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FIX Americas Industry Briefing 2017: In Search of the Flux Capacitor

Traders Magazine Online News, November 14, 2017

Tim Healy

From the improbable upside-down plane scene in ‘Flight’ to musing over the state of the Markets in Financial Instruments Directive (MiFID) in the future of ‘Bladerunner 2049’, this year’s FIX Trading Community event in Boston kicked off with references to the cinematic. But it was the keynote speaker’s analogy borrowed from ‘Back to the Future’—and, specifically, mention of the flux capacitor—that tied a wide range of topics including MiFID II and pre-trade transparency, zero-touch post-trade processing and virtual currencies, all together.

Every session at the event, hosted by State Street, was marked by disbelief about the twists and turns of innovation in recent years, whether it be in preparations for the gyrations of MiFID II, real-time pricing for investment-grade fixed income, or the explosion of initial coin offerings (ICOs). “Five years ago, you wouldn’t have believed…” was a common refrain. So the core question put to panelists was therefore a kind of puzzle, and frequently one that spawned friendly debate: given all that has come before, how can communication and standardization help to catalyze or further unlock market innovation for a wider array of participants? In short, how should the FIX standard fuel the FinTech and RegTech DeLorean?

MiFID II: How to Cope

Fittingly, the first discussion focused on a battle against time itself. When the first phase of MiFID II finally goes live shortly after New Year, the world’s financial institutions—whether based in Europe or not— will have a new regulatory behemoth to cope with, covering transparency, execution, and data costs among other priorities. It also promises potentially compressed timelines for the additional 2018 phases, short-term trading chaos as a result of systematic internalizer reclassifications, and little tolerance for excuses once ESMA brings a review. Even for those firms with narrower exposure to MiFID II, panelists agreed that the weighty new rules will likely align with future rulemaking in the US and elsewhere, marking an onerous new era for technology, operations and compliance globally.

The most common advice was surprisingly simple: be prepared to demonstrate how your MiFID II interpretations, frameworks, calculations and disclosures were thought through, designed and ultimately implemented. As one speaker put it, the ongoing problem with MiFID II will not be technological so much as semantic. Despite the 2018 deadline, a significant amount of definitional uncertainty remains around key concepts and provisions. Firms demonstrating dexterity around those issues will not only have an easier time navigating the new environment internally, but may be able to use the messaging standard’s flexibility and critical mass to influence outcomes on a practical, operational basis.

Zero-Touch: Pushing Payments

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