Regulation and compliance: here to stay

Contributor: Magnus Almqvist

The overarching objective of increasing market resilience and stability during periods of turmoil is shared by most, if not all, market actors. But that is where the agreements seem to end. How to achieve this, and how successful the regulators can hope to be is something that could be debated and discussed endlessly. We certainly had a good go at it during a recent panel discussion at SunGard’s London Industry Seminar, and I made the following observations from the event.

Regulation is here to stay, and its reach and coverage will continue to change rapidly. It is a challenge to even grasp the breadth of change happening in the various regulatory streams, such as EMIR, MAD, MiFID, and ESMA. What is the full regulatory picture created when these different rulebooks are overlaid? No one seems to be able to concisely formulate this yet.

That leads on to the question: are we creating something efficient? It is, in insulation for individual behaviors such as stemming layering or quote stuffing, but where do the various rules and guidelines get us when looking at the big picture? There is great uncertainty here, which is cause for concern.

Compliance desks are now scrambling to implement new guidelines, directives and regulations as they are published. At this point, information is often confusing, incomplete or still in draft form. When final versions are available, the publishing date is often only months from the go-live date, which is not enough time for firms to properly implement organizational and role changes and IT system improvements to fully comply. This waters down the effect and impact of changes, as regulators are essentially forced into a position where they have to show initial leniency towards implementation.

For any actor in financial markets, strong and well-functioning compliance is now becoming a marketing tool. Customers are increasingly asking how their orders are managed and how they can be assured they are being fairly treated. This is true for trading venues, banks and brokers alike. Regulation is here to stay, and its rate of change, reach and impact will continue to increase. So watch this space, and join us in our next panel debate, as I’m sure it will be another interesting discussion.

While you’re here…

• Read the regulatory spotlight on ESMA’s guidelines for market abuse and surveillance.
• See more commentary from our London SunGard Industry Seminar.

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