Connect with us

Finance

CAT BACK AMONG THE PIGEONS: WHAT NOW?

Earlier this year, the Financial Industry Regulatory Authority (FINRA) was confirmed as the new orchestrator of the consolidated audit trail (CAT) – a huge database that will house accurate, up-to-date records of all US equity and options trades. With that settled, followed an extended period of uncertainty around what are likely to be the new reporting requirements, the picture is starting to clear so Capital Markets participants must start progressing in earnest towards compliance.

Here, Harshad Pitkar, an independent CAT expert and board member of Inforalgo, provides some tips on what to do now.

 

In January, the news came that Thesys – the designated processor of the new consolidated audit trail (CAT) trade records database for US equity and options – had been fired, marking the latest in a series of false starts for the bold new Capital Markets transparency initiative.

The development received a mixed reaction by the industry. Thesys’s appeal had been as an agile, disruptive technology firm, poised to harness emerging technologies and build something without the thorny issues associated with legacy trade reporting solutions such as OATS and Bluesheets.

Harshad Pitkar

On the other hand, the prospect of starting afresh sparked some concerns about the potential for the raised cost of compliance. Certainly, Capital Markets participants are becoming jaded by all of the added administration and IT expense that keeps coming their way each time there is a new set of regulatory reporting requirements.

In March, the picture changed again, with the news that FINRA would take up the CAT mantle after all. So, where does this leave us?

 

Boxout:

 

DateEvent
July 2012SEC adopts Regulation NMS Rule 613
February 2013CAT RFP published
November 20153 bidders shortlisted (Thesys, FIS, FINRA) from a crowded pool of more than 15
January 2017Thesys selected as the winning bidder to build and operate the CAT
November 2017Participants file for exemptive relief proposing updated timelines, pushing the go-live date by more than a year for an implementation completion date of April 2021
May 2018Participants submit a ‘Master Plan’ to the SEC with a phased implementation approach and updated timelines with all phases being implemented by November 2022
October 2018Final technical specifications for phase 2a and 2b published with several unresolved issues
November 2018SROs start reporting to the CAT (after significant delays). Several issues reported
January 2019Thesys replaced as the CAT processor by an unnamed potential successor
February 2019Participants publish an updated elongated roll-out plan for phase 2a and 2b for large broker-dealer reporting which further breaks down the project into sub-phases
March 2019FINRA (FINRA CAT) officially named as the CAT processor

 

Figure I: CAT & mouse: a timeline

 

 

What we know now

Following the news that FINRA (or more specifically FINRA CAT) will now fulfil the role of CAT processor, a few specifics have been clarified. These updates are based on discussions at the latest industry events:

  • No changes are planned to industry member technical specifications

FINRA CAT will continue to use the final industry member technical specifications published in October 2018 (version 1.0). No material changes to the specifications are expected outside of resolution of outstanding issues.

  • Error feedback and correction mechanism to be included

The need for a mechanism to facilitate error feedback and correction has been acknowledged.

  • Updated roll-out plan

A revised roll-out plan for phase 2 A and 2B for large broker-dealers has been scheduled, which further breaks down the implementation for these two phases into 4 sub-phases, as follows:

 

PhaseSub-phaseTesting Start DateGo-live date
    
2A EquityFile Submission & Data IntegrityDecember 16, 2019April 2020
Intra-Firm LinkageApril 2020July 2020
Inter-Firm LinkageJuly 2020October 2020
Exchange and TRF LinkageSeptember 2020October 2020
    
2B OptionsFile Submission & Data IntegrityDecember 16, 2019May 2020
Intra-Firm LinkageApril 2020August 2020
Inter-Firm LinkageJuly 2020October 2020
Exchange and TRF LinkageSeptember 2020December 2020

Figure II: New, extended phasing for larger market participants

More details on the above phases and dates can be found on the CAT NMS Plan website (https://www.catnmsplan.com/wpcontent/uploads/2019/02/CAT_Industry_Webcast_02.20.2019_vF.pdf)

 

Given these changes, a ‘Regulatory conformance period’ is no longer deemed necessary.

Details relating to Phase 2C and 2D, and updated timelines for small broker-dealers, have not yet been communicated, so watch this space.

  • Delays remain likely

A 6-9 month delay to the proposed timeline is highly likely, as the transition to FINRA CAT will be complex and there remain some unanswered questions – for instance around the eventual technology assets that will be used. Expedited resolution of key issues will be critical too, in enabling the development effort to be completed in a timely fashion, and it will take time to establish a decent error correction and feedback mechanism.

 

A 4-point action plan

It is clear that the CAT system will not be an evolution of the existing OATS mechanism, even though FINRA is now in driving seat. To maximise their changes of being ready, market participants should now look to register with the CAT plan processor if they haven’t already done so, and prepare to start reporting within a year. Certainly, CAT reporting requirements will be complex and it will take time to get to grips with everything, so there is no time to lose.

