Thomson Reuters uses new Mifid 2 suite, expands Priips-compliant risk management platform

Thomson Reuters has enhanced Datascope ahead of the implementation of Mifid 2 reference data requirements, covering corporate actions, entity data, end-of-day and intraday data on January 3, 2018. The platform provides pricing, reference data and derived analytics, and covers more than 650 structured notes and derivatives meeting pre-trade, trade and post-trade operational requirements across the front, middle and back offices of financial institutions.

"The challenge is clear, reference data has become a real focus point for the market," said Stuart Martin (pictured), managing director, risk information and learning services at the company.

To be compliant with the new regulation, investment professionals need to have suitable risk models that safeguard against risk exposure and enable an overview of the non-equity trading lifecycle. The aggregation of market and reference data is central to ensuring this overview is possible.

Given the new fixed income, currencies and commodities requirements under Mifid 2, latforms will have to formalise their status as multilateral or organised trading facilities, while publishing trade data in a consistent manner. The Mifid 2 capabilities will include reference data on equities, warrants, options, futures, commodities, funds, government and corporate bonds, collateralised mortgage obligations, municipals, structured products and OTC derivatives.

"With just a short period remaining, there is still work to be done," said Stuart. "It would be misleading to say that the market is primed and ready to comply with all Mifid 2 requirements today. At this late stage, there are divergent levels of preparedness."

Among the challenges the industry is facing is the extension of the pre- and post-trade transparency regime to non-equity like instruments, including structured products, and the expansion of the scope of transaction reporting, according to Stuart. "One of the complexities will be to identify whether the trade is eligible for trade and transaction reporting, considering the underlying components of these instruments are generally not a single instrument, but can constitute a basket of securities or an index," said Stuart. The solution will provide the traded on a trading venue (TOTV) flag for individual securities to help customers identify the trade and transaction reporting obligation for each of the securities in the basket, according to Stuart. "For indices, we have launched an index eligibility solution, which provides a TOTV flag for the indices universe supported by Thomson Reuters; currently in excess of 400,000 instruments," said Stuart.

The company is planning to extend the 'index eligibility' solution to cover proprietary indices and baskets of securities leveraging on the solution developed to support index eligibility, according to Stuart. "We will continue to monitor the regulatory landscape to ensure that we provide new solutions, as well as adapting our existing solutions to accommodate required changes: for example, we anticipate additional Mifid 2 requirements in 2018 as a consequence of the delay in implementing the systematic internaliser regime," said Stuart. The new solution will complement the expansion of its Connected Risk platform, a Priips functionality released on December 6 and aimed at the structured products market.

The platform will now include a model risk management solution, allowing institutions to demonstrate a real-time understanding of their model risk landscape, with the ability to report on the governance status, sign-offs and related issues from a single platform source. The solution allows for the capture of on-the-go updates and additions to the model inventory with real-time reporting to regulators, committees and cross-risk functions. Changes are managed with an audit trail of supporting documentation, issues resolution and sign-off.

The solution provides a 'holistic approach' to model inventory management, enabling governance and risk management teams to track models across all risk thematics, using a single inventory store, helping to reveal potential redundancy and duplication in the inventory. This approach provides the necessary governance evidence for independent and regulatory review, as well as a faster response to regulatory changes that affect models.

New Mifid 2 solutions for the buy- and sellsides