Last year, as I wrote my predictions for the year ahead, I certainly did not foresee a global pandemic – no one did. 2020 will no doubt be defined as a year of great disruption, with consequences that will be felt for a long time. But I do not want to focus on the bleak outlook ahead, but instead say that despite the many new challenges brought by COVID, the operational leaders in the financial markets have adapted remarkably well over the past year.
This has of course not been without struggle. Home working has uncovered a range of shortcomings in the digital capabilities of financial institutions which has driven firms take rapid strides in the digitisation of their businesses. We have also seen a range of new and exciting product innovations, as gaps in existing technologies and operational processes have been exposed.
At SteelEye, we have always advocated cloud-based and data-centric technology solutions as the optimum way of responding to change – be that new regulations, changing market structures or a global pandemic.
2020 has in many ways proved to the market that innovation and digital transformation of operational processes is needed – particularly for mission critical processes like compliance. Firms need technology that is adaptable, scalable, and futureproofed, which we believe can only be enabled through a data-centric approach.
At SteelEye, we are more driven than ever to empower financial services firms to use their data - accurately, reliably, and fully – to gain complete compliance control and actionable insight. This is why we have amplified our product development and client onboarding in 2020 – over doubling our client base and team over the course of the year.
To round off 2020, I have highlighted below some key changes and trends that have emerged along with the SteelEye developments that have made it a year to remember.
As we look ahead to a new year, I want to thank our clients, partners, shareholders, friends and family for your continued support!
CEO of SteelEye
The first quarter of the year started out relatively normal for most firms in the financial markets. There were whispers of a virus spreading in the east, but most firms were continuing with business as usual, blissfully unaware of the disruption to come.
It was only really at the end of Q1 that Covid-19 started affect the financial industry – as several countries across the world went into lockdown. In response, European Securities and Markets Authority (ESMA) announced a three-month delay of the SFTR implementation to mitigate the impact of Covid-19 on the EU financial markets. ESMA also stated that they would, for a limited period, grant forbearance to firms that could not ensure that all recordable communications were recorded.
The UK FCA on the other hand was very clear early on that they expected firms to remain fully compliant and that they would continue to actively supervise the market. This meant that firms had to quickly adjust to the new reality of remote working. To support firms on this mission we published series of articles on business continuity planning, how to play by the rules, and key things for firms to consider when facilitating remote working.
At SteelEye, we started the year with a bang, closing our Series-A fund raise in a round led by Fidelity International Strategic Ventures, alongside existing investor Illuminate Financial. We also announced CIAM as a new client for our trade surveillance, best execution and data platform, and welcomed Rob Bernstein to the SteelEye team as our Chief Financial Officer.
“We were looking for an independent vendor that would enable us to proactively manage our regulatory obligations. We also wanted a solution that would allow us to respond to regulatory change quicker. SteelEye was the perfect fit.”
- Emmanuel Drujon, Chief Operating Officer and Risk Manager at CIAM
As we moved into Q2, the effects of Covid were being felt across the industry. With entire workforces working remotely, the use of e-communications skyrocketed. We also saw intense volatility and increased trading volumes.
As a result, surveillance teams quickly became overloaded with a large backlog of alerts and had to quickly figure out how to capture communications channels that were being used by employees working from home.
To help firms as they adjusted to the new remote working environment, we offered our communications surveillance service free to the market - assisting compliance teams in capturing and monitoring communications for employees working from multiple locations.
There was also heightened pressure on firms to demonstrate effective MAR oversight as the regulator grew concerned about increases in market abuse and financial crime. This is why we hosted a webinar with experts from Baringa, Finceler8, and SIX Group in May – to share insights around global market abuse monitoring obligations, common challenges, and best practices.
During the webinar, we took the opportunity to ask the buy- and sell-side market participants (many from compliance and operations functions) some questions about their compliance set up. Interestingly, 40% of the people that took part said that their compliance departments had been given increased budgets to manage problem areas since the lockdown.
Not only was this a clear sign of the challenges presented by remote working at a large scale, but it demonstrated an admirably speedy response by firms, who quickly realised that a clear focus on compliance and oversight was essential.
Because of the increased pressure on compliance introduced by Covid, sharing knowledge became a big focus for us at SteelEye. This is why we published our white paper Data-Driven Financial Services Compliance – Understanding the Opportunity in June. The paper explores the key challenges faced by compliance teams within financial markets and the ways in which digital transformation has a role to play.