 

Here are 4 things firms should do now:

  • Continue development as planned for Phase 2a, with increased focus on 2b

Although proposals to make the roll-out more gradual relieve some of the pressure, the CAT go-live dates remain aggressive. Firms should therefore continue development as planned for Phase 2a and 2b.

  • Build a strong control framework

The concept of a mature control framework for regulatory trade reporting is relatively new. Given the increased volumes and complex requirements for CAT, issues and breaks already seen with existing reporting will be magnified without robust controls. A strong control framework will greatly reduce breaks and errors, and speed up testing.

  • Focus on simple flows first

Irrespective of the type and size of firm, simple order flows account for the highest volume of transactions (eg where an order is routed away without any splitting or bunching, or is crossed internally etc), so handling these successfully will be a big win. More complex order flows (eg multiple entity / desk / system hops, splitting / bunching etc), which typically account for only 10-20% of overall volumes, can be dealt with later.

  • Be engaged, proactive & forceful in voicing concerns

Industry participants should aim to use the latest CAT developments as an opportunity to address any residual concerns they might have about the impending new requirements, especially as FINRA CAT appears to be more accommodating of industry requests than Thesys. This is a good chance to participate proactively in industry forums (FIF, SIFMA etc), and make heard any concerns and requests relating to outstanding issues and desired functionality.

 

The author is an independent CAT expert and now a board advisor to the management team of capital markets data automation specialist Inforalgo. You can find out more by downloading the ‘Consolidated Audit Trail eBook’ here.

 

About the author

Harshad Pitkar is an independent CAT expert and a board member of Inforalgo, the Capital Markets data integration & smart automation solutions provider. Before founding his own consultancy (RegEdge), Harshad spent a number of years working for Big 4 firms, most recently as a risk and regulatory practice Partner. He has also worked at the coal face, most notably for a large high-frequency trading firm, in roles spanning front-, middle- and back-office functions.

 

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Finance

TIME TO FOCUS ON YOUR ‘WEALTHBEING’

Tony Mudd, Divisional Director, Development & Technical Consultancy. St James’s Place

 

FIVE WAYS TO SAFEGUARD YOUR FINANCIAL FUTURE

The financial and economic impact of the coronavirus crisis has thrown up a host of issues for families to consider.

Above all, the experience has reinforced the importance of always being prepared.

The pandemic’s effect on jobs and incomes has underlined the value of having a robust financial safety net in place.  And it’s never too late to take control and start planning. It’s time to focus on your ‘wealthbeing’.

 

Here are some positive steps you can take to safeguard your financial future.

  1. Income security

With almost nine million UK employees of around one million businesses1 placed on furlough since the coronavirus crisis unfolded, there is potential for large numbers of redundancies as employers examine their reopening plans and contemplate the future of their business.

If you’re in employment and still being paid, look at how long that is likely to continue. As far as you are able, try to budget appropriately. Also look longer term at other sources of finance that you would be able to access if needed (such as savings, existing investments or, perhaps, borrowing), as well as the gaps that insurance policies could help fill.

Tony Mudd

If you are facing redundancy, make sure you understand what you can expect from your employer – your notice period, redundancy entitlement and statutory redundancy cover – as well as the government support that’s available.
Ask yourself – Where do I stand? What do I need? Can I continue to pay my bills? What are my responsibilities?If you do need to dip into your savings or investments, be careful about where you take it from – and when. The right choices here will help you preserve your capital by helping you minimise your tax, reduce charges and get the best from your assets.
If you don’t have savings or investments available, check whether you’re entitled to state support. The Money Advice Service website is a good source of information and guidance. If you’re struggling, or think you might soon be, don’t hesitate to seek free, impartial debt advice from the likes of StepChange and Citizens Advice.

 

  1. Create an insurance buffer

Do a risk audit on yourself. Ask what the financial implications would be – for you and your family – if you get sick or lose your job. Ascertain what potential risks you might face as a family and as an individual. It will be different for everyone, so it’s about considering your personal circumstances and those of the people who rely on you to work out what you need. There’s nothing to stop parents or grandparents from paying income protection premiums for a younger member of the family, particularly if they are renting or starting out on the property ladder and can’t afford them.

 

  1. Prepared for later-life care?

It may seem a long way off, but the Covid-19 outbreak has shown us all that our lives can change in an instant. A will is something that should be reviewed on a regular basis, as it sets out not only who your assets will go to, but also when. Power of attorney (POA) can be especially important, and it’s essential in long-term care. This is an area where financial advice is enormously valuable. Long-term care planning is difficult, and too often people ask for advice when they are already in or approaching a crisis, when it’s likely too late to make a significant difference.

