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I particularly agree with #4 - Don’t underestimate the data challenge. It often merits, in my experience in several large banks, a remediation programme of its own

Helpfully the FCA’s recent announcement on MiFID II ( https://www.fca.org.uk/sites/default/files/cp16-29.pdf ), reconfirms the analysis above.

It clearly agrees that even the Evolution option will require process and system changes as stated above. In their latest paper they point out “Operationally, this will require changes to current Commission Sharing Agreement (CSA) accounts” and then indicate a number of conditions that need to be satisfied. They also confirm that the “hard dollar” Revolution option is consistent with MiFID II e.g. “direct payments by the investment firm out of its own resources”.

However, it still leaves the choice of where on the spectrum a firm wants to settle and how exactly it wants to satisfy the rules as being a choice for the firm. It also seems to be taking a different view from the AMF, the French regulator, which will further complicate decision making. We are seeing firms starting to be attracted to options which look at budgeting at a strategy rather than client/fund level. As the FCA notes this “may allow firms to set a budget at a desk-level or strategy level” but only if “the individual and collective portfolios subject to the budget share sufficiently similar research needs.” This may make budgeting easier but will still require a far more robust evaluation of research needs and how they are satisfied than exists in a good number of firms.

Whatever the potential approach, it is time to start implementation.

Given the sea change brexit vote since this was posted a number of people have asked whether the MiFID impact is likely to change - maybe some suggest there be delay or even an opt out for UK firms under MiFID. Well, the short answer is no - not likely. 

The longer explanation is that the MiFID II live date is within the two year period when we are still bound by EU regulation, also to do business in the EU as currently UK firms would have to comply with at least equivalent MiFID regulations and given the recent FCA announcement of regulation is business as usual, it is hard to see major changes to the research changes for MiFID II for UK firms.

I acknowledge that many firms would strongly prefer to avoid the pain that will come with a number of aspects of MiFID II whilst facing the Brexit challenges. There are also some other areas of the MiFID requirements have not been finalised. However, these are unlikely to cause delays - rather the regulations come into effect as planned but only the late defined parts have an extended bedding in period.

The best approach is surely to continue implementation programmes for research changes on the same schedule, but where possible build in the extra flexibility for change and more complex post EU exit models.

Given as mentioned above that the MiFID II live date is within the two year period when we are still bound by EU regulation and the recent FCA announcement of regulation is business as usual, it is hard to see major changes to MiFID II.

There is sufficient uncertainty in many other areas at the moment so speculation that creates more does not help - although I acknowledge that many firms would strongly prefer to avoid the pain that will come with a number of aspects of MiFID II whilst facing the Brexit challenges.

The best appraoch is surely to continue implementation programmes on the same schedule, but where possible build in the extra flexibility for change and more complex post EU exit models.

Yes, agree. Transformation is required not simply running the existing checks faster.

Given the discussion above, it was interesting to see in the news last week that Contador has been suspended by the cycling governing body for a drugs irregularity found during this same event. So could this be the final confirmation that he had been prepared to do anything, fair or foul, to win this iconic race for the third time? Well the jury is still out as the amount of the banned substance found in the test is so small that Contador argues it could have entered his system through contaminated food. The same chemical is used (illegally) by farmers to promote growth of lean meat by their cows. In a further parallel between sport and business life, the Contador debate on the web has generated those supporting the current method of regulation and those advocating nothing less than a complete culture change.

From a business perspective one key way that money managers seek to mitigate their counterparty risk in the research commission pools held by brokers is to spread their CSA trading across multiple brokers. However, without a central utility this often means implementing multiple IT interfaces, different reconciliation processes and learning how to operate different systems - potentially one new system per broker. Thus for many buy-side firms, their choice of number of CSA brokers to deal with can be limited by infrastructure, IT or operational issues rather than what should be the key counterparty/credit risk driver. Hence they may run higher risks than they would otherwise want to. With a central utility solution, this changes as there will be a single interface, single reconciliation process and single system to learn and operate (the same characteristics that also reduce operational risk as you mentioned), whether you have two or twenty brokers. This allows fund managers to adopt the number and mix of brokers in line with their business drivers and counterparty risk appetite, as it should be, without IT and infrastructure constraints. So having a centralised utility solution will help address these buy side counterparty/credit risk concerns.

As promised, a quick summary on the results of this process. The first impact was that the process of generating "blogable" and "tweetable" (if there are such words?) content did help increase involvement in most of the presentations. However, the short format of Twitter did not help when trying to generate value added comments whose value would persist beyond the day. I am still in two minds as how to make best use of this, however it is clear it is a communication channel for immediate news, reaction, comment and soundbites rather than full analysis. The work to generate short "real-time" blog entries was useful although a mix of technical issues and British reserve meant that not all of them made it onto the web. In terms of generating increased engagement, the process was helpful with material additions to Twitter followers, LinkedIn connections and significantly LinkedIn discussion group membership. More preparation and "advertising" is required to get intraday blog comments - the readership of the blog stream on the day was not wide enough. As with most social media initiatives, it is important to try things to see what does and doesn't work. So overall, a useful experiment for me, and one I hope to repeat in the near future so as to exploit by enhanced "inner maverick", apply the lessons I have learnt so far and gain more experience in this interesting area.

Several presentations this afternoon have asserted that 21st century organisations need to be organised on collaborative, person based principles rather than control, mass based 20th century "industrial age" principles.

Regulation is a significant potential inhibitor to the use of social media in the financial sector. However, these regulatory challenge are not insurmountable as shown in other industries such as wines and spirits. One of the presentations at Somesso emphasises the use of buy-in, collaboration with Legal & Compliance, education, moderation and an ability to react quickly as required, as ways of overcoming these.