JWG-IT Launches Mifid Testing Group

LONDON—JWG-IT Group, a Mifid think-tank, is tackling testing issues surrounding the Markets in Financial Instruments Directive, DWT has learned.

Testing of Mifid-compliant systems has been one of the most overlooked subjects in the past year. Back in September, members of the IT Subject Group of the Joint Working Group, an independent body focused on preparing for Mifid, and independent from JWG-IT Group, exposed that firms still needed to understand the rules before putting a strategy in place. At that time, firms would be able to start developing and deploying systems able to cope with the new best-execution, pre- and post-trading data or transaction reporting rules.

Consequently, some firms will be able to start testing these new programs in the summer of 2007, with most of the others starting in September or later.

Even then, testing is not a given, a securities firm official says. "How do you do testing side-by-side with normal day trading? You can't—you can't get your traders to do their work and test the new systems simultaneously," the official says (DWT, Sept. 18).

JWG-IT Group has sponsored a group that plans to resolve the critical industry gap. The Financial Services Testing Group (FSTG) will work with senior industry experts to develop appropriate tools and services that address the complex testing challenges of Mifid.

The FSTG is expected to begin its operations by the second quarter of next year. The group is composed of four independent IT-testing companies: Facilita, SDLC Solutions, Testing Circle and T-Plan.

"Your test plans need to be in place by March 2007 if you want to be ready," says P.J. Di Giammarino, founder and CEO of JWG-IT Group. "For every £1 you do not spend on testing, it will cost you £6 to fix it."

"It is critical that firms get their testing strategies and plans together early, as the longer they wait, the more costly it will be downstream," says Di Giammarino. "JWG-IT worked with over 25 financial institutions to define the detailed, practical operating models and reference implementation plans that Mifid requires."

Although performance-related issues will be fundamental during the testing phase of Mifid-compliant software, the group will also look at other issues. "We also need to focus on the value of the solution—just because a system is running fast doesn't mean it's necessarily doing the right things," says Peter Greenwood, managing director of Facilita.

JWG-IT is not the only firm looking at helping financial institutions test their Mifid solutions.

Database vendor Oracle is working on a simulation venue to allow firms to test their best-execution policies, according to Nigel Matthews, capital markets director at Oracle Europe, Middle East and Africa. "Firms will be able to stress-test all the components of their infrastructure," he says.

Matthews advises firms to develop a strategic response to Mifid. "They need a strategic, long-term goal," he says. "You need to make sure that you have sufficient insight so you can have the right information infrastructure. You need to think across the board and look at Mifid [as a way] to reduce costs and gain access to new markets and revenues."