ON THE LOOKOUT FOR PROJECT SENTINEL.
A new multi-bank initiative called ‘Project Sentinel’ has been launched to help mutualise the costs that firms incur related to MiFID II implementation for OTC-related front office trading technology. It will use a normalised regulatory data model that assists investment firms to meet the new OTC sales and trading requirements.
Currently, a group of between four and seven banks has officially signed up to be a part of the project, though their names have yet to be disclosed, with a further handful likely to join in the near future. It is thought that a number of large regional banks are included in the first wave.
It has been well documented that navigating MiFID II reporting and compliance obligations can be challenging and requires both human and monetary capital to research and implement appropriate measures, in addition to time constraints as new deadlines come into effect.
Etrading Software, which is serving as the project manager for Project Sentinel, said that “dealing with MiFID requires substantial human resources, expertise and technology investment” – which, if tackled on “an institution by institution basis, will demand substantial investment in areas that provide limited or no competitive advantage”.
Sassan Danesh, Managing Partner or Etrading Software, and who co-chairs the OTC product committee for the FIX Trading Community, explained in a statement: “We are delighted to facilitate this important initiative on behalf of market participants to create a modern, low-cost, standards-based MiFID II infrastructure capable of servicing client needs efficiently and electronically.”
Market participants will pool their resources in non-competitive areas, such as MiFID II, by investing in a standards-based, strategic MiFID II compliant technology solution which according to Etrading, “streamlines and automates the business processes for the front-office, brings value and efficiency back to the business and reduces commercial risk”.
The focus will be to reduce expenses and risks through mutualisation of analysis, interpretation and implementation as well as compliance costs due to the sharing of IT investments. Moreover, economies of scale will help create a competitive, market-leading, “best-in-class” solution while ensuring dedicated, focused resources working on a single project. The solution will also be flexible enough to be adapted to other regulatory regimes such as the European Market Infrastructure Regulation and Dodd-Frank.
The next phase of Project Sentinel is mapping out the MiFID II compliant workflows for the core permutations of interaction and client types, trading models and platforms and instruments across the trading lifecycle to allow the selection of best-of-breed technology solutions (buy or build) for the new market structure to come.