Reporting requirements under regulations like MiFID II are driving the buy-side to outsource data functions to manage the complexity of complying with the rules.
The explosion of data handled by asset managers for reporting to regulators, stakeholders and clients, is so complex that buy-side institutions are increasingly seeking to outsource data operations.
BNP Paribas Securities Services’ recent whitepaper - exploring the reasons behind the buy-side outsourcing such functions – said that managing complexity is the ‘key driver’ for the trend.
“The number of possible dimensions of data, on asset valuation, process monitoring, performance analytics, market status and so on, compounds the potential complexity,” the whitepaper said.
Under European regulation MiFID II, pre-trade transparency rules are forcing the buy-side to submit 70 fields of data - up from 23 – increasing scrutiny, risk and responsibility for asset managers.
BNP Paribas Securities Services said following the implementation of OTC derivatives rules in 2012, it saw an increased demand for operations outsourcing, as firms push for standardised reporting.
“Regulations like the Dodd-Frank Act in the US, MiFID and EMIR in the EU and a plethora of rules in Asian jurisdictions mean keeping up with compliance has become a greater and greater burden,” the whitepaper said.
BNP Paribas Securities Services added that it expects the operations outsourcing trend to proliferate.
“The burden of maintaining the technology necessary to keep up with reporting and compliance obligations, and a need to be ruthless about finding efficiencies wherever possible are conspiring to make outsourcing investment operations a more compelling prospect,” it concluded.