With the implementation of MiFID II less than two months away, firms are under pressure now more than ever to reconcile their risk management capabilities. In light of the impending countdown towards January 3 and staunch industry demand, Cappitech Regulation has rolled out its new a Best Execution platform for investment firms.
The platform itself is geared towards sell-side firms ranging from brokers to banks. In particular, the platform will help compare client executions to benchmark rates, while also providing a comprehensive end to end process for firms to handle their Best Execution compliance. The launch comes at a crucial juncture for many firms that are eyeing increased regulatory standards under the new MiFID II regime.
Ronen Kertis, CEO of Cappitech, commented on the new platform: “Best Execution compliance is on the radar of European regulators. When we adapted our Capptivate platform to handle MiFID II transaction reporting, we believed adding Best Execution features was a complementary feature to greater support our client needs for 2018.”
Best execution in focus
Indeed, MiFID II will dramatically reshape the financial services industry, with brokers and banks both in line to face an uptick in reporting and execution standards with clients. The new regulations will lead to tougher rules on a wide range of components, such as Best Execution rules.
While these rules have been in effect since 2007, European regulators have been increasing their monitoring of execution policy, which for years have pursued a more strict policy. This trend was exacerbated by industry-convulsing scandals over the past few years, such as the widespread manipulation of FX rates and LIBOR.
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With governmental and regulatory scrutiny for Best Execution practices at an all-time high, the new platform will look to make an immediate splash. Consequently, the requirements initiated by the European Securities and Market Authority (ESMA) for MiFID II under Best Execution include:
- Creating an order execution policy that is published and available for clients to review
- Publishing top five venues of where client orders are executed at
- Having a process in place to best fill client orders based on asset class
- Monitoring client executions to ensure they meet published Best Execution policies
- Ability to escalate execution issues to management for remediation
- Per client request, investment firms are required to provide means to demonstrate to customers how their orders are executed within the execution policies
What to expect from the platform
Cappitech’s new platform will look to reconcile these requirements for brokers and banks while also helping shore up potential risk issues that may affect a firm’s bottom line. Available as a standalone product or additional module for Cappitech’s Transaction Reporting clients, the platform performs a variety of unqiue functions.
This includes an inregration with customer database to consume execution information – broker or banks can also use the platform to see deails of their execution policy. Furthermore, client transactions are compared to benchmark rates from Thomson Reuters with transaction prices adjusted for a broker’s respecive execution policy.
On its new platform, the results and deviations of these figures will be displayed on an interactive dashboard with comprhensive reports available to download to share internally and with clients. The launch of the platform is important as it underscores Cappitech’s inroads in the RegTech field and its inherent advantages bestowed upon financial firms.
The new platform will be instrumental in providing investment firms with a solution to both comply with new MiFID II rules and reduce P&L risk that is the result of poor pricing of products.
“Along with introducing automation through our Capptivate platform, we wanted to provide more value adding features for our customers. We believe that through our dashboard, compliance officers and risk personnel will be able to gain more insight on their EMIR regulation reporting and easily be able to drill down to review individual orders,” added Mr. Kertis.