Products & Services

Reg NMS & MiFID Compliance

Addressing the Challenges of MiFID and Reg NMS

All firms that execute trades on behalf of clients in the EU and US are affected by the set of regulations outlined by the Markets in Financial Instruments Directive (MiFID) and Regulation National Market System (Reg NMS). These regulations present a range of complex organizational, procedural, and technological challenges, compounded by the relatively short timeframe available to implement the change before the directives takes effect.

Complex event processing technology from Aleri directly address the technology challenges of MiFID and Reg NMS by providing a versatile, flexible, and easy-to-use foundation to rapidly implement intelligent order routing based on:

  • Flexible rules that implement policy
  • Real-time market prices
  • Execution venue characteristics
  • Customer preferences

Specifically, The Aleri Streaming Platform is well suited for rapid implementation of solutions for several aspects of the new rules:

Market Fragmentation and Increased Market Data Rates

In both the US and EU, the new rules are expected to increase market fragmentation -- there will be more exchanges and alternative trading systems making a market in any given security. The result? An explosion in market data rates that will present new challenges in coping with the faster message rates and assembling a complete view of the market.

  1. Solution – The Aleri Streaming Platform is designed to handle very high message rates and to combine streaming data from multiple sources. It can be used to build a single consolidated order book that represents orders across multiple exchanges.

New Order Routing Rules

In both markets, the rules for determining where an order should be sent for execution will have to change:

  1. They will have to cope with new and more execution venues to choose from
  2. They will have to deal with new order types and exception rules
  3. In the case of MiFID, they will have to take into account aspects other than price (eg., transaction cost, speed, etc.)

Many sell side firms and exchanges already have order routing technology in place, but is it flexible enough to adapt to the new requirements? And how quickly can new logic be implemented?

  1. Solution – The Aleri Streaming Platform is designed for flexibility, with tools for quickly implementing complex logic. Ultra-low latency is a hallmark, which is critical in order routing applications, since slowing down the order is not an option. The Aleri technology can be used to build an order routing application that takes incoming trades and market data, and applies the routing “rules” to determine where to send the order for “best execution”.

Compliance

Firms will need to collect data to monitor and demonstrate compliance. To do so, they will need to be able to show, for each trade, the basis for the decisions on where to execute the trade and whether or not the execution decision was in compliance with the policies around best execution.

  1. Solution – The Aleri Streaming Platform’s ability to combine data from multiple sources in real-time, and capture the results in persistent (ie., disk-based) storage, at very high rates, is ideal for implementing a compliance application. The application would record, for each trade, the state of the market at the time of the trade. This information would then be periodically “swept” into a data warehouse for permanent storage and reporting. A real-time view of exceptions and/or generating alerts could also be maintained.