Most Innovative Regulatory Solution: SmartStream RDU

When new and complex regulation is introduced, compliance is seldom a straightforward task for the financial services industry. Sometimes, it is the industry’s responsibility to find innovative ways to cooperate to meet changing regulatory requirements, and at times this can involve the introduction of brand new data services that make it possible for user firms to establish efficient processes and comply on time.This year’s winner of the Most Innovative Regulatory Solution award—SmartStream Reference Data Utility (RDU)—has been a catalyst in helping the industry overcome barriers to compliance with the revised Markets in Financial Instruments Directive (Mifid II).

 In what judges dubbed a “bold move,” SmartStream RDU has worked with the industry to create a centralized Systematic Internaliser Register, which will help firms meet Mifid II post-trade reporting requirements. Firms had the choice to opt in as systematic internalizers (SIs) when Mifid II was first introduced, but from September 2018 the SI regime will be mandatory. The challenge for firms will be to identify whether counterparties are SIs for the financial instruments they are trading in. 

The Systematic Internaliser Register, a result of industry collaboration between SmartStream RDU and a group of approved publication arrangements (APAs), will help plug this gap by offering a centralized database that lists SIs for each specific instrument. Peter Moss, CEO of SmartStream RDU, says firms need data from SIs to understand the role of a counterparty to accurately report on a trade under Mifid II, and APAs need data from SIs to meet their trade reporting requirements. 

In a bid to create an efficient process for both buy-side and sell-side firms, the SI register combines the necessary reference data from SIs and makes it available to the market. Moss explains that the APAs collect the list of instruments for which their SI customers are providing SI services, and then share this data with SmartStream RDU, which validates and consolidates it. “There’s a template we provide to SIs to collect the data, and then we undertake a series of validations to ensure it is accurate,” he says, adding that the data received may contain incorrect International Securities Identification Numbers or asset types. The result is a unique dataset that provides transparency on which services each SI offers.

 The initiative is an example of the industry collaborating to overcome a new challenge presented by regulation, and judges praised SmartStream for its “innovative solution to assist firms in regulatory reporting and identifying SIs.”

Read more about the IMD/IRD Awards 2018 winners