New regulation means new headaches and costs for investment firms. To decrease the burden and provide a regulation tool that also provides operational features to improve risk management, Cappitech has added Best Execution tools to their Capptivate regulatory reporting platform.
Cappitech Regulation is excited to announced the launch of a Best Execution platform for investment firms today. Aimed at sell-side firms such as brokers and banks, the platform compares client executions to benchmark rates. In addition, risk management features provide an end to end process for firms to handle their Best Execution compliance.
FinanceFeeds previewed Cappitech’s new product during the MiFID II seminar delivered by the company to London’s compliance executives last month.
The new release occurs as MiFID II is now only 50 days away. When the new regulation goes into effect on January 3rd, 2018, brokers and banks face increased standards for measuring and enforcing their execution standards with clients.
Best Execution rises to the forefront
Although in effect since 2007, European regulators have been increasing their monitoring of execution policy. In a 2014 review, the Financial Conduct Authority (FCA) of the UK, found poor overall compliance of authorized brokers in their handling of Best Execution regulation. Also, scandals such as the FX Fix Rates and Libor Rigging have increased government and public awareness to the problems of client executions.
With MiFID II ‘raising the bar’ of Best Execution rules, regulatory scrutiny is expected to get tougher in 2018. Among the requirements initiated by the European Securities and Market Authority (ESMA) for MiFID II under Best Execution include:
- Creating an “order execution policy” that is published and available for clients to review
- Publishing top five venues of where client orders are executed at
- Having a process in place to best fill client orders based on asset class
- Monitoring client executions to ensure they meet published Best Execution policies
- Ability to escalate execution issues to management for remediation
- Per client request, investment firms are required to provide means to demonstrate to customers how their orders are executed within the execution policies
Solving Best Execution with Cappitech
The new Best Execution platform from Cappitech provides a solution for brokers and banks to meet these new standards as well as spot potential risk issues that may affect a firm’s bottom line. The platform is available as a standalone product or additional module for Cappitech’s Transaction Reporting clients.
How it works:
- Cappitech integrates with customer database to consume execution information
- Broker or bank uses platform to ses details of their execution policy
- Client transactions are compared to benchmark rates from Thomson Reuters
- Transaction prices are adjusted for the broker’s execution policy
- Results are deviations are displayed on interactive dashboard
- Reports are available to download to share internally and with clients
Overall, the launch is part of Cappitech’s believe in how Regulation Technology (RegTech) solutions should serve the financial industry. Rather than just being cost centers to comply with regulation, RegTech solutions should also provide operational advantages for
In early 2016, Cappitech was a leader in the RegTech space with the launch of its Web Based Dashboard. The product has provided numerous Transaction Reporting clients of EMIR and MIFID I increased transparency of their submitted reports. Client feedback has stated to Cappitech that the dashboard has made it substantially easier to successfully pass regulatory audits with their local regulators.
By embedding Risk Management features in the Best Execution platform, Cappitech provides investment firms with a solution to both comply with new MiFID II rules and reduce P&L risk that is the result of poor pricing of products. The creation of the product leverages long time know how of the Cappitech team building and support of Transaction Cost Analysis (TCA) tools and merges it with compliance.
“Best Execution compliance is on the radar of European regulators” stated Ronen Kertis, CEO of Cappitech. “When we adapted our Capptivate platform to handle MiFID II transaction reporting, we believed adding Best Execution features was a complementary feature to greater support our client needs for 2018.”
“Along with introducing automation through our Capptivate platform, we wanted to provide more value adding features for our customers. We believe that through our dashboard, compliance officers and risk personnel will be able to gain more insight on their EMIR regulation reporting and easily be able to drill down to review individual orders.”
Image: Cappitech’s Ron Finberg addresses compliance executives in London