Mikkel Mördrup, executive advisor on global transaction reporting, Compliance Solutions Strategies, believes the coronavirus pandemic has provided a necessary push towards the use of multi-regulation compatible systems.
“I think that going forward we will see increased investments [in RegTech] because some of the things that might have worked before in a normal world, now with the stress on the solutions it isn’t possible to run it, so you need to have different measurements in place and different processes in place in order to be less dependent on [full time equivalents] (FTEs),” says Mördrup.
“Before, you could see the argument for having a consolidated solution, but there was no real pain. There was no compelling event for moving, but now that COVID-19 is exposing the weaknesses in the setup, then this might start some thinking afterwards.”
The European Securities and Markets Authority (ESMA) announced last week that phase one of SFTR would be delayed until July, following a joint letter by the International Securities Lending Association (ISLA) and the International Capital Market Association (ICMA) which asked for relief for firms amidst the coronavirus-prompted market crash.
On March 20 the UK’s Financial Conduct Authority (FCA) clarified its position on ESMA’s delay, deferring phase one from April 13 to July 13, effectively combining the two phases. Both ESMA and the FCA have stated that they will continue to monitor the situation as the new deadline approaches.
“It gives [firms] some breathing room. And the monitoring bit you could interpret as if things are still problematic when we get closer to the July date, then maybe we can have another look at it again,” says Adrian Dale, director, ISLA.
According to Mördrup, the onset of the European Market Infrastructure Regulation (EMIR) and the Markets in Financial Instruments Directive (Mifid) prompted industry talk of consolidating reporting processes and reusing data to increase efficiency and cut costs. With SFTR, there is fertile ground for such adoptions.
“With SFTR that was the discussion, that investment firms should see it from a more strategic perspective, consolidate their reporting and also reuse the data so that they don’t have to have parallel reporting solutions. They could look at reporting obligations from a more aggregated perspective and I think when we have a
crisis like this, fragile infrastructure or manual processes will be exposed,” says Mördrup.
Yet the delay exposes the industry to new instabilities and uncertainties.
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