Best Enterprise Data Management Initiative. Most Innovative Regulatory Solution WINNER

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1 Best Enterprise Data Management Initiative Most Innovative Regulatory Solution WINNER

2 Best Enterprise Data Management Initiative SmartStream RDU With headlines claiming new regulation could cripple the financial industry, and the rush to comply, there was one topic on every agenda last year. The revised Markets in Financial Instruments Directive (Mifid II) was a key driver of investments in market and reference data management programs, as firms prepared for the January 3, go-live date. Not surprisingly, the vendor awarded the Best Enterprise Data Management Initiative was on hand to help clients be compliant by the deadline SmartStream s Reference Data Utility (RDU) for its Mifid II Reference Data Service and Systematic Internaliser Register. SmartStream RDU has been celebrated at the Inside Market Data/Inside Reference Data Awards for the past two years following its launch, as it focuses on bringing together and integrating reference data, including data for regulatory reporting. To help clients with compliance, SmartStream RDU launched its Mifid II Data Service for firms that require access to reference data to support pre- and post-trade price transparency and transaction reporting. Peter Moss, CEO of SmartStream RDU, says the service is currently used by a number of customers to help them provide approved publication arrangement (APA) or systematic internalizer (SI) services. The intraday application programming interface is particularly helpful when automating the trade workflow required for over-the-counter derivatives. Although some large firms have started taking on the SI role, it is optional until September 1,, and Moss explains this has led to SmartStream continuing talks with customers those that have opted to wait and those looking to create more resilient processes. Of those that set up as SIs from January, there are a number [of firms] that are making decisions around what they need to do to turn this into a 10 year sustainable business process, says Moss. According to judges, SmartStream edges out the others by being a bit more cutting-edge, and offers an innovative service that serves multiple banks and financial institutions. What makes the winning entry truly unique is its Systematic Internaliser Register, which was jointly developed by a group of APAs and SmartStream RDU. APAs collect data from their SI customers and then provide it to SmartStream RDU, which consolidates it and administers it back out to the market to help users determine who is an SI in which instrument. The fundamental problem we re trying to solve is that you need to understand if a counterparty is an SI or not, says Moss, adding that this is a great example of how financial market participants can work together to solve industry problems. What makes the winning entry truly unique is its Systematic Internaliser Register, which was jointly developed by a group of APAs and SmartStream RDU. 1 June waterstechnology.com

3 Winners Circle Cooperative Mifid II Compliance SmartStream s Reference Data Utility (RDU) continues to be celebrated for its collaborative approach to solving the data burden, and won praise this year for supporting the industry in plugging a gap in the market for Mifid II readiness, winning both the Most Innovative Regulatory Solution and Best Enterprise Data Management Initiative awards. Inside Data Management speaks to RDU CEO Peter Moss. Q What is SmartStream RDU s role in helping firms comply with the revised Markets in Financial Instruments Directive (Mifid II)? SmartStream RDU has come a long way in a year, having released its relevant products in time for the January 3 Mifid II deadline. Our financial data utility offers a fully integrated reference dataset to support pre-trade price transparency, post-trade reporting and transaction reporting, and in collaboration with approved publication arrangements (APAs) we have also launched a Systematic Internaliser Register. Since going live, we have supported a number of customers using the Mifid II reference data to help provide the APA service and fulfill the systematic internalizer (SI) role, and we are continuing to talk to a range of organizations considering adopting the service. Peter Moss Since the APA role includes managing trade reporting on behalf of the market, APAs need this data to accurately trade-report. In fact, they cannot do their job without access to the data, and it was recognized there was a gap in the existing mechanisms. APAs worked together to help solve this problem in advance of the Mifid II start date. If the market needs to collaborate to make the regulation work, market participants are good at making that happen, which this example demonstrates. Q What market events are driving interest in Mifid II services at the moment? We re seeing as much activity now as we were seeing this time last year, and Mifid II is still a key driver. Since SIs are not mandated to take on the SI role until September 1, some have chosen to wait until that date. The largest firms typically decided to opt in from January, but the response was mixed for large domestic or regional players some opted in and others decided to wait. In addition to seeing interest from firms yet to adopt SI status, we are also talking to firms that made the change in January but are now looking for more robust processes and increased automation. Q What makes partnership with APAs stand out? SmartStream RDU has worked with Deutsche Börse on Mifid II readiness, and has been speaking to APAs about the difficulty in identifying who is an SI for which instruments. The fundamental problem is that you need to understand whether a counterparty is an SI or not when you report a trade, which is impossible unless it is published. We provide a mechanism for SIs to publish the instruments for which they are an SI and then compile a listing for all instruments and SIs, which is made available to the market. Q How did SmartStream RDU set up the Systematic Internaliser Register? SmartStream RDU has put together a service where each APA collects instrument coverage from its SI customers and then passes that data to us. We then consolidate the data and offer the complete listing back to the market to help users determine which APA is an SI in which instrument. Q How does SmartStream RDU validate the data in the Systematic Internaliser Register? We provide a template to SIs to collect the data and then make a series of validations to ensure it is accurate. This includes ensuring we receive valid International Securities Identification Numbers and legal entity identifiers, and correct asset types, for example. Given the importance of this data for accurate trade reporting, it is essential to ensure it is correct. Q What is next for SmartStream RDU? SmartStream RDU is progressing its core initiative, which is to create an industry-wide security master. Last year, we completed the derivatives content for that build-out, sourcing reference data from more than 100 exchanges. We then added nearly twice as much content to the data from the exchange feeds to define product and contract dynamics, blending in additional data from vendors. We have now sold the derivatives data to a number of firms, and those firms are seeing exceptional success in terms of improved data quality. SmartStream RDU is currently building out equity coverage, which will launch in Q3 of this year. For equities, we are mainly focused on vendor coverage, offering customers a blended selection of feeds where tradeable products can be uniquely and unambiguously identified and corporate actions are reliably applied before the start of the trading day. Equity coverage will add the second substantial component of the coverage we need for a full security master, and we ll then start modeling fixed income. This is the broader journey SmartStream RDU is on, but Mifid II was a significant market challenge that could not be ignored. waterstechnology.com June 2

