Regulation is a high tech science. Is your firm ready? Interview with Corvil and Abide senior executives

As the need for advancement of technology and use of granular and big data is becoming vital in today’s regulatory environment owing to the largely electronic global markets, strategic partnerships between specialists in this sector are important indeed.

Last week, Corvil, a company that provides network data analytics company for today’s modern, real-time digital industry, concentrating  on MiFID II, market infrastructure, security, trading systems and big data, forged a strategic partnership with Abide Financial, which develops automated regulatory reporting systems for EMIR and MiFID II.

With regard to background, FinanceFeeds today spoke to David Murray, Corvil Chief Business Development Officer at Corvil, who explained “We have been established around for 15 years, and are very heavily utilized across banks, hedge funds, exchanges, major trading firms and some outside of financial markets.”

Mr. Murray then began to explain the ethos behind Corvil’s systems. “We utilize analytics technology that enables us to see all of the trade flows and it is asset class independent. We use this to instrument the entire end to end business, including trading and algo businesses to optimize how they perform in terms of quality of execution and technological performance.”

“We also enable them to maintain a forensic record and history of all that has happened, as well as detect threats and conduct cyber security, then we stream that data into BI systems including our own” he said.

“That’s the technology and it is widely deployed. We have caught on aggressively in financial markets. Information , precision, accuracy of analytics are all integrated, and the system can perform all of these functions in real time” explained Mr. Murray.

“That’s the 50,000 ft view of the technology” he said.

Speaking today to FinanceFeeds, Chris Bates, Chief Commercial Officer at Abide Financial explained “Regulatory reporting is effectively a tax on firms, and therefore the value is in getting it right first time, an helping firms avoid investigation, fines and getting publicized for transgressions.”

Taking a look at how technologically advanced the regulatory reporting sector is these days, Mr. Bates said “It has been mentioned more than a few times that regtech is the new fintech.”

Mr. Bates then comprehensively explained Abide Financial’s direction toward establishing its own repository, as the size of its business requires more self-determination. “We are currently handling 2.5 billion messages per year, therefore we are launching our own repository because we have got to the size where we have got to use our own repository. There is a lot of benefit with regard to owning the hub in the middle and therefore being able to independently manage the client relationship. Doing this on a field by field level can provide quality reconciliation across all clients.”

“With regard to MiFID, we were licensed in November 2011 to become an Approved Reporting Mechanism (ARM) and are now processing more than 20% of all MiFID transactions. As soon as the window opens we will be applying for ARM2 status which is the MiFID II ARM approval status. There is currently a lot of onus on ARM2 to make sure that everything that we are processing is correct before it gets to the FCA, or other regulatory jurisdiction that a firm may be licensed by. Abide also processes approximately 50% of all EMIR FX transactions.” – Chris Bates, Co-Founder, Abide Financial.

Machine learning is trending

With regard to automation in gaining full data is the concept of machine learning which is now becoming very much a focus among trading infrastructure providers.

Mr. Murray said “We are committed to continually evolving aspects that are trending, one of which is machine learning technology. Later this year we will be introducing another step function in the series of this technology.”

This partnership enables an important strategic alliance with Abide Financial.

“We share some clients but we know Abide Financial as an organization in the regulatory reporting space very well, and understand that it is a very well reputed organization. There were a series of points which we liked, as well as some complimentary aspects to our technology and client philosophies” said Mr. Murray, reflecting on the initial stages of forging the partnership.

“Corvil prides itself on accuracy and reducing errors, and we live and die with precision accuracy in terms of time and completeness of data” – David Murray,  Chief Business Development Officer at Corvil

The importance of big data and business intelligence in regulatory reporting

Mr. Bates then detailed how companies can take control of their reporting to ensure that any errors are assessed and corrected properly before the regulatory authority receives reports.

“Our ethos was to focus on providing tools to companies not just to manage their own regulatory risk but also to share that approach with those firms, and offer compliance operation and manage the regulators request. We ensure that customers feel safe and are re-assured that their regulatory reporting has been taken care of by Abide Financial” he said.

“When you take that approach you cannot just provide a MiFID reporting off the shelf. Clients already think that this is a tax, and an off the shelf reporting system just puts the onus back on the firms to manage all of the reporting” explained Mr. Bates.

