The effect of the pandemic has been a mixed bag for many involved in our markets. The increase in volatility has seen a boost to trading activities and RegTech has been busy innovating to help overcome the compliance issues of remote working. With banks splitting personnel between the office, disaster recovery sites and working from home, issues have arisen that will spur technological development and system renewals.
The regulators have been forgiving in certain areas such as trade reporting and best execution reporting requirements. However, they have insisted that vital compliance functions around market abuse and other critical areas will still be examined carefully. The mantra was very much that if you cannot do it in real-time then it must be done in near-time with higher standards applied.
What is absolutely certain is that automation has been key in these difficult circumstances. Those who have taken the strategic decision to deploy a unified treasury, trading and sales platform have benefited from a common DataMart. Alongside this, those deploying hybrid sales desk technology using electronic price feeds and customer data drawn from a common repository, often coupled with cloud deployment, have eased the way forward for home working. When this is coupled with robust regulatory reporting capabilities, and activity being able to be viewed via dashboards, compliance in real or near-time has been a reality.
However, for some in smaller financial institutions this has highlighted some key staff issues which expose the institution to potential compliance breaches. For these market participants a thorough review of all processes will be undertaken, especially those that have required manual interventions which are difficult in the home working environment. Certainly people will be looking at having an integrated, automated client onboarding capability by way of example. Also, firms will be taking a long hard look at their business continuity plans and will look to technology to fix the gaps exposed by the COVID-19 crisis.
While the industry looks at lessons learnt, it will come as a relief that regulators have postponed certain key global deadlines such as the SFTR go live date, RTS27 report publishing dates, the EMIR REFIT consultations, SI calculation dates and amendments to CRR and CRR II. However, these are temporary postponements and, converse to this, is that we can expect COVID-19 to spur further regulatory adjustments down the line which will undoubtably centre on business continuity planning based on the observed implementation of ‘existing’ plans. On top of this, the phasing out of LIBOR remains on the same course, with some postponement to interim steps, and is still set to be completed by the end of next year.
So with the “return to the office” planning under way, a variety of measures exist; from approaches such as one week onsite, one week offsite via two teams, through to those looking to bring all staff fully back from the end of June to mid-July. Conversely many others are looking to bring back 30 to 50% at first then evaluate a full return in September or October. What is certain is this return will lead to an examination of how the BCP worked and, for many, they will be looking to how they can replace legacy technology with systems and platforms that will make this crucial planning easier to implement in a timely fashion.
Holistic solutions are likely to be in vogue with innovative features added. One of the issues has been how to monitor trading activities that allow compliance with the first and second line of defence that surrounds the dealing processes. Is it possible to incorporate technology that re-creates a virtual trading room in a Zoom-like fashion within the front office systems? Or make sure the webcam is turned on when negotiating or executing trades to make sure inappropriate signalling is not taking place? A lot of lessons will emerge from this and absorbing them and putting the output into practice is going to keep us all busy in the days and months ahead!!
