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1© Cloudera, Inc. All rights reserved.
MiFiD II Best Execution
Compliance with
Cloudera and TickSmith
Francis Wenzel
CEO, ...
2© Cloudera, Inc. All rights reserved.
Our relationship with data is changing
3© Cloudera, Inc. All rights reserved.
Boardroom thinking
DRIVE CUSTOMER
INSIGHTS
IMPROVE PRODUCT &
SERVICES EFFICIENCY LO...
4© Cloudera, Inc. All rights reserved.
Boardroom thinking
DRIVE CUSTOMER
INSIGHTS
IMPROVE PRODUCT &
SERVICES EFFICIENCY LO...
5© Cloudera, Inc. All rights reserved.
Areas Affecting Business Risks
CYBERSECURITY FRAUD COMPLIANCE
• Insider threat
• Ad...
6© Cloudera, Inc. All rights reserved.
Areas Affecting Business Risks
CYBERSECURITY FRAUD COMPLIANCE
• Insider threat
• Ad...
7© Cloudera, Inc. All rights reserved.
Our Customers Include
Over 180 financial companies (banking, capital markets, insur...
8© Cloudera, Inc. All rights reserved.
Regulatory Compliance & MiFID II
9© Cloudera, Inc. All rights reserved.
Comprehensive Regulatory Compliance-Key Drivers and Objectives
Drive
Efficiencies
R...
10© Cloudera, Inc. All rights reserved.
Cloudera: Managing Data for Comprehensive Regulatory Compliance
Handle real-time
d...
11© Cloudera, Inc. All rights reserved.
MiFID II – Markets in Financial Instruments Directive
Investor
Protection
Transpar...
12© Cloudera, Inc. All rights reserved.
MiFID II – Data Governance & IT Infrastructure Challenges
Best Execution Validation
13© Cloudera, Inc. All rights reserved.
MiFID II: New Requirements for Best Execution
Best Execution standards are being e...
14© Cloudera, Inc. All rights reserved.
RTS-27: Best Execution Requirements For Execution Venues
RTS-27: Regulatory Techni...
15© Cloudera, Inc. All rights reserved.
RTS-28: Best Execution Requirements for Investment Firms
RTS-28: Regulatory Techni...
16© Cloudera, Inc. All rights reserved.
MiFID II’s Best Execution Related Data & Technology Challenges
⎻ Extensive benchma...
© TickSmith Corp. All rights reserved.
Leveraging “big data”
To solve this big data problem: MiFID II RTS 27 & RTS 28
You ...
© TickSmith Corp. All rights reserved.
TickVault
Big data problem
MiFID II
RTS 27
RTS 28
Proven big data
technology
Award ...
© TickSmith Corp. All rights reserved.
Introducing TickVault
TickVault: Hadoop-based big data management platform for capi...
© TickSmith Corp. All rights reserved.
TickVault
Deployment
● In-house, on client hardware and Hadoop cluster
● On client’...
© TickSmith Corp. All rights reserved.
TickVault for data producing firms
Exchanges & data vendors
● Centralize & normaliz...
© TickSmith Corp. All rights reserved.
TickVault for data consuming firms
Systematic trading groups, market
makers, regula...
© TickSmith Corp. All rights reserved.
TickVault modules
3
4
5
6 7
21
Complete software platform
1. Load all exchange, tra...
© TickSmith Corp. All rights reserved.
Addressing MiFID requirements
TickVault is able to store, normalize, and run calcul...
© TickSmith Corp. All rights reserved.
TickVault’s RTS-27 Solution
Takes book by order data from trading venues and automa...
© TickSmith Corp. All rights reserved.
TickVault’s RTS-27 Solution
Custom Search displays Top of Book HITS or Rollups (one...
© TickSmith Corp. All rights reserved.
TickVault’s RTS-27 Solution
Custom Search page
Top of Book interface and
charting a...
© TickSmith Corp. All rights reserved.
TickVault’s RTS-27 Solution
TickVault Generated machine-readable Table 6 for an
exa...
© TickSmith Corp. All rights reserved.
TickVault’s RTS-28 Solution
Whenever a client investment firm executes an order, Ti...
© TickSmith Corp. All rights reserved.
TickVault’s RTS-28 Solution
Private data portal
TickVault Generated machine-readabl...
© TickSmith Corp. All rights reserved.
Beyond compliance
Usable data is valuable data. Using TickVault with Cloudera CDH a...
32© Cloudera, Inc. All rights reserved.
Thank you
Francis Wenzel
CEO, TickSmith
@wenzelware
Richard Harmon
FS Director, Cl...
