David Bull's headshotMiFID II – the second iteration of the EU’s impending Markets in Financial Instruments Directive, due for implementation on January 3, 2018 – is being touted as the most extensive shake-up of financial services for a generation. But it’s a European regulation, so why should Asia-based companies care?

John Mason's photographFinancial institutions are bracing themselves for the EU’s impending Markets in Financial Instruments Directive II (MiFID II). Often described as the most far-reaching regulation affecting trading firms and their clients in a generation, the directive will have significant impact on investor protection, conduct of business, transparency and organizational and infrastructural issues.

Navigating the sea of regulatory change is a complex task. Strategic data management can simplify the process, so why are many buy-side institutions reluctant?

The zero-tolerance approach of regulators since the financial crisis means institutions are having to master complicated data requirements with no room for error. 

Jayme profile image displayValuation is mission critical to investment funds and policy makers indicate that failing in this area contributed significantly to the recent financial crisis. To protect the customer, efforts to harmonize and institutionalize best practice Valuation standards must be put in the spotlight.

With hedge fund managers now subject to similar scrutiny as the traditional investment funds and new transparency requirements embedded in the post-crisis regulatory response, we must keep an eye on fund valuation dynamics and the ever-changing landscape. Might there be commonalities between the valuation regulations across different jurisdictions? 

Mike Demas HeadshotFrom default to market reform, the U.S. municipal bond market now demands a greater focus from investors.

When the Government Development Bank (GDB) of Puerto Rico failed to make its full debt service payment on May 1, the municipal market took note. While anticipated, the default of a major issuer still raises concerns among investors.

 

This is just one reason why they are paying closer attention to their muni bond holdings.  

Jayme profile image displayHeightened regulatory scrutiny of financial markets globally has elevated the need for accurate asset evaluation and transparency into the price level.

Regulatory requirements for evaluated pricing is intensifying as regulators seek greater insight into the value of investment portfolios with a view towards identifying any pricing issues that could disrupt markets or, at worst, cause failure on the scale of the 2008 crisis.

Tim LindAfter the 2008 financial crisis and notable gaps in the understanding of market risk, transparency has become the primary  theme driving regulatory reforms globally. Transparency in all its forms -- in market exposure, management fees, conflict of interest, liquidity, asset valuation, and beneficial ownership -- is the main pillar of compliance for global asset management.

As regulators begin to pivot their attention from banks to asset management in terms of their impact on systemic risk, the accuracy of disclosures will fall under increased scrutiny. 

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Since the Alternative Investment Managers Directive (AIFMD) regulation came into effect, financial companies have struggled with the data challenges.

Thomson Reuters hosted a panel where industry professionals shared their advice on managing the AIFMD data challenge. 

The rise of the back office, setting data free and why, whilst it might never be sexy, you need to love your reference data

As the regulatory deadline calendar ticked inexorably by through 2015, it continued to present ongoing challenges for firms with their understanding, approach to and implementation of BCBS 239 for risk data aggregation, BCBS 238 for liquidity coverage ratios, Solvency II for the insurance industry, AIFMD for the fund industry, and the evolving requirements of MiFID II. From any angle, 2015 was shaped greatly by the need for financial institutions to respond to mounting regulatory pressure efficiently and quickly.  

Jayme profile image displayThe worlds of technology and finance are increasingly intersecting in exciting ways. One of the most visible—and important—trends in recent years has been peer-to-peer (P2P), or marketplace lending. In this process, a third-party platform matches lenders and borrowers, creating new opportunities in an area long the domain of banks, credit unions, and other traditional financial institutions. 

Publicly traded Lending Club and privately-held Prosper are perhaps the most popular and well-known P2P lending services. Their online marketplaces function as intermediaries for loans to consumers and businesses. They offer investors an opportunity to finance the loans, which are usually in the range of $2,000 to $35,000.

MarionThe marketplace is recently waking up to the fact that implementing the required changes as outlined with Basel's principles for effective risk management data aggregation and risk reporting ahead of the January 2016 deadline may be harder than it first thought.

Polled in January 2015, 14 systemically important banks said they believed they would not be ready in time, up from 10 in 2013.

Jayme profile image displayThis customizable software solution offers transparency and insight into evaluated pricing to streamline portfolio valuation and regulatory compliance

Thomson Reuters Valuation Navigator® is a new software solution that simplifies the way our customers access and analyze pricing and reference data every day. It integrates feeds from multiple pricing services, provides transparency into the market observable inputs and offers better insight into evaluated pricing.

 

profile image displayThere are multiple challenges in measuring, mapping and mitigating credit, market and liquidity risk and I have been actively exploring these with risk managers and related practitioners in the market.

Fundamentally many variables influence how the market responds to and interprets liquidity risk management. In an interview I recently had with Finextra, I considered liquidity risk from a data perspective and explored the types of challenges practitioners are confronted with as well as how to best overcome them.

Evaluated pricing sits at the heart of fair value measurement. This hasn’t necessarily always been the case. When I recently sat down with Liz Lumley from Finextra to talk about this topic, we explored the changing role of evaluated pricing for practitioners and its importance for portfolio valuations.

A lot has been commented on and written about the challenges that market participants face when trying to address regulatory change. The cost and time implications of meeting new regulatory reporting requirements and enhanced risk management obligations are both significant and unavoidable. When I was recently interviewed by Liz Lumley from Finextra, I shared my thoughts on market data operations in the context of today’s demanding post-crisis risk reporting climate.  

The dual pressures of ongoing operational cost reduction and clients’ regulatory compliance are changing the business of asset servicing for custodians and prime brokers alike. But armed with the right tools – including access to the right data sets – asset servicers can position themselves for future growth as they help clients meet the growing regulatory data challenge.

Blink, and you’d have missed it.

Even those of us who have waited years for concrete SEC guidance on fund valuation would have struggled (and be surprised) to find its stance on how fund boards should deal with vendor prices, which was buried on page 285 of the recently issued Money Market Fund Reform Rule. This reform – published last September – aims to make money market funds more resilient during times of stress while strengthening the market and protecting American investors.

With its January 2016 deadline looming, those affected are finding Solvency II to be one of the more demanding regulatory challenges of 2015. But onerous as the regulation is, some asset managers are identifying an opportunity to shine as they help their insurance clients meet their reporting obligations.

 

However you look at it, 2014 was all about regulation – variously impacting different asset classes, financial services market participants and geographies. Regulations impact industry participants in different ways, but any hopes of isolating impacts were dashed as inter-jurisdictional impacts through the web of the financial markets became clear. With consequences not confined to massive financial liabilities, personal liabilities and expectations with regards to culture and conduct moved the agenda beyond the task of data capture and reporting.

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