How Do You Plan To Address Realtime MiFID II Compliance ?

Solving the Real-time Needs for MiFID II and MiFIR Compliance

Fixed Income Software, a FinTech startup that aims to commoditise high-performance software for fixed income market participants, announces a real-time audit and monitoring platform for MiFID II and MiFIR compliance.

Overview

Although MiFID has been around since 2007, fixed income and derivative markets were relatively untouched by the regulations. Developments in the trading environment since MiFID was first launched and the financial crisis of 2008 have resulted in a drive to extend the regulation. The rules known as MiFID II and MiFIR are focused on the fixed income and OTC derivative markets and aim to increase transparency, better protect investors and support supervision of trading activity within the EU.

When does it take effect and what are participants doing about it?

MiFID II and MiFIR are targeted to be transposed into national law of EU member states by mid-2017, and planned to be effective from Jan 2018. Fixed income participants have already been putting significant effort in to understanding the regulation and forming a plan to comply. Some of the regulation requires formal process and procedures to be put in place. Many requirements are aimed at the real-time nature of today’s electronic trading, requiring automated solutions to be implemented by, not only trading venues and markets, but also firms participating on the buy and sell side of trades.

What’s the technology problem?

Real-time trading platforms implemented by dealers and clients are inherently complex systems, made up of many discrete functions including: market data aggregation, price generation, quoting, market connectivity, trade execution, post trade STP. The real problem here, is one of distributed sub-systems that all need to play a part in a fully compliant MiFID II / R solution.

Our team has built up a wealth of experience in building systems for fixed income and derivative trading over the years, mostly using tried and tested technologies that suited at the time. What we’ve seen over the years, is that although all market participants eventually build systems that quote, execute and STP trades, they all do it in slightly different ways but achieving the same results. Some favour a vendor product, some an in-house solution and often a combination of the two, and that’s just the software. Middleware, data centres, co-location and cloud infrastructure adds a further integration challenge, to an already complex set of sub-systems.

What is our unique approach?

We feel it’s wholly unreasonable, too costly and risky to start re-thinking a complex architecture, especially when it’s critical to a firm’s core business activities and reputation. So we have come up with a plan that we feel ticks a lot of boxes:

Start with the domain experts - We’ve brought together a team of experienced fixed income BA’s and technology specialists, who can evaluate trading environments and understand what they do and how, in a timely and efficient manner.

Use high performance software "off-the-shelf" - We have built the necessary common components that can be seen as commodity software, including a real-time rules engine for compliance monitoring and business intelligence, and a best execution calculator to provide visibility of fair quoting. All on a platform where you can add your own high-value components using a simple API.

Quick and easy business integration – Aggregate data from separate business silos without third party middleware, complex configuration or setup. Supporting integration to multiple transport types and sub-systems that may be running in dedicated data centres, co-location or cloud infrastructure environments.

A technology that brings it all together - A distributed technology that is built from the ground up for financial applications. Extend with your own high-value business components using a simple API. Deploy the platform on local, co-location and cloud infrastructure environments, simultaneously. It supports bank grade line encryption, where sensitive data or external links are required, automatic audit history collection and resilience features are built in as standard.

 

Learn More About Our Platform - www.FixedIncomeSoftware.co.uk

Contact Us - www.FixedIncomeSoftware.co.uk/Contact-us

 

About Fixed Income Software

Fixed Income Software is a FinTech start-up that specialises in providing software and services to financial market participants. We aim to:

  • Provide cost effective and low risk solutions to solve common industry objectives like regulatory compliance, business intelligence, reporting and connectivity.
  • Give you access to experienced technology and business SME's who can help advise, design and build your financial systems.
  • Provide you with systems that enable industry collaboration while meeting performance, privacy and security requirements.

In 2014 "eConnect Connector framework" was released and in 2015 was used by Neptune Networks, a consortium of around 15 top tier investments banks and 25 of their buy side clients. The framework formed the basis of the Neptune GUI, providing real-time, pre-trade AXE indications on a secure internet hosted GUI.

About Ajay Kapoor

Ajay Kapoor founded Fixed Income Software in 2014 and has over 15 years experience in the investment banking and finance industry. During which time has helped develop fixed income and OTC derivative trading solutions for many of the cities major investment banks, including J P Morgan, Credit Suisse, HSBC, Lloyds Banking Group and LCH.

 

Bond AXE Publication Manager

Bond AXE Publication Manager

with eConnect Micro Data Service Platform


Introduction

Over that last few years there have been a number of initiatives to improve liquidity in bond markets. This has resulted in the emergence of a number of platforms aimed at sell side banks to publish AXE indications of interest to buy side participants.

Many sell side banks have opted to connect to more than one platform, to achieve wider distribution of their AXEs, however some of these come at considerable expense and complexity of integration in to the banks existing systems, since they have disparate connection and engagement paradigms.

