Regulation, compliance and technology have converged during the last year, and as a result the continual evolution that FX brokers,…
Regulation, compliance and technology have converged during the last year, and as a result the continual evolution that FX brokers, technology vendors and prime brokerages need to navigate has become a major discussion point at senior executive level.
Today, FinanceFeeds spoke to Iskandar Najjar, Managing Director and Head of Middle East at ADS Securities who also attended the iFXEXPO International FX industry conference in Cyprus last week, where ADS Securities participated in discussions on this matter with senior officials and industry executives from around the world.
Nowadays, regulation is not just the ‘paper bureaucracy’ that it used to be, and regulatory matters require full technical understanding of the trading system right the way from the user interface (trading platform) to the way that the PoPs connect to the banks and how trades are executed, and orders filled
The role of, and need for, regulation is always changing and developing, and has accelerated over the last five years. New technology, a reduction in liquidity and a tightening of credit have increased the focus on risk and capital. After the SNB event in January 2015 and some high profile legal cases, regulators realized that they need to have a much greater focus on the global FX market. They are using regulation to control risk from prime broker level through to the customer, always with a focus on protecting individual traders.
So it is now essential that brokerages have a detailed understand of regulation and that this is built into the systems, products and processes.
At ADS Securities all new products or service are evaluated and mapped against existing permissions, and licenses, by each jurisdiction. On a rolling basis, or upon material change, we ensure that our products are fit for purpose and in line with all regulatory requirements. Prime-of-Prime is an example of this it is uses our systems and controls protocols and is electronically integrated with the Banks/PBs.
It is a natural evolution of E-trading converging with E-governance. This will automate and improve many aspects of regulation and management Information reporting.
How is ADS positioned to assist its corporate clients (brokers that receive liquidity) in ensuring compliance via the technical understanding of what parameters are required within a full end to end liquidity and trading solution (ADS provides the liquidity, and also full connectivity to MT4 as well as the proprietary OREX platform)?
ADS Securities is a young company with no legacy systems so modern compliance thinking and systems have been built in from day one. We are also an international financial services firm and face Tier 1 institutions globally, and deliver a compliance protocol which allows us to work on a level playing field with our peers. Compliance is therefore a fundamental cornerstone of our corporate culture and business planning.
As a firm we have also invested in technology which has given us ownership and oversight of our bespoke, compliant, turn-key solution. We can develop and deliver solutions which smaller brokerages find difficult to address.
What are the advantages this provides as the entire system is owned and supported in house by a very well capitalized firm?
Ownership and in-house development brings control and reduces costs. Thanks to our high level of capitalization we are in control of our development and priorities. This positions us well and makes us agile and able to quickly respond to any regulatory changes.
It also means that we can use systems which are designed to link in with a range of partners from large institutions through to small brokers.
Automation has become a very significant factor for companies – not just to keep their costs down in terms of automating sales and retention and marketing points, but also reporting and regulation.
We see automation as a critical element in cost and efficiency control, and thanks to our in-house development teams we can quickly adjust to the needs of regulators and clients. The use of automated ‘alert’ systems and monitoring programs has allowed our compliance function to service the business on a granular basis in the face of ever increase demands.
Management information provided by these systems means that the business can be planned around current and future regulatory needs and also provide a more tailored solution to individual clients.
Advances in automated regulatory reporting for transactions have enhanced confidence in the market, led to greater transparency and resulted in cost savings being passed on the end client.
What is your opinion on automating regulatory reporting, and how valuable it is to put in place an automated system which keeps track on the company’s daily procedures to ensure that all the requirements are met and therefore saving any potential transgressions in reporting to the regulators?
In the main regulatory centers like London and New York, IT departments already have a high work load, and it is fair to say that much of the development resource which used to focus on platforms is now dealing with regulatory systems.
As new regulatory requirements come along we can only see this requirement increasing. For small companies, with limited IT budgets, this could impact their growth and development. We are therefore looking at white labeling our systems to help firms with less capital who need automated compliance systems.
What aspects came to light during the iFXEXPO conference from ADS perspective, what brokers asked the company and what current matters are important to brokers when looking for a vendor or liquidity partner?
There is one simple answer – access to credit. Almost all the brokers we talked to are concerned about credit and liquidity in the market. They are very interested in our new Prime-of-Prime service which allows credit intermediation for clients using our, or their own, liquidity.
We estimated that the credit gap in the market is now around US$1.3trillion, so believe that PoP linked to high-quality compliance will be of interest to a lot of clients.
Photograph: ADS Securities at iFXEXPO International, Limassol Cyprus. Copyright FinanceFeeds#ads securities, #compliance, #forex prime brokerage, #Islander Najjar, #prime of prime, #regulation