Electronic TradingMiFID II
Making Compliance Simpler, Faster, Cheaper
Reliable Precision and Consistent Traceability
Corvil’s MiFID II solution captures a record of the lifecycle of each order and trade transaction with nanosecond precision and traceability to UTC needed for compliance with RTS-6, RTS-7, RTS-9, RTS-22, RTS-24, RTS-25, RTS-27 and RTS-28.
Corvil’s solution is non-intrusive – providing UTC clock-synchronized data capture, real-time monitoring, order lifecycle tracking, unexecuted orders to transactions ratio alerting, compliance validation and security analytics with zero impact to the servers and software that run the business. This minimizes the need for costly and time-intensive hardware, application and database upgrades to meet MiFID II Transaction Reporting, Order Record Keeping, OTR Risk Management, and Clock Synchronization regulations.
Outcomes
- Lowers regulatory tail-risk to the business from non-compliance and forensic audit or enquiry
- Reduces cost to meet RTS rules
- Minimizes changes to trading systems
- Reduces implementation complexity
- Improved intraday insights
- Future-proofed against more stringent rules
Access to accurate, reliable and timely data will be critical to demonstrate the provision of best execution; as such, the majority of respondents to a recent TABB survey highlighted data concerns as their main challenge.
TABB Group
Problem Overview
Cost and Complexity To Implement New ESMA RTS Rules
The recently published ESMA RTS rules are demanding a new norm for monitoring, order record-keeping and forensic surveillance of trading activity that is typically not supported by current IT systems and processes that underpin today’s electronic trading businesses.
- RTS-6: Requires comprehensive real-time monitoring and surveillance systems for algorithmic trades.
- RTS-9: Monitor and, where appropriate, limit the ratio of unexecuted orders to transactions.
- RTS-24: Requires precise record keeping of all messages and events involved in trade execution life-cycle.
- RTS-25: All “reportable events” ( ESMA/2015/1909 Section 3.1) need to be UTC synchronized with 100uS accuracy “or better”.
- RTS reportable events, such as transmission and receipt of orders, and decisions to trade, need to be accurately time stamped, and made available to regulators for reporting, either continuously (transaction reports) or on-demand with a 5 year history (order record keeping).
With these new rules there is a clear emphasis on data quality, accuracy and timeliness. The intention of the competent authorities responsible for enforcement is to enable audit and forensic inspection of the sequence of trade events across all venues and members.
While cost-effective compliance with the ESMA rules is the primary concern of most investment firms, the major tail-risk to the business is exposure to large regulatory fines. Corvil provides both a cost-effective answer to MiFID II monitoring, order-record keeping, and intraday OTR compliance risk mitigation while providing a trusted and independent third party data platform capturing the forensic evidence needed in the event of a MiFID II audit or enquiry to minimize risk of fines.
Challenges
- A new type of data to be collected and processed i.e. machine-time data
- Major upgrades to IT systems
- PTP distribution network to every server for accurate UTC sync
- Server upgrades to support PTP input
- Application code changes and/or software re-architecture
- Database changes to handle precision time stamps and storage
- Test and calibration system for UTC compliance (RTS-25, Article 4)
- New type of intelligence required for proactive OTR oversight
MiFID II Requirements for Clock-Synchronization Learn More
You can sleep much better at night knowing you have an independent watchdog system that sees everything. The scary situations are the events no one has imagined, and Corvil helps protect us from those
MD Global Investment Bank
Solution Overview
Corvil MiFID II Solution Enables Faster, Easier Compliance
Corvil’s unique approach uses a dedicated independent system to gather the data needed for ESMA RTS reporting, oversight, and forensics. Corvil's MiFID solution is deployed non-intrusively as an overlay on existing infrastructure, seeing all trading activity without requiring configuration for systems or flows to opt in. This removes the need for trading venues and participants to overhaul internal IT systems. Other proposed solutions to meeting MiFID II requirements would necessitate costly and time-intensive hardware and server upgrades, in addition to coding changes to dozens or hundreds of applications and databases.
Corvil’s wire-based data collection and timestamp measurements drastically reduces the size of the PTP distribution infrastructure required. It also reduces the need for extensive application and database development efforts to support implementation and ongoing maintenance of a home-grown solution.
Corvil’s wire-based data engines also stream in real-time, granular, precision-sequenced information to Intelligence Hub for machine learning algorithms to analyze OTR data. Leveraging this rich and readily available data source drastically reduces the lengthy timelines and costs of data integration and quality management required to effectively predict how conditions will change over time.
