Reporting may be a mundane regulatory burden, but it’s not something firms can afford to get wrong. As trade and transaction reporting requirements continue to grow, so too does the risk of inaccurate or incomplete reporting. In 2015, Merrill Lynch International was fined £13.3 million ($16.9 million) by the UK Financial Conduct Authority for failings in transaction reporting, and it is unlikely to be the last.
Financial institutions need strong expertise and technology to give them confidence in their regulatory reporting, and they also need to invest time and resources in validating the data that they report. Ultimately the risk can only be borne by the user, yet NEX Regulatory Reporting, which is powered by Abide Financial, shows it has faith in its product by deliberately not including contractual clauses that prevent the firm being sued by its customers.
“Whilst we can’t indemnify our clients against fines, hypothetically if a client was fined because of something we’d done, or failed to do, contractually they would have recourse to seek remedy. We stand behind our service, plain and simple,” says Collin Coleman, founder and chief executive of Abide Financial.
Prior to its transition to NEX at the start of this year, Icap acquired Abide Financial in October 2016, having already held a strategic investment through Euclid Opportunities, its financial technology investment unit. Abide was founded in the UK in 2011 with an exclusive focus on transaction reporting. The service supports reporting workflows, with specialist consultancy and advisory teams and a multi-regime reporting hub, which translates new obligations into regulatory compliant solutions. Abide is an approved reporting mechanism (ARM) under Mifid I, and has applied to be an ARM and an approved publication arrangement (APA) for Mifid II, allowing it to report transactions and publish trades on behalf of investment firms.
“The first pillar behind our service is that we offer it in conjunction with being able to offer regulated end points for reporting,” says Coleman. “The second is the quality of that service; we have a good stable of some of the widely acknowledged market-leading experts in this space. Lastly, the systems that we have built tie a lot of that intelligence in so that those rules, those enhanced checks, are baked into the system and every single record that comes through gets that kind of continuing oversight.”
Given the sheer weight of compliance demands, reporting can become a box-ticking exercise, adding little value to an organisation’s operations beyond avoidance of fines. By going beyond simple box ticking, NEX has developed an offering that users value.
“[It] doesn’t just provide a transaction processing conduit but a fully managed, end-to-end solution,” notes one client. “Unlike other providers, everything they offer is customisable rather than a one-size-fits-all solution.”
This is a conscious strategy, says Coleman, stemming from the poor level of engagement between many providers and users – something he experienced directly in his previous role as chief operating officer at Schneider Group. “When I was a buyer of regulatory reporting, I was pretty unimpressed with what was on offer. It was seen by many as a tax on trading and the default as a market participant is to minimise your overheads and the tax you are paying. My take is that firms should actually get a benefit from money they have to spend anyway.”
Among the platform’s features, judges were particularly impressed by the NEX Regulatory Reporting Navigator, the platform’s graphical user interface. This has been designed to create full transparency across the transaction lifecycle, while providing insight into reporting timeliness and data quality.
The Navigator not only allows clients to analyse reportable data, but it also gives them the ability to set their own targets for reporting accuracy, weighed against the industry average, by viewing the anonymised analytics of their peers.
Obtaining a benchmark against which to compare their own activities can be a real advantage for firms that have to invest in reporting technology. Not only is there a risk of under-investment, leaving them exposed to fines for failing to report adequately, there is also a risk of over-investment as a result of gold plating reporting due to lack of insight.
Under the bonnet of NEX Regulatory Reporting, the platform is running a complex data aggregation system to handle the variety of data types and formats that clients require. Its capabilities extend across jurisdiction and institution type, and its consultancy and advisory service is the icing on the cake for many users.
“It really is a hands-on service,” says Coleman. “Effectively we take shared responsibility for client outcomes specifically to make sure that clients are compliant with reporting rules, both at the point of onboarding with us, and over time as their businesses change.”