MiFID II: what is it and why is it so important?

In the last months, more and more people is asking us “What about MiFID II regulation?”. It can be a good point to clear what MiFID II is and how it can involve IT systems.

The MiFID II is an European regulation regarding the financial market. It became necessary to update the old MiFID, in order to respect nowadays’ financial universe.
Generally speaking, the main goal of this regulation is to enhance investors’ protection by increasing transparency and safety.
In its 446 pages, it introduced changes regarding both technical and operative aspects, but just few of them talk about the change for the communication systems.

In spite of the few pages, the news regarding the IT will bring a great deal of change, as it renewed the way records are held in Europe.

The main changes are:

  • New 5 year’s retention period
    It is now mandatory to store the collected recordings for at least 5 years. This means the archiving systems have to manage a higher amount of data.
  • All “communications that are intended to lead to a transaction” are to be recorded
    Not only the recordings will be stored for a longer period, but the number of recorded communications will increase too. While the old MiFID required just the recording of “client orders and transaction”, now any communication leading to the transaction has to be recorded.
  • Firms are to monitor the collected records and that their recording systems are correctly working
    Firms have to increase the control on recordings and recording systems. In case any issue occurs, firms are to investigate on the problem, understanding why it happened. Records of the investigation are to be kept for 5 years, like any other recording.
  • The management team must be allowed to clearly oversighting and controlling the recording processes.

(“5 reasons why MiFID II will impact your trading communications” ipc.com/5-reasons-why-mifid-ii-will-impact-your-trading-communications-2016)

Thanks to its features, Mida recording system supports firms respecting this new regulation. In particular, the Call Archiving module provides tamper-proof marking, highlighting any system breach, and GSM Full Rate file compression, improving storage capability up to 6 times standard PCM files.

To learn more about Mida Rec click here.

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