From MiFID II compliance through to ESG, the tax implications of investments, crypto and more, having access to quality key information enables businesses to use regulation to their strategic advantage, said Mr Gertel. And the earlier they move the better. “Whenever a new financial regulation consultation paper is issued, you can be sure that the new rules will come, with the main question being ‘when?’,” he said. “Delays in implementation process contributes to problems with implementation with the deadline looming,” he added.
Act early and inclusively
He recommends taking a bottom-up approach, featuring input from all relevant internal stakeholders, including them in the process of designing solutions. Budget has to be allocated along with time for planning and training, as well as for accessing data.
It can be tempting to wait until the end goal becomes clearer, but Mr Gertel believes this is a wasted opportunity. “By being early, you can save costs,” he said. “For example, if you work with external IT providers you could become a test client. This way, not only do you get early access to systems development work, but you get a good perspective on how the regulation is taking shape and the business implications,” he added. So even if the final regulatory details are defined with weeks before the implementation date, early movers are well placed to adjust, not least because data sources have been scoped out, tested and put in place.
By being early, you can save costs.
Real world example
“A simple example of how this works was with the target market rules in MiFID2,” said Mr Gertel. In this context, the issuer of each financial instrument has to define for whom this asset or product is appropriate. This information has to be followed up on by the distributor, who has the ultimate responsibility of ensuring that each instrument is right for the investor’s needs. Ensuring that relevant data flows quickly and smoothly between these stakeholders makes the sales process more comfortable for everyone in the supply chain and, ensure compliance with the regulation. Ultimately, the result is an improved experience for clients.
“At the starting point of the information flow are data feeds and templates which help to standardise data and facilitate data mapping, with IT tools to help us sort instruments into ‘complex’ or ‘non-complex “classifications,” Mr Gertel said. Such time savers are needed when seeking the key information in SIX’s database of around 11 million active instruments, ensuring that it meets client and regulatory needs.
ESG and Tax
ESG is another highly topical example. “Financial services businesses that have sufficient quantities of quality sustainability data can avoid charges of greenwashing, and that gives a strategic advantage,” Mr Falluel-Morel said. Although the security might be labelled green, can the product manufacturer be sure it meets their own internal sustainability standards? “We are going deeper by providing knowledge about each instrument, with our products that offer a look-through ability, giving clear knowledge of what is behind each asset,” he said. “The customer knows more about what they are really buying.”
The tax implications of investment in each asset and product also vary considerably, depending on the type of instrument, where it is located, and the domicile of the end client. “Two bonds might superficially look similar, with the same time horizons and returns,” Mr Falluel-Morel noted, “but when different tax regimes are applied this can change the outlook considerably. We are helping banks, asset managers and others by providing this information to give their customers added comfort.”
Our job is to ensure we provide the best possible and high-quality data at all times, with particular relevance for the latest version of any regulation.
AML/CFT requirements can also be incorporated into SIX’s data streams. Companies that are on sanctions watch lists, and also those that an asset manager or wealth manager wishes to avoid, can be flagged or blocked.
A specialist task
Ultimately sourcing data is a specialist task. “Maybe it sounds easy, but often the relevant documents are not immediately available or are not online. You need to put the processes in place to retrieve the documents you need,” said Mr Gertel. “Our job is to ensure we provide the best possible and high-quality data at all times, with particular relevance for the latest version of any regulation.”