Electronic TradingMiFID II

Making Implementation Simpler, Faster, Cheaper

Preparing For Compliance With ESMA RTS

Corvil's MiFID II solution is a foundational data platform approach to provide critical functionality and data required for compliance with RTS-6, RTS-7, RTS-22, RTS-24, RTS-25, RTS-27 and RTS-28.

MiFID II Transaction Reporting and Order Record Keeping regulations requires precise record keeping of all messages and events involved in transaction life-cycle and reporting of transactions executed. Reportable events such as transmission, receipt of orders, and decisions to trade need to be accurately timestamped and made available to regulators for reporting, either continuously (transaction reports) or on-demand with a 5 year history (order record keeping).

Corvil reduces the complexity and cost of compliance. Corvil offers a minimally disruptive, scalable, data acquisition, correlation, analysis and publishing platform, with support for accurate time-stamping and collection from all required data sources - network, application agents and logs.

Outcomes

  • Lowers regulatory tail-risk to the business from non-compliance and * Forensic audit or enquiry
  • Reduces cost to meet RTS rules
  • Minimizes changes to trading systems
  • Reduces implementation complexity
  • Future-proofed against more stringent rules

Access to accurate, reliable and timely data will be critical to demonstrate the provision of best execution; as such, the majority of respondents to a recent TABB survey highlighted data concerns as their main challenge.

Problem Overview

Cost and Complexity To Implement New ESMA RTS Rules
The recently published ESMA RTS rules are demanding a new norm for monitoring, order record-keeping and forensic surveillance of trading activity that is typically not supported by current IT systems and processes that underpin today’s electronic trading businesses.

Specifically:

  • RTS-6: Requires comprehensive real-time monitoring and surveillance systems for algorithmic trades
  • RTS-24: Requires precise record keeping of all messages and events involved in trade execution life-cycle .
  • RTS-25: All “reportable events” ( ESMA/2015/1909 Section 3.1) need to be UTC synchronized with 100uS accuracy “or better”.
  • RTS reportable events, such as transmission and receipt of orders, and decisions to trade, need to be accurately time stamped, and made available to regulators for reporting, either continuously (transaction reports) or on-demand with a 5 year history (order record keeping).

With these new rules there is a clear emphasis on data quality, accuracy and timeliness. The intention of the competent authorities responsible for enforcement is to enable audit and forensic inspection of the sequence of trade events across all venues and members.

While cost-effective compliance with the ESMA rules is the primary concern of most investment firms, the major tail-risk to the business is exposure to large regulatory fines. The new Corvil solution provides both a cost-effective answer to MiFID II monitoring and order-record keeping while providing a trusted and independent third party data platform capturing the forensic evidence needed in the event of a MiFID II audit or enquiry to minimize risk of fines.

Challenges

  • A new type of data to be collected and processed i.e. machine-time data
  • Major upgrades to IT systems
  • PTP distribution network to every server for accurate UTC sync
  • Server upgrades to support PTP input
  • Application code changes and/or software re-architecture
  • Database changes to handle precision time stamps and storage
  • Test and calibration system for UTC compliance (RTS-25, Article 4)

You can sleep much better at night knowing you have an independent watchdog system that sees everything. The scary situations are the events no one has imagined, and Corvil helps protect us from those

MD Global Investment Bank

Solution Overview

Corvil’s unique approach uses a dedicated independent system to gather the machine-time data needed for ESMA RTS reporting and forensics. The Corvil platform is deployed non-intrusively as an overlay on existing infrastructure, seeing all trading activity without requiring configuration for systems or flows to opt in. This removes the need for trading venues and participants to overhaul internal IT systems. Other proposed solutions to meeting MiFID II requirements would necessitate costly and time-intensive hardware and server upgrades, in addition to coding changes to dozens or hundreds of applications and databases. Corvil’s support for wire-based data collection and timestamp measurements drastically reduces the size of the PTP distribution infrastructure required. It also reduces the need for extensive application and database development efforts to support implementation and ongoing maintenance of a home-grown solution.