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MiFiD II Best Execution Compliance with Cloudera and TickSmith

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MiFiD II regulation on the horizon means financial organisations will need to adhere to the requirements by 3 January 2018. That date may appear to be a long way off, yet the challenge is that traditional systems and approaches are either inadequate or will require tremendous investment in order to meet the regulatory demands. For many organisations, this is just one of the projects vying for resources and budget when it comes to fundamental digital business transformation around data as a whole.

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MiFiD II Best Execution Compliance with Cloudera and TickSmith

  1. 1. 1© Cloudera, Inc. All rights reserved. MiFiD II Best Execution Compliance with Cloudera and TickSmith Francis Wenzel CEO, TickSmith @TickSmith Richard Harmon FS Director, Cloudera @ClouderaUK
  2. 2. 2© Cloudera, Inc. All rights reserved. Our relationship with data is changing
  3. 3. 3© Cloudera, Inc. All rights reserved. Boardroom thinking DRIVE CUSTOMER INSIGHTS IMPROVE PRODUCT & SERVICES EFFICIENCY LOWER BUSINESS RISK
  4. 4. 4© Cloudera, Inc. All rights reserved. Boardroom thinking DRIVE CUSTOMER INSIGHTS IMPROVE PRODUCT & SERVICES EFFICIENCY LOWER BUSINESS RISK MODERNIZE ARCHITECTURE
  5. 5. 5© Cloudera, Inc. All rights reserved. Areas Affecting Business Risks CYBERSECURITY FRAUD COMPLIANCE • Insider threat • Advanced persistent threats • Account takeovers • Anti Money Laundering (AML) • Payments fraud • Insider threats • Regulatory compliance (PCI, HIPPA, Dodd-Frank) • Internal compliance • External & internal audits
  6. 6. 6© Cloudera, Inc. All rights reserved. Areas Affecting Business Risks CYBERSECURITY FRAUD COMPLIANCE • Insider threat • Advanced persistent threats • Account takeovers • Anti Money Laundering (AML) • Payments fraud • Insider threats • Regulatory compliance (PCI, HIPPA, Dodd-Frank) • Internal compliance • External & internal audits
  7. 7. 7© Cloudera, Inc. All rights reserved. Our Customers Include Over 180 financial companies (banking, capital markets, insurance) 19 of the top 30 global systematically important banks (G-SIBs) 5 of the top 6 asset management firms 2 of the top 3 multi-national payment processing firms 3 of the top 5 Fortune 500 insurance companies (p&c and life)
  8. 8. 8© Cloudera, Inc. All rights reserved. Regulatory Compliance & MiFID II
  9. 9. 9© Cloudera, Inc. All rights reserved. Comprehensive Regulatory Compliance-Key Drivers and Objectives Drive Efficiencies Reduce Risk of Non-Compliance Reduce Time to Compliance • Unify data governance across lines of business • Scale data volume and processing cost-effectively • Improve data quality • Use all available current and historical data to improve accuracy • Apply machine learning • Use advanced analytics for better controls, including proactive and predictive • Break silos so that reporting can be performed seamlessly, on one data hub • Flexible/adaptable platform • Automate e-discovery • Automate data lineage tracking Unified Data Platform Supports a Comprehensive Compliance Framework
  10. 10. 10© Cloudera, Inc. All rights reserved. Cloudera: Managing Data for Comprehensive Regulatory Compliance Handle real-time data ingest from diverse sources Governance and Security Data Streams Deployment Flexibility Machine Learning Capabilities Diverse Analytical Options Combine Data from Different Sources Data Mgmt. Hub Scale easily & cost effectively Batch or Real- time Data Streams Data Sources A comprehensive data management platform to support more accurate and efficient compliance Data Sources Data Storage & Processing Reporting, Analytics & Auditing Data Ingest Other Data Governance (Data Lineage, Data Protection, Data Lifecycle Management) MiFID II, FRTB, IFRS-9, BCBS-239, MAD/MAR, GDPR, ….
