The aftermath of the global banking crisis of 2009 saw the introduction of a wealth of regulations around financial trading, among them the EU’s so-called MiFID regulations. Now, a new version of those rules – not surprisingly called MiFID II – are being introduced and will become mandatory from January 2017. One major change is that the new rules take a leaf out of the UK’s Financial Conduct Authority’s book and require that all mobile calls made by a financial trader are recorded.
So by January 2017, the trading community – including banks, brokers, financial institutions and independent advisors – will all have to put in place measures and systems to meet the new requirements.
And when it comes to recording trader’s calls – the new MiFID II regulations are very exacting – much more so than the original UK rules. They cover not just fixed line and mobile calls, but also instant and text message services, and calls made over a PC or phone using services like Skype. All these communications must be recorded, stored and available for retrieval.
The rules cover not just communications that conclude in a trade, but all those calls and communications that are intended to conclude in a trade. What’s more, there is even a strong school of thought that interprets the regulations as covering face-to-face meetings as well as phone conversations. Consultation on that interpretation is well underway as part of a wider review of the regulations.
Indeed, in the UK, the FCA has published an excellent consultation paper on all aspects of MiFID II and is currently engaged in a series of meetings with trading organisations and with suppliers in the marketplace. We have met with the FCA and are now providing them with specific feedback on the communications recording element of the regulations.
We are also taking time to meet with some of those organisations and companies likely to be covered, for the first time, by these regulations – in order to further our understanding of the requirement from a business perspective as well as from a technology one.
“We are using the knowledge we gain from these industry soundings to shape our response to the FCA.”
It seems clear that while most of the larger financial businesses will already have internal recording systems in place; the extension of the regulation across all the different forms of communications and the requirements for secure storage and retrieval for at least five years, sometimes longer, means that many of those systems will simply not be able to cope with the new rules.
And the extension of the regulation to cover smaller firms and even independent financial advisors will lead many organizations, small companies and individuals to begin searching for affordable and workable solutions.
The early publication of the rules does give time for the consultation process, and it also gives companies around 18 months to source, set up and commission a modern system able to meet all the requirements of the MiFID II regulations. But make no mistake; the time to act is now, as those 18 months will fly by.