Regulatory specialists from major asset management firms have raised concerns that the buy-side is too reliant on technology vendors following the implementation of MiFID II earlier this year.
Speaking at the InvestOps conference in London, a panel discussing how asset managers have coped since the regulation went live across Europe on 3 January revealed that the use technology vendors or RegTech firms is an ongoing discussion among the buy-side.
“RegTech is interesting and provides great opportunity, but it can be difficult to implement and build products as the regulation changes,” said Katy Stevens, global lead for regulations at M&G Investments.
“A lot of new technology providers have no track record or client base because they have sprung up alongside the new regulation, but once the regulation goes live, a lot of buy-side firms are reliant on those vendors. We are yet to see if this will be problematic.”
Kyra Brown, senior regulatory change specialist at Aberdeen Standard Investments, agreed with Stevens but added that regardless of the difficulty, asset management firms have to keep on top of new technologies.
“It can be really difficult to build a product without absolute regulatory finality or without absolute detail… but we have to always be aware of new products in the market and which technologies our competitors are using,” Brown said.
The panel also agreed that one of the biggest hurdles under MiFID II has been trade and transaction reporting requirements, which have brought about major additional costs for the buy-side.
“Trade and transaction reporting has been a huge operational lift for us in terms of cost and the infrastructure we needed to implement for compliance,” said Darryl Cornelius, head of European regulatory projects at State Street Global Advisors.
Brown also issued a warning about the potential penalties with regards to trade and transaction reporting.
She added that the substantial increase in the number of reporting fields, alongside the fact that asset managers must report on a line by line basis, means that at some point in the future buy-side firms will be fined for minor reporting errors.