In addition to the Covid disruption, Q2 brought significant change as the CME Group announced they were discontinuing their NEX Abide reporting services. Consequently, a large number of firms had to find replacement solutions for their EMIR and MiFIR reporting.
To support these firms, we partnered with UnaVista, integrating with their European Trade Repository (TR) in addition to their Approved Reporting Mechanism (ARM), and developed a data converter that made migrations easy and effortless. On the back of these efforts, it was rewarding to be recognised as Best Reporting Services for the Sell-Side by WatersTechnology and Best Regulatory Reporting Solution by HFM in Q2. We also received an award as the Best Record Retention Solution by A-Team Insight.
In Q3, most of the financial markets had adjusted to the new ways of working. But with that, there was even more pressure on financial firms to carry out effective market abuse surveillance.
To help firms manage their oversight more effectively, we launched our auto-trade reconstruction solution – which helps firms analyse complex datasets holistically by looking at any given trade or order (or several trades or orders) and bringing in relating communications, market data, global news, social media posts and other relevant datasets.
Following the various product enhancements we made to our reporting platform in the first half of the year, we were delighted to announce that Schroders went live with our MiFID II transaction reporting solution in July.
“The SteelEye implementation has helped us to improve the level of control and accuracy we have around our MIFID II transaction reporting. We selected SteelEye because of the quality of their technology, the regulatory expertise demonstrated by their team and their willingness to support our tight implementation timelines.”
- Keith Frimpong, Global Head of Operations Change at Schroders.
Further, SteelEye was selected by Ardent Financial for MiFID II and MAR compliance services, recognised as the Best RegTech Solution by the HFM Global, and honoured as the Best Trade Reporting Solution by the TradingTech Insight Awards USA. Our management team also grew with the addition of Rob Friend who joined as our Chief Operation Officer.
In Q4, reporting quality became a key focus for the regulator as certain Order Management Systems (OMSs) were flagged for being associated with inaccurate MiFIR reports.
As we are all too aware, reporting quality has been an ongoing challenge in the industry since the introduction of regulations such as MiFID II because of the breadth and complexity of data that needs to be consolidated and reported.
Since many firms still operate a lot of legacy technology, most of which are siloed, firms often end up having to patch together their transaction reports from a range of order management systems and trading platforms. And that is only for MiFIR reporting. For MAR compliance, they must also store and monitor communications data in addition to their transactions, and ideally capture global news and social media sources as well.
Safe to say, we have seen firms struggle to do this effectively for years – which is why we started SteelEye in the first place.
To help firms understand that all compliance obligations really start with data, we released our e-book 5 Steps to Great Compliance Data Governance in Q4, which highlights why good data governance, including data quality and data lineage, is now essential for all compliance obligations.
Because of the historic challenges firms have faced in consolidating the structured and unstructured data required for various compliance obligations, there has also been a lot of discussion in the industry about the concept of ‘holistic’ surveillance.
To get a clearer view of whether holistic surveillance is possible today, and what the end state should look like for this compliance practice, we invited David Cowland from Fidelity International and Ian Hollowbread from ING to join us for a webinar to discuss the theme.
As part of the online discussion, we asked the delegates several questions and it was interesting to learn that most attendees rated communication surveillance and holistic surveillance as their top priorities – perhaps indicating where technology investments will fall in 2021.
With regulatory reporting post-Brexit becoming even more complex, we made a number of enhancements to our reporting service in Q4, including extending our rules engine and set of validations to capture incoming changes. As a result, SteelEye is now able to assess instrument and jurisdiction eligibility, and thereby validate fields and submit reports according to the destination.
One of our biggest announcements as we moved towards the end of the year was the incorporation of Refinitiv market data on the SteelEye platform.
In Q4, we also announced that SteelEye was selected by DMA for MiFIR reporting, trade surveillance and best execution.
“With SteelEye, we can meet multiple regulatory requirements within one platform, utilising the same data set, and get enhanced insight into our operations.”
- Peter Johnson, Director (Legal & Compliance) at DMA.
As we have executed on our growth plans and doubled our team over the course of the year, we have maintained a continuous focus on people and culture. We were therefore delighted when it was announced in Q4 that SteelEye was listed as one of Harrington Starr’s top 5 FinTech workplaces in 2020. We were also recognised by WatersTechnology as the Best Market Surveillance Platform for the buy-side in Q4.
We hope you have enjoyed this summary of the key market changes and SteelEye developments in 2020. As we look ahead, let's cross our fingers for a quick recovery from the Covid-19 pandemic and a brighter 2021!
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