 

  1. Avoiding gaps in inheritance and legacy plans 

Inheritance Tax legislation changes frequently, and because you don’t know when you are going to die, it can be difficult to cover every possible gap, even with a will in place and some form of legacy planning. The closest option is often ‘whole of life’ cover, which can pay out in trust as a legacy or help family cover any Inheritance Tax liabilities. One of the great things about protection policies is that they can be the solution to a range of different problems.

 

  1. Involve your partner and family

Many families remain reluctant to talk about money issues. Consider working with a financial advisor who can bring the family together to ensure that all the necessary issues are discussed among the people who need to be involved. An advisor can facilitate the discussions (without emotional involvement) and offer guidance.

 

Continue Reading

Finance

PAYROLL AGILITY IN THE CORONAVIRUS CRISIS – HOW FINANCE FIRMS CAN ACHIEVE IT

COVID-19

by Hannah Grimshaw, BPO Payroll Lead, Symatrix

 

The government has published guidance with regards to the next steps for the Coronavirus Job Retention Scheme (CJRS) and furlough – and that will have implications for almost every business operating in the UK today, including those working across the financial sector. One big change is that the furlough scheme closed to new entrants on 30th June, meaning that from 1st July employers can only claim in respect of employees who had been furloughed for a minimum period of three weeks before 30th June.

From 1st July as part of the government’s guidance on the next steps for the CJRS and furlough, employers will be able to bring furloughed staff back part time and will be able to claim through the CJRS for non-working time – otherwise known as flexible furlough.

Furthermore, as of 1st July, the three-week minimum claim period for furloughed employees has changed to one week, and from 1st August the level of government grant will start to reduce and employers will be required to contribute to the wage subsidy on a phased basis. These changes in themselves will mean that employers have a number of considerations to factor in relating to payslips and flexible furlough, post-employment notice pay, pay in lieu of notice, redundancy pay and parental leave.

Hannah Grimshaw

In addition to this, on 26th June 2020, the government proposed amendments to the Finance Bill 2020 to protect individuals affected by Furlough, reduced hours or unpaid leave because of COVID-19. The new clause 32 ensures these circumstances, will not negatively impact the tax advantage of the enterprise management incentives (EMI) scheme membership. The new rules apply initially to the period between 19th March 2020 and 5th April 2021 with the potential for extension by the Treasury until 5th April 2022.

All of these changes are food for thought for finance organisations, or any business in general, and they will need to ensure that they have flexible and agile HR and payroll processes in place in order to manage them effectively. So how can finance organisations ensure that this is the case and that they are set up to be as agile and flexible as possible to deal with these processes through the pandemic and beyond?

 

Finding a Solution

To manage the requirements outlined above, organisations need a great operating model for payroll.  Running an all-in-one approach to HR and payroll will make a significant difference in ensuring that businesses have the agility to make adjustments to payroll and manage claims processes to HMRC quickly and efficiently in these difficult times all wrapped with strong governance and controls that the ‘one’ solution brings.

If an organisation’s payroll engine is fed by separate HR, time and labour and recruitment systems (HCM), the data transfer / collation processes will require interface creating & maintenance and almost certainly manual intervention, which introduces risk into any process. If a process is 100% automated, it will be quicker and deliver fewer errors than a process with human intervention.  In contrast, a single cloud-based HCM and payroll system removes the requirement for data transfer and manual interventions.

Managed services can also have a key role. The benefit of outsourcing HCM and payroll to an expert partner is that HR professionals can instead concentrate on  the positive HR activities to both the HR and organisation strategy and that can in turn help drive operational agility. Businesses that have trust-based partnerships with managed service providers can draw on the expertise of those providers that have been though these processes multiple times with other clients.  Managed services providers can provide expertise in a range of different areas, including how furlough is likely to impact a business right through to providing help with reports for making claims to HMRC, for example.

It is also important that every business, including those in the finance sector, adhere to the highest standards of data security and cyber-security, especially with large number of employees working from home. Being certified to ISO27001 enables finance businesses to ensure processes, procedures and IT systems are annually externally audited to make certain data is secure. With a Cyber Essentials certification or accreditation to FSQS, finance businesses can guard against the most common cyber-threats and demonstrate their commitment to cyber security.

The key point, however, is that a single HCM and payroll system, delivered as part of a managed services approach can be an ideal platform for increased security; less risk and enhanced agility – key benefits for any finance firm, especially in these difficult times.

 

Continue Reading

Magazine

Partner Events

Trending

Wealth Management2 days ago

HOW SALARY SLIPS HELP YOU UNDERSTAND TAX DEDUCTIONS ON YOUR SALARY

A salary slip is defined as a document that is provided by your employer which contains the breakdown of your...