“Partnering with Corvil enables Abide to bring a first to market end to end reporting solution which meets the latest data time-stamping requirements as per the MiFID II RTS 25. We can use the Corvil source of synchronized clock and time stamping functionality at the right resolution. This will fix issues for clients that they may not have pre-empted yet. For example, some companies consider that they did their best to report accurately and sent their report to a regulator considering that the regulator accepts that if a company uses its best endeavors, and a mistake was not intentional, then it will be looked upon leniently as long as the discrepancy is fixed” said Mr. Bates.

“Relying on best endeavor reporting may no longer be a viable excuse for potential errors for the reporting counterparties. Therefore the Abide and Corvil partnership is designed to meet the latest regulatory requirements and help clients to avoid any mis-reporting and potential fines.” – Chris Bates, Co-Founder, Abide Financial.

“Our reporting service precision is underpinned by the fact that in the past we have had clients using our data to prove a point with the as a result of an inquiry, or other such matters in which granular data is needed” said Mr. Murray.

“The cornerstone of this partnership with Abide Financial is the focus and commitment of combining efforts. The regulatory climate becomes more complex and stringent, and completeness, and timeliness are important” he said.

As far as the use of technology within a regulatory environment is concerned, there is much more than just reporting that matters. “Regulators want to be able to recreate market events, so together with Abide Financial we are able to create a more complete and forward thinking solution to the clients, so this precipitates decisions” said Mr. Murray.

Timestamp, reconciliation and trade capture

Mr. Bates said “We decided to invest in this partnership mutually in order to use timestamp enrichment as a first step. The secondary part of the partnership is reconciliation and thirdly, the firm’s trade capture source.

“Timestamp enrichment uses data sources to enrich and improve the reporting process. We are integrating with Corvil to use data in their output to reconcile data with reporting output” said Mr. Bates.

With regard reconciliation, Mr. Bates explained the importance of accuracy. “If Client X is expected to complete a certain number of reports, this can be based on data from Corvil. We can see if they are X number of reports light because we have seen the broad report from Corvil before its been through the reporting process in the firm” explained Mr. Bates.

“This way, we can identify discrepencies which would avoid an issue where their systems and processes may not have picked up an error. If a company spots a mistake and fixes it, then this is acceptable, but if a company does not spot a mistake and the regulator notices it, this is much more serious” – Chris Bates, Co-Founder, Abide Financial.

“Firms are reporting in unsynchronized time and often at the wrong resolution. We can enrich data for companies to ensure that their timestamps are accurate and based on clock-synchronized methodology” said Mr. Bates.

“This partnership comes at a perfect time, especially for global firms with multiple regimes to consider. As you know, EMIR 2 rewrite, and eventually MiFID II are going live within the next couple of years. Hence Abide and Corvil are thinking creatively as to how we can help solve these complex problems, and more importantly, fix them before they become an issue” – Chris Bates, Co-Founder, Abide Financial.

Who will use it?

Mr. Murray explained where the service fits in and in which sectors it will be used. “The range of solutions that we are able to provide and are looking to provide post-partnership opens the target market wide” he said.

“Our client base is diverse, from large banks to smaller buy side firms, whereas Abide Financial’s client base is relatively broad, therefore between the solutions we can offer, we have everything for smaller buy side firms, larger buy side firms, as well as the brokerage community which is a segment largely effected by the latest regulatory changes” David Murray,  Chief Business Development Officer at Corvil

“We have a pretty broad target audience, which starts with many receptive current clients. Both Corvil and Abide Financial have seen a great deal of interest, especially in the Eve of MiFID II. Abide Financial is a very technologically advanced company, so the synergy is good” said Mr. Murray.

Real time feed from Corvil means certainty that the reporting flow is complete

Mr. Bates said “We use the Corvil real time data to populate reports for us. Real time feeds come in from Corvil with a precise time-stamp allowing to accurately populate MiFID transaction report. This feature also allows us to perform enrichment on firm’s behalf, so they don’t need to do their own enrichment or aggregation of information.”

“For us this gives us the benefit of the two firms. The Corvil enriched time stamp is a useful commodity, whereas with Abide we have a very useful regulatory reporting platform. This makes it easy for clients as they don’t need to be overly involved in implementation” he said.

In conclusion, Mr. Murray reflected on the compatibility between the products of both companies “This is an important synergy for us because we are able to provide a comprehensive service especially when looking at clients with multiple systems or a diverse set of trading systems, therefore we are able to source real time data in the flow, rather than trying to piece it out of middle or back office systems.”

“We only look at time on a granular level, and as a springboard for whats to come. It is tough to declare anything futureproof, especially when there are surprises in the market ecosystem sometimes but we see this solution as protection against future regulatory changes.”