Compliance in FX is ultra-modern and high-tech! Christodoulos Papadopoulos, CEO, MAP FinTech explains all

The days of national regulatory authorities for financial services businesses which occupied wood-paneled chambers and oversaw analog industries by issuing written correspondence are not only long consigned to the history books, but indeed today a full circle has been completed. Compliance and regulation in today’s electronic and highly advanced financial markets is a sophisticated, technologically complex matter, with […]

Compliance in FX is ultra-modern and high-tech!

The days of national regulatory authorities for financial services businesses which occupied wood-paneled chambers and oversaw analog industries by issuing written correspondence are not only long consigned to the history books, but indeed today a full circle has been completed.

Compliance and regulation in today’s electronic and highly advanced financial markets is a sophisticated, technologically complex matter, with compliance staff in high demand and attracting ever increasing salaries and day rates due to companies and regulatory authorities constantly making effort to keep pace with technological change in the financial sector.

For this reason, one of the most prominent advisory, consultancy and legal firms which provides services to the entire European FX industry, MAP S Platis, has established its own division which concentrates purely on FinTech, led by CEO Christodoulos Papadopoulos, from the company’s headquarters in Limassol, Cyprus.

How FX companies are regulated today bears little resemblance to how any financial services business, analog or digital, has been overseen in the past, largely due to the sophisticated digital platforms that are today in common use among retail traders, and the borderless nature of this particular sector.

Last week in Limassol, Cyprus, FinanceFeeds spoke to MAP Fintech about the way that FX firms are now being regulated and what key considerations are currently hot topics.

What is MAP FinTech?

MAP FinTech is a trusted technology provider to the global financial services industry specializing on regulatory reporting, with clients and associates worldwide. We take pride in our mission to assist our clients achieve best and most efficient results.

MAP FinTech is the provider clients rely on to support their regulatory reporting obligations by delivering best-in-class and reliable technology, services and insight with a relentless commitment to excellence, innovation, integrity and with a client-support mentality.

What is the current level of compliance of the electronic trading and fintech sector with the overall structure required by EMIR?

EMIR affects all entities operating in the European Economic Area (EEA) such as banks, insurance companies, pension funds, investment firms, corporates, funds, SPVs etc. that are counterparties to OTC derivatives, whether they do so for trading purposes, hedging or executing client orders.

It has been their statutory obligation, under EMIR, to be reporting their transactions, since the 12th of February 2014, If they have not done so to date, they are incompliant and at risk of public regulatory fines.

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Christodoulos Papadopoulos, CEO, MAP FinTech

Never the less, it is our understanding that the vast majority of these entities have not been reporting as of yet and those that they do, they do not necessarily do it correctly. I would say overall, that the current level of compliance in this respect is still quite low.

What stance do national regulators, especially local regulator CySec, take with regard to compliance with infrastructure requirements set out by EMIR?

In response to mounting pressures by ESMA, EU Regulators are beginning to be much firmer in EMIR compliance matters recently and it is only a matter of time before we will see the first public regulatory fines for non-compliance with EMIR reporting. ESMA in fact, has increased recently the pace of their publications with regards to EMIR, with their latest update given out on the 4th of April 2016, which provides further updates via the “QA XVII on EMIR implementation” documentation.

As regards Cyprus, now, the Cypriot regulator (CySEC) sent out only recently a circular (Circular 115), with a deadline to Cyprus Investment Firms to reply by March 8, 2016, regarding their EMIR obligations. We consider this as a timely intervention by the Cypriot regulator and of course a proof of ESMA’s position that European investment firms must ensure full compliance with EMIR’s reporting without further delay.

Furthermore it reminds firms that they need to act as regards clearing and risk mitigation techniques – a major concern by EU Regulators these days. So, we are expecting developments in this respect.

How easy it is for someone to comply with market infrastructure rulings?

With MAP FinTech, it is a seamless, efficient and a risk-free process. It only takes us a few days to assist reporting parties both in understanding the regulation requirements and implementing a technical solution integrating with their systems in order to go live with reporting at T+1. Via technology we have developed in-house, we are able to automate the entire process completely.

Is it expensive?

It can be, for those who do not have the experience, understanding and systems to deal with the many complexities involved. But through our experience, since the very beginning of EMIR reporting, our technology and our volume agreements with Trade Repositories (TRs), we help our customers save a very large part of their TR fees. In fact, we pride ourselves that our packages are among the most efficient and economical in all of the EU. And especially, if one considers the continuous support available, via our compliance experts.

What are the main challenges faced by firms with regard to EMIR reporting?

Besides the selection of a TR, companies face various technical difficulties in collecting and interpreting certain EMIR data fields and of course creating the csv reports. Some of these data fields were not maintained by companies before EMIR. To collect and store this data, the technology and underlying processes needed to be changed. Many companies still have manual processes in place to capture this data and this makes it extremely difficult for them to comply.

Furthermore there has been a lot of uncertainty around new data fields, such as the Legal Entity Identifier (LEI) and the Unique Trade Identifier (UTI).

How did MAP FinTech resolve these challenges?

We have developed a highly specialized Reporting Hub Platform called “Polaris”, that caters for Data Sourcing, Data Mapping, Enhancing, Routing, Submitting and finally viewing TR feedback.

Polaris, we are happy to say, served millions of reportable trades to date, error-free at a rate higher than 99.9%! As part of our “Polaris” platform, we have implemented a very efficient on-boarding procedure, by utilizing an on-boarding web portal, gathering in advance all static information, with a very efficient procedure to limit data sourcing needs from our clients’ systems/platforms.

We are glad to say that we have achieved a fully-automated reporting flow through our “Polaris” Reporting Hub, that provides peace of mind to our clients, ensuring compliance with regulation at all times.

Finally, via our Feedback-Dashboard Web Portal for reviewing already reported trades, we provide full transparency for the complete reporting cycle, allowing our clients to easily monitor and ensure their continuous compliance.

Photographs copyright FinanceFeeds

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