The Problem
  • AXE information is a one way flow from sell side to buy side, no one caters for an electronic flow of interest from buy side to sell side
  • The existing pre-trade platforms largely have buy in from bigger, affluent buy side, a banks smaller clients may not be included
  • History and analytics of a banks AXE publications and received buy side interest, can influence trading behaviour, many sell side don’t have a data collection capability
  • Many sell side don’t have a single integrated solution to manage their AXE publication to selected venues and clients
  • Sell side have the challenge of integrating to many pre-trade indication platforms all with disparate connection paradigms
The Solution – eConnect Platform
  • Add buy side clients directly to the platform, creating two way connections, using the platforms unique secure infrastructure
  • Store history of published AXEs and indications of interest received from buy side clients, using built in data storage technology
  • Build real time HTML GUI’s to control AXE publications and view indications of interest received from connected buy side clients
  • Add simple adapters connecting to existing AXE venues, consolidating venue connectivity, utilising the platforms dynamic data streaming and discovery features
  • Add simple adapters to source the banks pricing, inventory or risk events that may influence AXE publication, to dynamically feed data and events to publication controllers
  • Scale the platform to add more buy side connections or venues, without impact to the existing platform components, leveraging it’s distributed service based design
Risk Event Based Trigger

Add simple platform adapters to source the banks risk events to trigger AXE publication

Instrument AXE Manager

Host on the platform an AXE manager to select instruments & markets to publish AXE’s based on risk or

position change events

AXE Data Store

Store Axe instrument data from the eConnect platform direct to platform data store to build historical reports

Pre-Trade Indication Platforms

Connect to existing pre-trade indication platforms like Neptune, Bloomberg RUNZ & Algomi, to feed real time AXE information, by simply adding platform adaptors

High level architecture of a bond AXE publication platform, providing a single trader interface to manage AXE publications to existing venues. Using the platforms unique secure infrastructure it’s also possible to create a two way communication channels directly to the buys side, not only, allowing them to receive real time AXE information but also publish indications of interest back to sell side traders.

AXE Price Feed

Add simple platform adapters to source the banks AXE price information from primary trading systems

AXE Manager GUI

View & control AXE publications in real time & receive indications of interest directly from connected buy side, through feature rich HTML GUI’s

Connect Direct to Your clients

Utilise eConnects unique secure infrastructure to publish AXE’s in real time, direct to buy side clients without centrally hosted platforms

Buy Side Direct Connections

Buy Side run Web GUI’s to receive real time AXE feeds & publish their interest back to sell side traders. designed to run on site or in secure cloud creating a PaaS

Fixed Income Multi Asset Trade STP

Fixed Income Multi Asset Trade STP

with eConnect Micro Data Service Platform


Introduction

Our client, an international investment bank actively trades a number different OTC products through global markets and brokers.

The products include single and multi leg instruments & derivatives, trade confirmations of these products need to be booked into local and cross regional booking and P&L systems.

The venues and brokers provide a range of disparate mechanisms to electronically report trade confirmations. The bank must interface to all of these, yet ensure they have a reliable and scalable system to accurately capture the banks risk position and be able to on-board new products and venues in a timely manner.

The Problem
  • Trade booking can be delayed for hours due to missing reference or mapping data, preventing visibility of an accurate risk position
  • Adding new markets or products, requires time consuming development, test and release cycles, to produce a new process
  • No ability to store trades from all markets to the banks global trade store without changing every STP process
  • Process start and restart times have become lengthy due to slow database initialisation
  • No secondary or DR instances are deployed leaving the bank exposed to outages without clear visibility of its risk position
  • Existing solution is formed of 25+ individual processes each with it’s own code base and no common core libraries
The Solution – eConnect Platform
  • Build real time risk and trade booking blotters based on readily available platform data for an immediate risk view
  • Add new products dynamically via admin GUI’s taking advantage of the platform dynamic data discovery
  • Add new markets, destinations or assets by adding new components to the platform in isolation to other running services
  • Store multi-market trades, with update history to the banks global trade store, using the platforms built in data storage technology
  • Reduce risk of outages using the platforms ability to be globally distributed and automatically fail over to secondary processes
  • Consolidate code by basing on eConnect Core and platform APIs, only requiring asset, source or destination specific additions
Trade Processors

Build asset & region specific Trade Processors to dynamically aggregate raw trade data, before enriching & normalising

Trade Store

Utilise the platform Data Store to persist trades, without any extra effort

STP Mapping Data Store

Utilise the platform Data Store to hold common STP mapping & enrichment data

Add New Trade Destination

Add new trade destinations e.g. Risk or booking systems, simply by adding a new destination adapter that aggregates global trade data targeted to that destination

High level architecture of an STP Trade booking system running on the eConnect platform, a number of “out of the box” features allow it to: scale globally for multiple assets & regions, use platform trade store to persist any data on the platform, reduce operation risk by distributing the components, run redundant pairs with automatic failover, capture trade event information with micro second accuracy.

 

Case Study - Fixed Income Multi Asset STP

Add New Trade Sources

Add a new market for an existing asset type by simply adding a new Trade Source Adapter to the platform

Trade Booking Blotter

Monitor real time trade booking status with HTML GUI’s based on our

platforms JavaScript API

Banks Monitoring Systems

Connect banks monitoring systems direct to the platform with Java, JavaScript API’s or JMX