Beware of 'unintended consequences' of regulation

“Beware of unintended consequences” of regulation, Fixnetix warns.

See below the video recordings from the event:

Digital transformation and regulation came under the spotlight at the RegTech conference at Second Home in Spitalfields, London earlier this summer. The event welcomed over 100 guests from every corner of the market, to hear a selection of recognised experts share their thoughts on the challenges, and opportunities, Digital Transformation is bringing.

Regulation can have "unintended consequences," suggested Bob Fuller, Chief Administration Officer, at DXC Fixnetix.

He said: "Unlike in the criminal system, the burden of proof lies with the participants. Best Execution is a good example: Banks must be able to demonstrate that they provided the best service to their clients. That makes having the correct data available, in completeness, in the right place, at the right time, all the time – critical.” Then he turned to MiFID I and II.The first iteration, he said: “Brought massive opportunities.” He cited the birth of new venues like Bats Chi-X and Equiduct, but said compared with MiFID II, “its impact will have been tiny. . . MiFID II says you must be a transparent pane of glass to your customer on how you execute a trade.” He continued, “On one single day we will change the fixed income market, the derivatives market and the equities market again, building on the changes brought about by MiFID I. We change to an environment where – if you don’t get the data right at the very beginning – you won’t be able to report it correctly.”

Andrew Reid, Global Head of Digital Market Management & Governance at Deutsche Bank who kicked of the discussion, said “Today’s competitive advantage lies in creating greater value from data” he said, and from that “use analytic techniques to transform this data into business insight.” But he warned that this will require a step-change, multi-disciplinary teams, and a new cultural approach,” with “the introduction of a new ‘co-opetition’ paradigm.”

Also speaking were Polina Evstifeeva, Vice President for Market Advocacy in Deutsche Bank’s Global Transaction Bank, who reminded delegates that the need for regulation dates back to 2008 and the finance crisis; Tom Fairbairn, Systems Architect, Solace, who proffered the view that “the big banks have huge legacy systems” and that “the new guys don’t,” and Paul Charmatz, Managing Director, Encompass Corporation, who said: “As we know, legacy technologies are cumbersome and slow.”He warned, however that from a regulatory perspective there’s a danger there as new technology is applied.”

Data is now a valuable commodity, and as the volumes continue to soar upwards, new and innovative solutions are being developed every day to help Buy- and Sell-side institutions gather, store, manage, analyse and monetise this information.

Andrew Reid, explained how the Bank is bringing data and Digital into the heart of strategy. Followed by Polina Evstifeeva, who discussed her role as Vice President within the Market Advocacy function, and how branches within RegTech could be applied proactively manage regulatory change.

Bob Fuller, Chief Administration Officer at Fixnetix, then took the stage. He discussed the intended, and unintended, impacts of regulation on market infrastructure. Tom Fairbairn from Solace followed, sharing his experience as Systems Architect to explore how firms will have to manage the increasing data volumes as a result of the increasing number of data sources.

Rounding off the speaker presentation portion of the evening, Paul Charmatz, Managing Director at Encompass Corporation, gave an overview into how the Know Your Customer (KYC) / Anti-money Laundering (AML) process has evolved and is continuing to innovate to stay ahead of financial crime. The evening continued into the night with an excellent Q&A session, hosted via a digital platform provisioned by Solace.

More RegTech forums are set to follow in London in September and October and then In New York in November, with more to follow in other international destinations.