Another Take on Compliance

Terry Flanagan

In today’s complex regulatory environment, compliance is not a one-and-done exercise. Trades must be checked for compliance at every stage of their lifecycle, from execution through to settlement.

This entails massive changes to the workflow at most firms, where traditionally systems for front, middle and back office have been walled off from one another. “People don’t want disparate systems covering point solutions anymore,” said Richard Hooke, product director at trading systems provider Fidessa, told Markets Media. “The benefit of having a common workflow and a common approach is outweighing the specific needs in today’s markets.”

Responsiveness, the ability of customers to respond to new environments, and new regulations are constant themes. “There’s a huge regulatory war of noise at the moment,” Hooke said. “It’s important to have the ability to respond quickly to that.”

Workflow lies at the heart of Fidessa’s Investment Management System (IMS), which provides portfolio management, position management, compliance and order management. “The system is effectively about managing the trading workflow, managing the compliance workflow, managing the portfolio construction workflow,” Hooke said. “Each of those areas features as a theme throughout the work we do across the various functional components within the IMS.”

The latest version of IMS introduces an Active Compliance feature, whereby pre-trade compliance controls can be checked for orders at time of entry and throughout the lifecycle. This is crucial for orders that are hard to work as a result of reduced liquidity, especially in fixed income.

“In today’s illiquid market conditions, we tend to have a situation where orders spend several days on the blotter waiting to be or trying to be executed,” Hooke said. “If you test them when they come in, you’re still at risk of them being non-compliant later on while those orders are being worked.”

The goal, he said, is to provide a “harmonized workflow platform that allows investment managers to run their businesses in an efficient, transparent, and operationally robust manner.”

Since not all compliance controls are automated, the system has added support for recording the results of manual compliance and embedding these into the workflow. “From a compliance standpoint, you need full access to both the rules that we test within the rules engine as well as the rules that have been tested outside the system,” said Hooke.

Featured image via Pavel Ignatov/Dollar Photo Club

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