Mifid II compliance: firms have “taken their eye off the ball”

Europe’s largest set of financial rules continues to put strain on the market’s technology and compliance departments

17 July 2018

The second markets in financial instruments directive (Mifid II), which came into force on January 3, continues to put pressure on market participants. Clause 16.7 of the directive, which requires firms to record communications linked to a trade to be recorded and made accessible to regulators should they require it, has been particularly onus: a recent report by TeleWare suggests that 40% of firms do not have adequate processes in place to comply with the clause. Bobsguide spoke with Brian Martin, regional director, Spitch, to discover why that is the case.

Why are market participants lagging behind on Mifid II call recording?

I think people have tended to look at different clauses within the directive and have taken their eye of the ball a little bit.

A lot of people would have had recording in place already, but there are specific clauses within Mifid II that say the recordings have to be accessible, which is totally different from making a recording.

Surely if you have the calls recorded and in place you can hand them over to the regulator if and when they ask for them.

Say you have a recording that stretches two days, it’s got all of your recordings on it – amassing to 150 traders on the trading floor, so instance – and you want to find one recording. The problem there is in finding one particular conversation.

In terms of requirements the term is ‘accessible’, so what you need to be able to do is make the recording accessible without doubt – for instance using keywords. If you’ve got a trade that you need to identify, made by a particular trader, using a particular stock, you can identify every time that stock was mentioned.

If a firm hasn’t implemented this, is it possible to go back and backlog the recordings?

That’s very much dependent on the platforms and technology that you had at the time.

Why have people overlooked this, what has been deemed more important under Mifid II?

I guess some people have just said ‘well we’ve got call recording in place, we need to concentrate on other areas’. But it’s the functionality of the call recording may have is entirely the issue.

How can call recording functionalities actually add value?  

You can look at sentiment involved in the call - so for instance we offer sentiment analysis, of what’s being emphasised in the call, were the people on the call stressed, were they happy etc, how were their stress levels over the course of that call. That might tie in with how to interact with a valuable customer. Likewise, you can assess how your staff are doing – from a duty of care perspective. 

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