited, the think-tank for EU-driven IT change in financial services, is pleased to announce that the JWG-IT TechSIG, assembled from the market’s leading technology suppliers, is seeing early success in its development of technology architectures which meet regulatory and market needs. There are less than 50 work days until 31 countries have to be tested and ready for the Markets in Financial Instruments Directive. Through capitalising on TechSIG’s collaborative approach, the industry stands to save millions of euros by using pre-defined flat pack solutions for complex infrastructures.

Significant customer and regulatory pressures sparked by MiFID will mean those that are not ready will risk losing customers and incurring significant fines in 2008. According to a research report, “Who’s ready for MiFID?”, which Thomson IFR published earlier this week, the TechSIG is addressing 90% of firms’ top issues by developing reference architectures for:

• Doing the trade right (DTR)
• Reporting the trade correctly (RTC)
• Storing and retrieving records (SRR)

68% of firms surveyed predict the first challenges to their best execution will come in the first quarter of 2008 and expect that regulatory fines across the market will total €50 million by the end of the year as the regulators have no alternative but to impose penalties for breach of the law, according to 73 respondents from financial institutions across Europe.

Phil Higgins of Brookcourt Solutions commented “We are building a common understanding of people, process and technical options which apply to ALL divisions of the bank. This level-setting helps technologists identify issues and present their investment case to senior managers who need to understand how technology can also be a business benefit.”

TechSIG is now leveraging 19 months of JWG-IT research to lay new foundations for a pioneering form of collaborative working. Members are using diagnostic tools, models and reference architectures to focus and truncate complex discussions about what is required to fill key gaps. A seminar, held recently in London with technologists from Tier 1 and 2 firms, reviewed the architectures and, in a blind survey, participants awarded 3 out of 5 for overall approach, with 66% expressing an interest in working with the group on the detail.

“The smart investment firms have realised MiFID presents massive infrastructure challenges. The new data and security challenges are complex, real and go far beyond the high profile topics. We are addressing immediate and long term needs,” commented Parm Sangha of Cisco and Vice Chair of TechSIG.

The group has now achieved a critical mass, having doubled its membership to 22 in the last 2 months, and it continues to bring in leading players. “TechSIG is working because the members know that it will provide customers with more efficient and effective technology choices. Our first seminar was a small but important step in a long journey, as it confirmed that we are focusing on the right topics with the right model”, said Nigel Woodward of Intel and Chair of TechSIG, who added, “Our next step is to detail the architectures and start testing the logical prototypes. It is now starting to get very exciting - watch this space!” To support the TechSIG workstreams, leading testing companies are now preparing test assets which support their architectures.

PJ Di Giammarino, CEO JWG-IT, concluded, “The industry runs a serious risk of panicking and flushing cash down the IT toilet by making sub-optimal MiFID resource decisions. It is great to see new levels of common sense from traditional technology competitors who are now working together to get ahead of the curve and help their customers. Their efforts are setting a new standard for the technology vendor marketplace.”

For further details about TechSIG or JWG-IT, please see www.jwg-it.eu, which has over 500 members of the financial community registered to receive updates and alerts.

IFR publish 'Who's Ready for MiFID'?

from PJ Di Giammarino of JWG-IT: The Financial Serivces industry think-tank

Thomson IFR announce the publication of ‘Who’s ready for MiFID?’ by PJ Di Giammarino, CEO, JWG-IT Think-Tank. The IFR Market Intelligence report is the first comprehensive healthcheck of EU capital markets’ new capabilities that need to be deployed in less than 50 workdays. The 73 responses to the survey cover a representative cross-section of the industry, featuring both buy and sell-side companies of varying sizes and focuses of business.

The snapshot is worrying. There is still widespread confusion about what needs to be done to comply with the directive and about the consequences for those that don’t:

1. The sell-side is feeling the heat across all the change drivers

2. Significant disconnects are apparent across the back-office

3. Firm resourcing and readiness varies considerably. Often compliance departments are unaware of their true position; many infrastructure managers hold a very different view

4. 95% expect fines for non-compliance in 2008 and are concerned about who will carry the can

5. All expect a “best execution” challenge from their customers
This uncertainty will have profound implications for the next three to four years as 20% of firms are investing to gain competitive advantage from their MIFID programmes now and some of these will have the capability to change the market.

