COVID-19 Highlights Automation is Key for Regulatory Compliance

The COVID-19 pandemic has affected industries in different ways. For some, the virus has been incredibly destructive, whereas, for brokers and trading providers, the related Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, or stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Trad In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, or stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Trad Read this Term has provided a boost for operations. But how has the global crisis influenced the operations of regtech and compliance firms?

As the name suggests, regtech firms provide technology that helps firms manage their Regulation Regulation Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Read this Term processes in order to meet their obligations. With the onset of COVID-19, the environment has become much harder for brokers to stay on top of things.

As Finance Magnates reported, regulators such as the Financial Conduct Authority (FCA) has relaxed its regulations for financial firms by easing best execution reporting requirements and extended financial reporting deadlines.

Automation is key

With this in mind, it would be natural to think that in a time like this, regulatory technology and the services offered by compliance companies would be needed now more than ever to help relieve the burden of brokers.

“During these times any service that has an automated and cost-effective nature is going to be of incredible value to most firms,” explained Quinn Perrott, co-CEO of TRAction Fintech to Finance Magnates.

“Often, smaller financial firms have significant key-man risk in regards to compliance and regulatory reporting in general. The more they can outsource and automate, the less likely the risk of breaching a regulation as a result of a key staff member falling ill or redundancies.”

Echoing this, Ronen Kertis, CEO of Cappitech said: “Automation is really important in situations like this where manual processes are difficult to keep up with when staff is working remotely, juggling work/home balance and the overall outbreak fear. In addition, having control functions such as a dashboard to easily review reporting breaks helps firms identify when and where are their problems.”

Remonda Kirketerp-Moller, Founder and CEO, muinmos, said that working from home has exposed weaknesses for businesses: "At Muinmos we have seen a surge of demand for our mPASS regulatory compliance engine as compliance teams in financial institutions, like the majority of office-based employees, are being forced to work in a very different way from usual as a result of COVID-19."

"They no longer have a team based in the same office and are having to adapt fairly quickly to the realities of working from home, abandoning long cherished paper-based routines and references. The situation has highlighted the need for enhanced online systems and has given rise to the need for secure cloud-based technology such as mPASS. Our Advisors, who are now also based at home, have been facing intense demand to onboard teams from financial institutions worldwide so that their compliance work can continue without interruption."

Has COVID-19 led to an increase in regtech demand?

Over the past couple of years, the need for regulatory technology and greater compliance has been on the rise, with regulation tightening not just in Europe but across the world. With automation being so important to help firms survive these difficult times, has COVID-19 led to an increase in the demand for regulation technology and compliance help? According to Kertis, the answer is yes and no.

“On one hand, a sales lifecycle will naturally be longer now with many firms unable to make decisions on new products. On the other hand, many firms have found out that there are major limitations to their current processes when working from home or with reduced staff. This has triggered conversations about available technology in the market.”

Kirketerp-Moller said that demand for regulatory technology was already on the rise, as market participants become increasingly aware of the benefits of regtech, namely in terms of automated onboarding, mitigating the risk of fines from regulatory breaches, and providing a ‘safety net’ for the compliance function. This has only been accelerated by COVID-19.

Perrott from TRAction, also said the current environment has led to an uptick in demand, as the increasing volume from its clients has led to a number of new inquiries and also new clients.

“Since most of the people are working from home now, they are able to save some time from their commute and invest it in addressing projects that have been on the back burner, such as improving their trade reporting process,” he said.

Challenges of the pandemic

"The pandemic has accelerated the need for Muinmos to expand our global offering, with an enhanced database covering more jurisdictions. This will enable us to provide additional support to financial institutions who are increasingly faced with a growing landscape of international clients and differentiated financial products that are subject to different rules in various jurisdictions," commented Kirketerp-Moller.

However, although coronavirus may have brought with it new opportunities, it has also brought its own set of challenges. As highlighted by Perrott, the pandemic has brought a few obstacles.

“Trade volumes have actually increased quite a bit with the volatility in late February and all through March 2020. Our London and Sydney offices have moved to Work From Home mode, which so far has been seamless. A few global deadlines have been postponed, including the SFTR go live date and RTS27 report publishing dates. It looks like EMIR refit and SI calculation dates will also be pushed back,” Perrott outlined.

COVID-19’s lasting impact

Whilst COVID-19 has been a boost to trading, it has also highlighted the weaknesses in a lot of industries. With this in mind, is it likely that we will be seeing changes in regulation aimed to better address these weaknesses?

According to Kertis, the most immediate regulatory changes we are likely to see will be around Business Continuity Planning (BCP) and standards firms need to have in place. “Covid-19 has revealed a lot of information of how BCPs are being implemented in real life,” he said.

Perrott, however, believes that governments might take a more appreciative approach towards businesses that have been negatively impacted by the lockdowns in place across many countries.

“However, in Australia, it would be naive to think that ASIC would adopt a lenient approach toward compliance,” he highlighted. “For example, we note that recently AMP was fined by ASIC for non-compliance with its OTC derivatives trade reporting obligation. ASIC Commissioner Cathie Armour said that 'the infringement notices issued to AMP Life and AMP Capital are a message to reporting entities to ensure compliance with their reporting and monitoring obligations under the ASIC Rules.' Compliance is important, economic downturn should not be an excuse for any non-compliance.”