  11. 11. 11© Cloudera, Inc. All rights reserved. MiFID II – Markets in Financial Instruments Directive Investor Protection Transparency Transaction Reporting Micro- Structural Issues Data Publication & Access Commodity Derivatives Market Infrastructure Governance Authorization, Branches & Passporting MiFID II / MiFIR Trading & Clearing Four Objectives for MiFID II 1. To strengthen investor protection 2. To reduce the risks of a disorderly market 3. To reduce systemic risks 4. To increase the efficiency of financial markets and reduce unnecessary costs for market participants. Active: January 3, 2018
  12. 12. 12© Cloudera, Inc. All rights reserved. MiFID II – Data Governance & IT Infrastructure Challenges Best Execution Validation
  13. 13. 13© Cloudera, Inc. All rights reserved. MiFID II: New Requirements for Best Execution Best Execution standards are being enhanced & expanded ⎻ These changes are designed to protect investor interests. ⎻ They require both buy-side and sell-side firms to document, monitor and demonstrate best execution based on quantitative and qualitative metrics – such as price, cost, speed, size, likelihood of execution, settlement, size and nature of the trade. • Firms are required to explain their execution policies in sufficient detail to allow clients to easily understand how orders will be executed; • Firms are required to disclose the top five execution venues used on an annual basis; • Firms are to disclose on at least an annual basis the quality of execution; • ESMA has upgraded the obligation to achieve the best execution result from an obligation to use "all reasonable steps" to a more stringent requirement to take “all sufficient steps”.
  14. 14. 14© Cloudera, Inc. All rights reserved. RTS-27: Best Execution Requirements For Execution Venues RTS-27: Regulatory Technical Standards (Execution Venues) ⎻ Coverage: Applies to all trading venues, systematic internalisers, market makers, or other liquidity providers. ⎻ Cost Disclosures: Requires full disclosure of all order execution charges ⎻ Execution Likelihood: Requires metrics to be created to assess the likelihood of execution of a specific financial instrument on a specific venue. ⎻ Execution Comparison: Requires order execution comparisons to be sized ranged based upon the type of financial instrument and its liquidity to ensure an adequate sample of executions in a size that is typical in that instrument. ⎻ Public Data Access: Requires trading venues to enable public website access for all provided data
  15. 15. 15© Cloudera, Inc. All rights reserved. RTS-28: Best Execution Requirements for Investment Firms RTS-28: Regulatory Technical Standards (Investment Firms) ⎻ Data will need to be captured at each transaction/order level, such as the percentage of passive/aggressive/directed orders; which will need to be stored for future recall if necessary. ⎻ The data must then be mapped and attached to every order for reporting purposes. ⎻ To maintain the data’s accuracy and reliability, consistent management and control will also be required. ⎻ This controlled data can then be fed into various post-trade feeds for allocations, confirmations, affirmations and surveillance or global order and risk monitoring.
  16. 16. 16© Cloudera, Inc. All rights reserved. MiFID II’s Best Execution Related Data & Technology Challenges ⎻ Extensive benchmark data across all relevant markets must be sourced, stored and accessible. ⎻ Where benchmark data is not available, firms will need to devise proxy methodologies to compute the required best execution metrics. ⎻ Many firms will need to modify & enhance their data feeds and coded “best execution” logic in their trade capture systems and market data sources. ⎻ Agile Big Data solutions will be required to process, store and analyze the vast amounts of benchmark and proxy data required for “best execution”.
  17. 17. © TickSmith Corp. All rights reserved. Leveraging “big data” To solve this big data problem: MiFID II RTS 27 & RTS 28 You need proven big data technology: And an award winning solution:
  18. 18. © TickSmith Corp. All rights reserved. TickVault Big data problem MiFID II RTS 27 RTS 28 Proven big data technology Award winning innovative solution
  19. 19. © TickSmith Corp. All rights reserved. Introducing TickVault TickVault: Hadoop-based big data management platform for capital markets TickVault is a complete software application built on a modular architecture Accumulate/transform/analyse/disseminate Terabytes and Petabytes of financial data Used by trading and risk groups, regulators, exchanges and data vendors Ideal for compliance and trading Complete workflow from data centralization to delivery with entitlements and standard access tools Abstracts the complexities of big data technology into a ready to use platform
  20. 20. © TickSmith Corp. All rights reserved. TickVault Deployment ● In-house, on client hardware and Hadoop cluster ● On client’s cloud infrastructure ● Capacity driven by infrastructure and supports Terabytes to multi-Petabytes TickVault is a Cloudera Certified Technology that supports CDH 4.7, 5.2, 5.3, 5.4, 5.7, 5.8
  21. 21. © TickSmith Corp. All rights reserved. TickVault for data producing firms Exchanges & data vendors ● Centralize & normalize ● All trade & quote data ● All asset classes and + ● Analyze & enrich ● Reconstruct & report ● Interact & distribute https://nasdaq-cx.ticksmith.com https://datamine.cmegroup.com https://trdata.tickvault.com
  22. 22. © TickSmith Corp. All rights reserved. TickVault for data consuming firms Systematic trading groups, market makers, regulators and compliance ● Accumulate & centralize ○ Data from quote feeds, trading systems, event feeds, etc. ○ All asset classes, depths and data types ○ Up to nanosecond resolution ○ Supports multiple timestamps ● Normalize, combine, analyze, reconcile ● Rebuild point in time market depth ● Provide time series & reports ● Interact & integrate with in-house apps National Bank of Canada case study at https://aws.amazon.com/solutions/case-studies/national-bank-of-canada/
  23. 23. © TickSmith Corp. All rights reserved. TickVault modules 3 4 5 6 7 21 Complete software platform 1. Load all exchange, trade and other data from exchange feeds, network appliances, (Corvil, Solace, Exegy, etc.), aggregators, OMS, order routers, FIX engines, trade venues, etc. 1. Connect directly to your data on local and cloud storage (SAN, NAS, file servers, S3…). 1. Retain original data. Normalize through time and across sources. 1. Create combined and derived datasets. Turn data into time-series. Run analytics, create reports and statistics. Reconstruct market activity and market depth. 1. Entitle and control data and features access to users and systems. Interface with existing billing system. 1. Provide data via easy to use web interfaces and Rest APIs. 1. Monitor and manage all tasks and processes.