Strengths
- UTC clock-synchronized data capture
- Real-time monitoring of order life-cycle and order-to-transaction ratios
- Precision order record-keeping and publication
- Trade execution surveillance, analytics & anomaly detection
- Watchdog over cyber threat to IT systems
- Independent, trusted, 3rd party platform
- Non-intrusive / low-overhead data capture & monitoring of multiple data sources
- Best-in-class, proven data analytics platform for trade execution life-cycle
- Better data precision and accuracy than specified in RTS-25
Key Benefits of the Corvil MiFID II Solution
Reduce Risk
Corvil enables you to meet the MiFID II reportable events obligations, to manage intraday OTR risk, and has the data accuracy and context to defend a forensic audit.
Trusted and Independent
Corvil is viewed as the trusted independent third party provider of transparency and forensic machine-time data to the trading industry.
Reduced latency
Offload timestamping and logging of events from critical application points in the infrastructure. For example, avoid software logging of receipt and transmission of orders by tuning in to network data.
Lowest Application Overhead
Where application events are required, the Corvil Application Agent generates accurate timestamps with the absolute lowest application overhead.
Cost-Effective, Fast Deployment
Reduced need to modify existing server code and OMS databases. Collect and timestamp from the network where appropriate. Rapid, unique insight without big data cost or timeline.
Business and Operations value
With a single deployment, Corvil delivers the MiFID data capture, plus performance, troubleshooting, intraday OTR mitigation, and security analytics.
Multi-venue, asset class
Single product to collect data across platforms, asset-classes, venues. Support for all major order-flow protocols and market-data feeds globally and SDK to support any local data formats.
Proven solution
Trusted by the world’s top global banks and exchanges.
Key Features of Corvil’s MiFID II Solution
Scalable & Extensible - Add appliances and software to cope with almost any data load. Support for 400 data protocols, an SDK and APIs, User-configurable dashboards, and flexible publishing of real-time streaming analytics to external big data systems.
Correlation - Each appliance is capable of millions of correlations per second, and supports distributed multi-event correlation. Correlation supports the reporting of Gateway-Gateway latency at the 99th percentile, as required by RTS-25.
Data Sources - Transaction Records collect execution reports off the network, and extract data including the embedded transaction time
Network Events collect order receipt and transmission events directly off the network, timestamped in hardware, removing the need for software logging of these events.
Application Events Corvil Application Agent offers ultra-low overhead event publishing, for collection by Corvil appliances, while meeting the requirements for timestamping accuracy.
Logging Events ingest existing streams of log messages and extract data and timestamps
Timestamping - Hardware timestamping with support for PPS and PTP synchronization, with alerting for outages.
Independently validate the consistency of PTP distribution and application timestamping.
Normalization - Convert events into a common format, regardless of the original message format or protocol
Systems receiving streams from Corvil need only support a single format, independent of the original Venue, Vendor, or in-house message content and encoding.
Publishing - Corvil Streams make the collected data available in near-realtime via an API. Corvil Connectors easily connect Streams to receiving systems such as kdb, Hadoop, Microsoft SQL Server, Kafka and Flume.
Anomaly Detection - Powered by machine learning, data exploration & visualization.
Specific Areas of MiFID II Addressed By Corvil
Clock Synchronization (RTS-25) - Provides timestamp granularity down to the nanosecond for GPS, PPS and PTP — Corvil syncs status reporting and accuracy diagnostics with alerts on any loss of sync.
Market Transparency and Reporting (RTS-22 and RTS-24) - Establishes an independent and complete record of activity based on network, application and log data that is trusted by some of the top financial institutions worldwide — streaming data integration with Storage, Databases, Analytics, Risk systems for compliance reporting.
Pre and Post-Trade Risk (RTS-6 and RTS-7) - Monitors for unusual behavior and assures that pre-trade checks were completed correctly — Corvil automated trade activity discovery makes it impossible for unauthorised trading activity to be concealed.
Order to Transaction Ratio (OTR) (RTS-9) - Delivers intraday alerts, powered by machine learning, of Order to Trade Ratios likely to exceed end-of-day venue limits and insight into key contributors, enabling them to mitigate risk.
Best Execution (RTS-27 and RTS-28) - Creates a complete time-synchronized record of market-data and execution activity for trade reconstruction, including analysis on price metrics per symbol, speed of execution per venue and market data latency monitoring.