4 Most Innovative Regulatory Solution SmartStream RDU When new and complex regulation is introduced, compliance is seldom a straightforward task for the financial services industry. Sometimes, it is the industry s responsibility to find innovative ways to cooperate to meet changing regulatory requirements, and at times this can involve the introduction of brand new data services that make it possible for user firms to establish efficient processes and comply on time. This year s winner of the Most Innovative Regulatory Solution award SmartStream Reference Data Utility (RDU) has been a catalyst in helping the industry overcome barriers to compliance with the revised Markets in Financial Instruments Directive (Mifid II). In what judges dubbed a bold move, SmartStream RDU has worked with the industry to create a centralized Systematic Internaliser Register, which will help firms meet Mifid II post-trade reporting requirements. Firms had the choice to opt in as systematic internalizers (SIs) when Mifid II was first introduced, but from September the SI regime will be mandatory. The challenge for firms will be to identify whether counterparties are SIs for the financial instruments they are trading in. The Systematic Internaliser Register, a result of industry collaboration between SmartStream RDU and a group of approved publication arrangements (APAs), will help plug this gap by offering a centralized database that lists SIs for each specific instrument. Peter Moss, CEO of SmartStream RDU, says firms need data from SIs to understand the role of a counterparty to accurately report on a trade under Mifid II, and APAs need data from SIs to meet their trade reporting requirements. In a bid to create an efficient process for both buy-side and sell-side firms, the SI register combines the necessary reference data from SIs and makes it available to the market. Moss explains that the APAs collect the list of instruments for which their SI customers are providing SI services, and then share this data with SmartStream RDU, which validates and consolidates it. There s a template we provide to SIs to collect the data, and then we undertake a series of validations to ensure it is accurate, he says, adding that the data received may contain incorrect International Securities Identification Numbers or asset types. The result is a unique dataset that provides transparency on which services each SI offers. The initiative is an example of the industry collaborating to overcome a new challenge presented by regulation, and judges praised SmartStream for its innovative solution to assist firms in regulatory reporting and identifying SIs. There s a template we provide to SIs to collect the data, and then we undertake a series of validations to ensure it is accurate. Peter Moss, SmartStream RDU 3 June waterstechnology.com

5 smartstreamrdu.com Systematic Internaliser Registry. Centralized. The Systematic Internaliser Registry (SI) provides the necessary data to determine which counterparty should report, by allowing SIs to register the details of the financial instruments and asset classes for which they are providing services, in a single centralized listing. The SI Registry is a collaboration between the SmartStream RDU and a group of Approved Publication Arrangements (APAs). The initiative is open to all APAs and SIs and offers a comprehensive and granular set of data from a growing population of SIs - providing much needed clarity to the market. Contact us today to find out more: info@smartstreamrdu.com