New regulations require financial institutions to access high quality market data, both real-time and historical. How can firms get the information they need?
The geopolitical environment is changing, and with it, regulations impacting global financial centers. This shifting landscape is set to trigger greater regulatory disparity, and complexity, in turn introducing greater risk.
But as well as these challenges, there are opportunities for growth for those with the insight and agility to take advantage of them.
Amidst this change, one thing remains constant — financial institutions need reliable, high quality information upon which to act.
The regulatory burden
It’s worth revisiting the changes to which financial institutions are reacting:
- MiFID II / MiFIR — January 2018
In 2007, the Markets in Financial Instruments Directive (MiFID) drove change within European cash equity markets, seeking to improve transparency, and create a safer marketplace and remove cross-border barriers.
MiFID II extends across a broader set of instruments, asset classes and trading venues, with both pre and post-trade transparency being key tenets, alongside best execution, record keeping and reporting.
- Market Abuse Regulation — July 2016
MAR replaced and strengthened the MAD framework introduced in 2005, increasing its scope, and eliminating variations in local law across EU member countries.
One year on, many firms are still grappling with MAR compliance.
- The Fundamental Review of the Trading Book — 2019
FRTB addresses perceived shortcomings in the Basel 2.5 market risk capital regulation.
One of the biggest changes delivered by FRTB is to the methodology via which banks calculate market risk (Expected Shortfall), and the requirement to calculate either Standard Approach or Internal Model Approach risk models for all trading desks.
These calculations must take into account data as far back as the 2007 financial crisis.
High quality market data
The common thread running through these regulations is that financial institutions must secure access to increasing volumes of high quality market data, both in real-time, and historically.
They must perform analysis across that large data set, to comply with reporting and record keeping requirements, to inform trading strategies, risk management practices, and demonstrate their unique value in a more open marketplace.
MiFID II requires that all investment firms who trade in shares, depositary receipts, ETFs, certificates and other similar financial instruments traded on a trading venue publish the following details via an Approved Publication Arrangement:
- Instrument identifier
- Venue identifier
- Trade and reporting timestamps
MiFIR places a similar obligation on those trading in bonds, structured finance products, emission allowances and derivatives.
Regulatory compliance requires the retention of significant volumes of information by financial institutions. For example:
- Those who take part in high frequency trading must retain a record of their trade history for at least five years.
- They must monitor all types of trades communication, and retain relevant market data, for market surveillance purposes.
- They must make available information demonstrating adherence to: best execution; trading strategies and regular counterparties.
Relying on a Tick History service to provide the relevant market data, when and where it is required, can significantly reduce the cost of regulatory compliance.
Meet your MiFID II obligations with Velocity Analytics, which provides ultra-high-speed processing of real-time, streaming and historical data.
Captured from real-time data feeds, Tick History is the only service in the market to offer global tick data since 1996 across all asset classes.
These cover both OTC and exchange traded instruments across 400+ exchanges and third party contributor data, the majority available two hours after markets close.
The service enables improved algorithmic trading strategies, additional reference data fields for new MiFID II data sources — a critical agent of SI determination — and compliance with RTS 27 and RTS 28 best execution reporting.
Tick History is now accessible from the DataScope Select platform, thus reducing TCO.
Tick History data can also be seamlessly integrated into Velocity Analytics, a high performance platform with powerful new tools and MiFID II modules, that transform raw data into unique, actionable insights.