Strengths

  • UTC clock-synchronized data capture
  • Real-time monitoring of order life-cycle
  • Precision order record-keeping and publication
  • Trade execution surveillance & analytics
  • Watchdog over cyber threat to IT systems
  • Independent, trusted, 3rd party platform
  • Non-intrusive / low-overhead data capture & monitoring of multiple data sources
  • Best-in-class, proven data analytics platform for trade execution life-cycle
  • Better data precision and accuracy than specified in RTS-25

Key Benefits of the Corvil MiFID II Solution

Reduce Risk

Corvil will not only enable you to meet the reportable events compliance obligations (of MiFID II) but has the data accuracy and context to defend a forensic audit.

Trusted and Independent

Corvil is viewed as the trusted independent third party provider of transparency and forensic machine-time data to the trading industry.

Reduced Latency

Offload timestamping and logging of events from critical application points in the infrastructure. For example, avoid software logging of receipt and transmission of orders by tuning in to network data.

Lowest Application Overhead

Where application events are required, the Corvil Application Agent generates accurate timestamps with the absolute lowest application overhead.

Fast and Cost-Effective to Deploy

Reduced need to modify existing server code and OMS databases. Collect and timestamp from the network where appropriate.

Business and Operations Value

With a single deployment, Corvil delivers the MiFID data capture, plus performance, troubleshooting and security analytics.

Multi-Venue, Asset Class

Single product to collect data across platforms, asset-classes, venues. Support for all major order-flow protocols and market-data feeds globally and SDK to support any local data formats.

Proven Solution

Trusted by the world’s top global banks and exchanges.

Key Features of Corvil’s MiFID II Solution

Scalable
Add appliances and software to cope with almost any data load.

Distributed
Users control where data is collected, analysed and stored. No single point of aggregation means no looming scale limit.

Extensible
Support for 400 data protocols, an SDK and APIs, User-configurable dashboards, and flexible publishing of real-time streaming analytics to external big data systems.

Correlation
Each appliance is capable of millions of correlations per second, and supports distributed multi-event correlation. Correlation supports the reporting of Gateway-Gateway latency at the 99th percentile, as required by RTS-25.

Data Sources
Transaction Records collect execution reports off the network, and extract data including the embedded transaction time

Network Events collect order receipt and transmission events directly off the network, timestamped in hardware, removing the need for software logging of these events.

Application Events Corvil Application Agent offers ultra-low overhead event publishing, for collection by Corvil appliances, while meeting the requirements for timestamping accuracy.

Logging Events ingest existing streams of log messages and extract data and timestamps

Timestamping
Hardware timestamping with support for PPS and PTP synchronization, with alerting for outages.

Independently validate the consistency of PTP distribution and application timestamping.

Normalization
Convert events into a common format, regardless of the original message format or protocol

Systems receiving streams from Corvil need only support a single format, independent of the original Venue, Vendor, or in-house message content and encoding.

Publishing
Corvil Streams make the collected data available in near-realtime via an API

Corvil Connectors make it easy to connect to Streams and insert into specific receiving systems such as kdb, Hadoop, Microsoft SQL Server, Kafka and Flume.

Specific Areas of MiFID II Addressed By Corvil

Corvil’s solution is applicable to the following MiFID II requirements:

Clock Synchronization (RTS-25)
Provides timestamp granularity down to the nanosecond for GPS, PPS and PTP — Corvil syncs status reporting and accuracy diagnostics with alerts on any loss of sync.

Market Transparency and Reporting (RTS-22 and RTS-24)
Establishes an independent and complete record of activity based on network, application and log data that is trusted by some of the top financial institutions worldwide — streaming data integration with Storage, Databases, Analytics, Risk systems for compliance reporting.

Pre and Post-Trade Risk (RTS-6 and RTS-7)
Monitors for unusual behavior and assures that pre-trade checks were completed correctly — Corvil automated trade activity discovery makes it impossible for unauthorised trading activity to be concealed.

Best Execution (RTS-27 and RTS-28)
Creates a complete time-synchronized record of market-data and execution activity for trade reconstruction, including analysis on price metrics per symbol, speed of execution per venue and market data latency monitoring.