“MiFID [is] a different challenge, in that there are no comprehensive instructions for the firm or the regulator and the industry faces significant “known unknowns”. This, not surprisingly, has resulted in firms taking different views on what to do, how to do it and the implications of their decisions. The differences are interesting and important for all parts of the financial services value chain. This report will help firms understand those differences and their own relative position in the industry.” from the foreword of the report by Nicholas Child, Managing Director, Head of EMEA Markets Compliance, Citigroup Global Markets Ltd.

The report’s online ‘MiFID Healthcheck’, is a self assessment tool for purchasers to assess their relative readiness against their peers and across their own organisation. It is timely as 2008 budgets, that will set the agenda for change and consequently the health of the industry, are currently being developed.

For more information:
please contact
Thomson IFR – Jonathan Price +44 (0) 20 7369 7575 jonathan.price@thomson.com
JWG-IT Think-Tank - PJ Di Giammarino +44 (0) 20 7870 8004 pj@jwg-it.eu

and please see Chris Skinner's latest publication: The Future of Investing in Europe's Markets after MiFID

JWG-IT TechSIG establishes reference solution working groups to fill key MiFID gaps by PJ Di Giammarino

Leveraging impartial research with over 50 financial institutions in 2007, a team of 15 technology vendors, with combined revenue of over €100 billion, has now targeted key hot spots which financial institutions face to comply with the Markets in Financial Instruments Directive (MiFID). Over 60% of the 1,000 MiFID requirements are being addressed, with both large and small vendors teaming up to identify a common set of reference architectures to comply with the new law which goes into effect on 1 November 2007.

JWG-IT Technical Special Interest Group’s (TechSIG) growing number of members has agreed how they will collaborate to build a solution stack to address new business process requirements created by MiFID. A reference framework for business and technology needs, developed in collaboration with financial experts from 10 geographies in over 150+ days of facilitated collaborative effort, will form the basis of vendors’ thinking across technology domains.

TechSIG members have allocated resources to three work teams to drill down on what is required of complex infrastructures, applications and data architectures post MiFID:
• Doing the trade right: tackling the new best execution and order management requirements
• Reporting the trade correctly: addressing regulatory, market and customer reporting needs
• Storing and retrieving records efficiently: examining the new requirements of record reconstitution for the lifetime of the relationship with the client

Each stream is now developing a view of the critical technologies that form the solution and the gaps that TechSIG members will address. Reference solution architectures will be the first outputs, against which end-user firms and vendors can design and position their approach. The groups have established aggressive targets to start the flow of deliverables this month and July dates of seminars to discuss the solutions will be announced shortly.

Nigel Woodward, Director Intel, and Chair of the TechSIG commented “This represents a significant milestone in industry collaboration which we hope will provide a valuable reference for firms and encourage assembly of solutions which take advantage of technology elements from a number of sources – we are writing the orchestral score for the industry”.

PJ Di Giammarino, CEO, JWG-IT Think-Tank, added “With less than 80 work days until financial institutions are meant to have tested their MiFID changes, the industry is still struggling to identify what “MiFID compliant solutions” are. We are delighted to have a strong core group of technology providers engaged in deep debate as to how appropriate technologies can help firms achieve compliance in cost-effective manners. Financial institutions that have engaged in our detailed requirement discussions will now have a frame of reference for getting the job done.”

Current TechSIG membership includes: Intel (Chair), Cisco (Vice chair), Aleri, Aptivaa, ASPOne, BEA, Brookcourt, BT, chi-X, Kurtosys, Redhat, Sybase, Telelogic, Tier-3 and Xenomorph.

JWG-IT is unique – the only Financial Services industry think-tank to facilitate collaborative work to resolve industry issues created by regulatory change. Based on a working model started in 2005, JWG-IT has established strong relationships with EU administrators, leading banks and technology companies. It is neither lobbyist nor consultancy and revenues are restricted to membership fees and content sales. The JWG-IT Think-Tank is designed to help members and participants manage regulatory-driven change better, quicker, cheaper and with less risk.