MiFID like some giant ogre is looming menacingly over the I.T. budgets of 2007 with many financial services firms still in a quandary at best and at worst blissfully ignorant of how MiFID will affect their business and future prospects. Many are yet to specify their technology requirements and their software suppliers are waiting with increasing agitated impatience for the call to arms to make any technology adjustments necessary for their customer’s requirements.

However, Ian Salmon, head of the MiFID programme at Fidessa sees that the market is finally beginning to move and says “The market’s taken a long time to wake up but we are now seeing that the mobilisation of MiFID projects are under way”

It’s unusual with such a major market change that software vendors have remained so far ahead of their customers in understanding MiFID for such a long period, especially given the shortening implementation date. This may be as a result of the early creation of the MiFID joint working group, which mainly consists of vendors and consultants eager to find new revenue opportunities. If this is the case Chris Pickles from BT Radianz, founder of the MiFID joint working group must take huge credit and the gratitude of the supply industry.

Fidessa has been impressive in their detailed understanding of MiFID and the rational they have taken, using their extensive knowledge of their customers business, to soberly evaluate their system against the MiFID articles.  With this acute technology and business information under their belt they have mapped MiFID to where their systems existing functionality already adheres to MiFID and where enhancements or developments are needed and finally where new business opportunities can be capitalised on.

By tackling the business issues that their customers face they find themselves actually leading the way, ahead of many vendors still searching and waiting for their customers’ specifications. The successful implementation of MiFID is no doubt going to be very reliant on the ultimate capability of the software vendor to provide systems, that are not only MiFID compliant at the outset, but also able to provide functionality that is flexible enough to enable their users future business development, and product and service expansion. It is good for the market that Fidessa is hitting the right MiFID notes, where a bit like the old Morecambe and Wise sketch many in the market are currently playing all the right notes, but not necessary in the right order.

Fidessa has recognised the market issues for their customers early and realised that much of the MiFID functionality requirements are already within their system and this is very likely to be the case with many other systems in the UK market. But not in other EU states where their markets do not operate in the horizontal order execution and processing structures as in the UK.

Software vendors will need to keep a close watch on their customers, post MiFID, should they change their business profiles creating new functionality requirements. The risk to the aggressive software vendor is to develop functionality that does not match with their customers requirements.

It is a wise move for Fidessa to concentrate their MiFID developments in areas that offer them most return and their customers most reward. This astute management of the opportunity brought by MiFID is sadly not replicated in many financial services firms as they struggle to come to terms with the cost benefit equation. Simon Barmby, global director of marketing communications at Fidessa commented that “MiFID has been analysed thoroughly within Fidessa and we quickly realised that many of the articles held no fears for our existing technology and found that we could develop new system capabilities to enhance our products and produce added rewards for our customers”   

It’s interesting that Fidessa have already identified significant future business opportunities which can be derived from MiFID implementation, one would hope this would also be mirrored within financial services firms, especially on the buy side.

One of the imperatives of good MiFID compliance is centred on the new client classifications and how the appropriateness tests are utilised within the front office CRM (Client Relationship Management) system. Fidessa have recognised this vitally important facet of MiFID and have been developing a technology solution. No one can say today how much oscillation will happen between classified clients and appropriate financial products and therefore the reliance on the flexibility and controls within the technology will be of paramount importance, but Fidessa has started down the right path and has begun to focus on the likely needs of their customers. 

As yet it’s uncertain how compliance in the post MiFID markets will be enforced, as implementation across all EU states appears very uneven and it would be churlish to treat one EU state with an ‘Iron Fist’ approach and  another with a ‘Velvet Glove’. Although the gloves might hold the iron fist!

Fidessa see a clear distinction between the existing capabilities in the UK to be able to comply with MiFID, against a less prepared situation in other EU states. Fidessa’s MiFID expert, Ian Salmon enthused “There is a clear business opportunity for Fidessa in many EU States given our existing live functionality, which already complies with a number of the MiFID articles”. 

Lucky for Brussels that the UK market operational structure exists as it is, as a pathfinder to show the way forward for lesser transparent EU states!

The future structure of the EU securities markets is almost too difficult to call today, as there is likely to be no end of new businesses which might transpire because of MiFID and any number of mergers and collaborations that could shift existing order flow from its current route, to new alternative venues. There may also be a new wave of outsourcing that could become attractive especially in IT and Operations.

The uncertainty about the future market structure and business models has been great news for commentators and even better for consultants, but very bad for the extremely conservative financial services companies, who much prefer a world of certainty and assurance with predictable bonuses. But Fidessa seem to be well placed having the court covered, as their product is already imbedded in many of the largest blue chip securities firms and are wonderfully placed to be able to adapt their system to which ever way their customers and market moves. Ian Salmon again says “We feel the market will take some time to bed down and there will no doubt be winners and losers, but we are very confident that we will be able to support our customers all the way” 

Best Execution policies as defined by MiFID may also be something that Companies are likely to take an evolutionary approach with. Where the definition within the articles are really the starting point of compliance and where the flexibility built within the best execution MiFID principles can be adapted in light of market experience. It has always been the case that the rules are developed upon precedence and I am certain that MiFID will produce many instances where the market rules adapt under precedence but within the principles of what MiFID is trying to achieve.

Fidessa has researched and planned system enhancements well, with a keen eye on their user’s future requirements. An enviable position for their clients created by the strength of their management and development teams who have been able to understand their customers business issues, the technical solutions and possible opportunities that financial services organisations have even before they have been specified. This clearly puts Fidessa as a leader, rather than a follower of their customer’s demands thus they can take a strong consultative approach in assisting their customers to not only help them make the correct decisions for functionality support but also to help educate them on the opportunities. 

As one of the leading Blue Chip software vendors in the market today it’s been the enlightened evaluation by Fidessa in preparation for MiFID and more importantly the capability of the company to come up with technology solutions for a changing market that is going to accelerate rapidly post MiFID. Fidessa have the right key and are getting all the right notes in the right order as a result.

Gary Wright