Electronic TradingMiFID II

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.

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.