  24. 24. © TickSmith Corp. All rights reserved. Addressing MiFID requirements TickVault is able to store, normalize, and run calculations on terabytes to multi-petabytes of financial data as required for MiFID II compliance. Leveraging Hadoop, it provides a future-proof to address: RTS 27/28 best execution reports Public portal for data queries File inventory centralization (RTS1, 2, 6, 22, 23 & 24) Timestamp validation of accumulated data
  25. 25. © TickSmith Corp. All rights reserved. TickVault’s RTS-27 Solution Takes book by order data from trading venues and automatically generates best execution tables for MiFID II RTS 27 data retention and publication. Reports are organized by TickVault’s internal custom search and statistics engine. TickVault also provides alerts on specific unfilled table fields that may require ad hoc descriptions to be inputted. TickVault is able to automatically generate tables 1, 2, 3, 4, 6, 7, 8 and 9 given the following trading venue data: Financial instrument directory System event information (halts, suspensions, outages, failed transactions) Book by order for all price levels including number of market makers and specific types of orders All timestamped execution information of every financial instrument
  26. 26. © TickSmith Corp. All rights reserved. TickVault’s RTS-27 Solution Custom Search displays Top of Book HITS or Rollups (one second/minute time intervals) for each queried financial instrument which can be exported as a csv file. The export button can also produce RTS-27 tables. Statistics page displays calculated information for each queried financial instrument including, but not limited to: ● Daily VWAPs ● OHLC ● Trading Value ● Number of Passive/Aggressive Orders ● Mean time elapsed between order acceptance and execution ● Number of suspensions ● Average Spread at Best Bid and Offer Statistics information can be exported as a csv file and RTS 27 tables.
  27. 27. © TickSmith Corp. All rights reserved. TickVault’s RTS-27 Solution Custom Search page Top of Book interface and charting available trading venue data Book by Order interface from trading venue data Statistics page
  28. 28. © TickSmith Corp. All rights reserved. TickVault’s RTS-27 Solution TickVault Generated machine-readable Table 6 for an example trading venue and financial instrument TickVault Generated machine-readable Table 7 for an example trading venue and financial instrument
  29. 29. © TickSmith Corp. All rights reserved. TickVault’s RTS-28 Solution Whenever a client investment firm executes an order, TickVault logs all relevant best execution information for that order and organizes it for reporting requirements. Tables 1, 2, and 3 can be automatically generated. Investment firm can add notes and descriptions in trade analysis report in the case of irregular executions. TickVault contains an Access and Identity Management module which manages user authentication and access to private data. The investment firm’s execution statistics can be exported into a csv file.
  30. 30. © TickSmith Corp. All rights reserved. TickVault’s RTS-28 Solution Private data portal TickVault Generated machine-readable Table 2
  31. 31. © TickSmith Corp. All rights reserved. Beyond compliance Usable data is valuable data. Using TickVault with Cloudera CDH allows your firm to leverage existing Hadoop clusters and provides an ideal solution to organize and exploit trading and market data on Hadoop. Example of machine learning application using data from TickVault In addition to its specialized tools and interfaces, TickVault’s easy to use APIS provide in-house developers and applications access to data and analytics for: ● Back-testing ● Quantitative research ● RISK data management ● Compliance ● Financial econometrics ● Machine learning and algorithmic models.
  32. 32. 32© Cloudera, Inc. All rights reserved. Thank you Francis Wenzel CEO, TickSmith @wenzelware Richard Harmon FS Director, Cloudera @ClouderaUK

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