Sopra Steria has been selected by the Financial Conduct Authority (FCA) to deliver the UK’s largest digital market data processing platform.
The solution will be used to ensure investment firms’ trading reporting activity remains compliant, supporting the FCA’s on-going regulation of firms as well as new requirements under the forthcoming EU regulation MiFID II (‘Markets in Financial Instruments Directive’).
We spoke to Melba Foggo, Sopra Steria’s Financial Services Managing Director, to find out how the solution will help the FCA and what the implications are for the use of big data technology in the financial services industry.
1. Why did the Financial Conduct Authority (FCA) require a new digital market data processing platform?
The FCA were looking for a responsive, leading edge technological solution which not only provided the scale and flexibility to report on the high volumes of transactions associated with MiFID II, but also the potential for scalability to support downstream regulatory programmes and broader benefits to other regulatory bodies and regulated firms.
2. What is MiFID II, and why is it so critical to the financial services industry?
The Markets in Financial Instruments Directive, known as MiFID II, is one of the most ambitious pieces of regulation ever introduced by the European Union. Under MiFID II, trading venues and investment firms will be required to submit market data on a wide range of financial instruments to the FCA.
All firms and venues will need to forward information to the FCA on nearly everything that takes place – trades, shares, derivatives – and create transaction reports. Its aim is to improve the functioning of financial markets after the financial crisis and to strengthen investor protection. As such, it will impact the whole of the financial services industry.
3. How will the solution support the FCA with MiFID II and other regulation?
The platform will store billions of transaction reports over the initial six-year term of the deal. Its reporting warehouse facility will interrogate large amounts of data with the purpose of giving the FCA greater transparency, and therefore a larger breadth and scope of information on reported transactions. As a result, it will enable the FCA to meet stringent validation times and deliver value for money by reducing implementation and running costs.
4. What kind of technology does the platform use?
The platform is a big data solution using cutting-edge open source application components and hosted on Amazon Web Services (AWS). It will be able to handle millions of transactions per day, the receipt and delivery of which are guaranteed by Axway which assures the exchange of files between submitting entities, the FCA and other stakeholders. Powered by DataStax Enterprise Max it will validate and store all transaction reports, ensuring they meet the MiFID II rules. It is an innovative SaaS platform delivering the services back to the regulator.
5. How might other organisations take advantage of the platform?
The benefits of Regulatory Support Service platform are its scalability and ability to operate completely independently from existing architectures, as it is run off a cloud operating system. This allows it to be seamlessly integrated into existing technology. The shared platform model will enable other organisations to be part of a system that sits right at the heart of MiFID II developments, as Sopra Steria continues to work closely with the FCA.
Organisations will receive the service level and operation capability of a large platform, but the flexibility of this architecture means that it can be customised to reflect specific needs. This shared service platform means it can offer high speed, scalable technology but at a fraction of the cost.
6. What are the implications for the financial services (FS) industry?
MiFID II has huge implications for the whole FS industry, affecting both different types of firms and different types of banks, whether retail, commercial or investment. If firms are not compliant by the due date - 3 January 2018 - they run the risk of fines, the inability to trade, as well as the potential for severe reputational damage. This is why our solution is so important: as it is a flexible framework that can adapt to any future financial regulation, both regulators and regulated firms can benefit from the technology.
7. How can big data technology help the FS industry?
The FS industry has embraced big data technology, and many organisations now see it as an opportunity to fundamentally change the way they make decisions. For instance, banks can and are using data analytics to offer personalised services to their customers and inform their business plans. Big data services are not only becoming more secure and reliable, but also more innovative, as we’ve seen with the recent interest around the incorporation of social data in FS analytics.
This increased uptake in big data services is another reason why our Regulatory Support Service platform is so significant: we’ll be creating huge data sets that could reveal insights never seen before, which we can then share with the wider industry.
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