Banking2 days ago

BRANCHES ARE THE HUMAN FACE OF YOUR BANK?

Sudeepto Mukherjee, Senior Vice President, Financial Services Lead EMEA & APAC Publicis Sapient   Branches have always played a pivotal...

News2 days ago

RISE IN E-COMMERCE FOR SMALL BUSINESSES IS A BIGGER RISK THAN JUST STOCK CONTROL

With consumer confidence in the high street at an all-time low, many SME shops and businesses have moved to online...

Finance2 days ago

TIME TO FOCUS ON YOUR ‘WEALTHBEING’

Tony Mudd, Divisional Director, Development & Technical Consultancy. St James’s Place   FIVE WAYS TO SAFEGUARD YOUR FINANCIAL FUTURE The...

COVID-19 COVID-19
Finance2 days ago

PAYROLL AGILITY IN THE CORONAVIRUS CRISIS – HOW FINANCE FIRMS CAN ACHIEVE IT

by Hannah Grimshaw, BPO Payroll Lead, Symatrix   The government has published guidance with regards to the next steps for...

Business2 days ago

WHY IT’S TIME TO ADAPT TO THE VIRTUAL WORLD: HOW TO MASTER ONLINE NEGOTIATIONS

By Tony Hughes, CEO at Huthwaite International, a leading global provider of sales, negotiation and communication skills development   Virtual...

News3 days ago

BNP PARIBAS PERSONAL FINANCE COLLABORATES WITH EXPERIAN AND ARYZA TO HELP CUSTOMERS THROUGH THE COVID-19 PANDEMIC

The consumer finance specialist will be using the Open Banking tool to help customers create an affordable payment plan based...

News5 days ago

NUAPAY BRINGS OPEN BANKING TO 190M FRENCH ACCOUNTS

Nuapay brings Open Banking payments into Europe following its success in the UK Nuapay is connected with 55 banks, enabling...

Finance5 days ago

REDUCING AGENT CHURN IS CENTRAL TO IMPROVING THE CUSTOMER CARE OF FINANCIAL SERVICES FIRMS

By Jonathan Mobbs, Head of Finance Vertical at Maintel   In recent months contact centres have been forced to turn...

News6 days ago

FOUR MEDIA EVENTS THAT ROCKED THE FINANCIAL MARKETS

The media has incredible influence over many facets of life and the financial markets are no exception. A famous study...

Wealth Management6 days ago

DIFFERENCE BETWEEN BITCOIN AND LITEBITCOIN

When you get closer to the world of cryptocurrencies, it is not uncommon to confuse reference assets due to the...

Top 106 days ago

BITCOIN TRADING – DETERMINING THE TREND

The trend is your friend – this rule is fundamental in technical analysis. This is why, before you start trading...

Top 106 days ago

BITCOIN TRADING – LEVERAGE

In the case of cryptocurrencies, there is volatility. Even for some more conservative traders, this may be overkill. Therefore, before...

News6 days ago

TRADECORE LAUNCHES NEW PLATFORM IN THE UK TO HELP FINTECH START-UPS INNOVATE AND GET TO MARKET FASTER

The platform provides a one-stop shop for the technology and ecosystem needed to build and launch new fintech businesses, reducing...

SOFTWARE SOFTWARE
Banking6 days ago

STRANGE NEW WORLD: WHAT NEXT FOR BANKS?

Simon Wilson, Director, Payment Solutions, Icon Solutions   What’s next for banks in this strange new world we find ourselves...

News6 days ago

RESPONSIBLE AND HUMAN BUSINESS PRACTICES ARE MORE IMPORTANT THAN EVER;

78% of directors believe customers are paying more attention to responsible business practices since pandemic   New research from Gobeyond Partners,...

Top 106 days ago

TIME TO TAKE A SECURITY-FIRST APPROACH TO APIS IN INSURTECH

By Olaf van Gorp, Perforce Software   Insurance is one of the latest sectors to start to benefit from advancements...

News6 days ago

ETRADING SOFTWARE INCREASES THE BREADTH OF ITS MANAGED SERVICE OFFERINGS

Expanding its operations in Europe and Asia with additional hires Etrading Software, the independent, global provider of technology-led solutions designed...

Top 107 days ago

ANTICIPATING CYBER THREATS AND PROTECTING DIGITAL ASSETS AMID A GLOBAL PANDEMIC

Brian McCann, President Security Solutions, Neustar   The best possible outcome for any cyber threat aimed at your network –...

Wealth Management2 weeks ago

MANAGING VOLATILITY: HOW TO PROFIT FROM STOCKS WITHOUT COMING UNSTUCK

Dáire Ferguson, CEO, AvaTrade   The last few years have provided us with a series of unpredictable political and social...

Trending