Following Swiss exchange's Six move to bundle all activities in the securities business including the merger of exchange trading and post-trading areas into one organizational unit, with all securities trading services now provided from a single source, SRP spoke to Roy Kirby, head product propositions at Six, about the exchange's financial information division's work around regulatory issues surrounding the European structured products market.

"What we have seen, and this is anecdotally, because Mifid 2, in size is such a big regulation, most people probably in some ways have put Priips on the backburner to concentrate on Mifid 2," says Kirby, pointing that the majority of organisations are aware that they have to produce a key information document (Kid), and they have to align with Priips. "But I don't think they have gone into it in the same detail they have gone into Mifid 2."

According to Kirby, the industry as a whole says that it will be ready in time for both regulations in January but he thinks that there will still be a lot of manual processes in place. "We have had discussions with some customers and what we see is that the customers who are well prepared have set up systems and processes for January for both Mifid 2 and Priips," says Kirby. "There are also customers who are not quite as prepared and have manual processes in place but others have thought about what do they do next year in both projects, not just meet the regulation but actually about the quality of information they will have for the regulators to look at."

Most of the focus in 2018 will be around reviewing processes that have been put in place, review of data, and concentration on quality, according to Kirby.

"When you ask the market, 70 to 80% say they are ready. Are they ready to report, or just to do minimum viable compliance?," asks Kirby. "We think 2018 is the year that they will start to review and actually start to look at the quality of their data and take out some of the manual chapters that are put in place."

The danger of legal uncertainty over the next few months around Mifid 2 and Priips comes from the fact that both regulations touch not just one part of an organisation, but everything: back office, front office, pre-trade, post-trade, institutional and retail, according to Kirby. "Most organisations are still set up with different project arms, different data arms, and we have seen customers, not only people from investment banking and asset management, but also people from Luxembourg and people from Germany that are working on the same project and haven't spoken to each other before," he says. "Some of these regulatory tasks were distributed across a company's current infrastructures and organisations rather than being done via a central team."

Kirby believes that the lack of clarity around manufacturer versus distributor responsibilities and other issues still remain. "We are a bit clearer now with the EMT (European Mifid 2 Template), and the Priips template, but there is overlap between the two," says Kirby. "There is uncertainty about which one is going to take precedence. At the moment what you have to do is to make sure you can do both templates, make sure you report the information for both, you distribute the information for both, so over time there will be synergies of what we need to work on as an industry. Yes, we got the regulations, we now have the standards, over time we all have to be eligible to amend our systems, our processes, because we know that some of those items will change slightly over time."

According to Kirby, the regulator is under a "huge amount of pressure" from the governments from everybody else, to do something, so they have to start somewhere.

"When you listen to regulators, I think they are now happy that they will get enough information and I think they will now adapt their own rules slightly," says Kirby. "Take an example of someone who does no reporting and doesn't do anything and ignore the regulation completely, they are the ones that the regulator would start with. People who are reporting some information but maybe under reporting or reporting in a slightly odd way, they are already meeting the regulation because they are on board and they are ready and willing to amend."

On the impact of the regulation on the day to day business Kirby highlights that most customers "feel that they can carry on doing business and will meet the regulation".

"That's the majority," he says, adding that there are a number of customers that want some more information and want to really push on and get everything correct. "Do people see that they should take regulation now on a more holistic level rather than a more individual project level? I think they do," says Kirby. "With new regulation coming out now they will be more talking internally and externally with vendors, with regulators, with everybody else, to understand the regulation as early as possible. Q&As will be important to clarify issues and update the market but regulation will remain a theme."

Despite the potential impact on investor choice as product providers slow down their offering, Kirby remains positive "that regulation and standards with transparency will help the market".

"Six is part of the regulated market in Switzerland," says Kirby. "To make the market clear, transparent and working, you do need standards. And if you publish those standards and everybody is aware of them, then all players are on an equal field. At the end of the day that can only help private investors and institutional investors."

According to Kirby, Six has focused on a very simple scenario with the regulatory standard around the ISIN code. "We, as a data vendor, have our own coding system but we also sit on the board of ISIN and we supported that decision because extending the ISIN gives everybody something that is a reference code," says Kriby. "There is no longer the hiding behind 'I had a Bloomberg code and you had a Reuters code and they had a Six code.' Yes those codes do exist but an ISIN is an ISIN. The more standardised the market is, the better it is for the industry."

According to Kirby, the financial services team at Six remains committed to the market and "help the larger banks through whatever the new regulation is, to set up early regulatory forums and invite the customers along".

"We would like to be the bridge in some way between the market, the regulator and other vendors and for people to use our expertise in data and regulation as a sounding board," says Kirby. "There is a competitive advantage in that for us but there is also a competitive advantage for the banks who get compliance and regulation right. If they can get some kind of approval from the regulators, they can get more business."

Six wants to be involved in creating a level playing field, and new standards and standard reference points for the industry that can be reused, according to Kirby.

"There is a big concern about using the LEI (Legal Entity Identifier) under Mifid 2 as firms cannot trade unless they report on an LEI," says Kirby. "Well, the LEI has been in existence for a long time, it is used by Solvency 2. But it is completely new to the Mifid 2 teams. As an industry, if we can pick those reference points that we all know and have a standard for, that would help everybody in the long term."

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