Firms focus on MIFID II best execution07.23.2015
Tom Doris, chief executive of OTAS Technologies, said the industry has a lot to do to meet the best execution regulations proposed under MiFID II, the new rules covering financial markets in Europe.
Doris told Markets Media: “There is still a big gap to be filled to meet the best execution requirements of MiFID II but that is changing rapidly. Best execution should not just focus on single stock executions but lowering cost for the whole portfolio by allowing traders to focus on the five to 10 trades that will be most volatile or difficult to execute.”
The market data analytic provider has launched OTAS Lingo, a natural language reporting technology which Doris said is central to its response to MiFID II reporting. The technology automatically generates alerts in plain English, rather than in charts or graphics, based on parameters set by the clients – which can include calendar events, price performance and short interest. Clients also decide the timeframe of analysis, the frequency of the report and a time of receipt.
“By combining our realtime microstructure analytics with the Lingo technology, we provide a feed of customizable alerts in plain-English that immediately highlights unusual activity to both traders and compliance and risk staff,” added Doris. “By leveraging natural language generation, we make this content accessible and easier to process.”
OTAS was found in 2011 to analyse market data and highlight actionable information for equities trading to fund managers in an easily digestible visual format. The software analyses changes from the normal pattern in data such as insider transactions, short interest, options and credit default spreads and automatically highlights the most relevant signals for stocks in their portfolio for review. Although regulators have not published the final MiFID II rules, the alerts help provide evidence of trying to achieve best execution using observable data, rather than purely relying on broker relationships.
In April this year OTAS was acquired by a private investment group for an undisclosed sum and the firm has been developing partnerships with execution management systems.
“We are at the start of something which people have anticipated for a long time as existing platforms connect to diverse content from specialist providers,” Doris said.
After previously targeting the buyside, Doris expects OTAS to gain sellside clients over the next six to 12 months as the firm is already in advanced discussions with some tier one banks.
“Our goals in 2015 are to launch more channel partnerships and we expect to announce two or three in September,” Doris said. “In 2016 we may start looking at foreign exchange and fixed income.”
Doris added that OTAS is reviewing messaging platforms and may collaborate with platforms such as Symphony Communication Services.
Symphony was originally developed by Goldman Sachs to allow employees to access multiple sources of information, such as email, social media and text, through one platform. In October last year Symphony raised $66m from a 14 financial services firms including Goldman Sachs, BlackRock, Deutsche Bank and Wells Fargo.
The messaging platform has an open-source, open architecture approach that should allow it to easily integrate with third-party applications and networks.
Doris said he is seeing a move towards financial companies using more flexible open technology, rather than proprietary systems.
“Firms are cautious about technology platforms and do not want to risk core functionality. There has to be seamless integration with existing workflows,” Doris added. “We’re seeing a shift as firms streamline their tech architecture by leveraging cloud-based services and integration of HTML5 content into legacy applications.”
Launch follows successful implementation and testing of the initiative by BNP Paribas.
This will ease the process of gathering, aggregating and reconciling counterparty information.
The enhancements provide actionable insights within one click.
Real-time analytics that move from data to actionable information allows firms to save resources.
Standardised template will drive enhanced transparency and accountability.