Industry practitioners have responded to the UK Financial Conduct Authority's latest publication on Mifid and Priips (https://www.investmenteurope.net/news/4001146/uk-fca-urge-eu-authorities-address-priips-failings) by noting that it has recognised the shortcomings in the proposed regulatory regime.
Alex Dorfmann, director of Product Management, SIX, said: "The problem is that in the run up to Mifid II and Priips, too many financial institutions adopted a ‘do whatever it takes regardless of the cost' approach just to keep the prying eye of the regulators away.
"These FCA findings prove this approach is simply not sustainable, and that firms need to adopt longer-term thinking when it comes to compliance. There is significant crossover between Mifid II and Priips. While the same level of detail may not be required, a lot of information market participants distribute for Mifid II is reflected under Priips.
"With both rules requiring overlapping sets of data, firms need to clean up the information silos scattered across the business, and consolidate their approach. Be under no illusions, as the FCA and others begin to shift their focus from demanding data consistency to seeking data quality, the industry can ill afford to neglect a reassessment of their compliance approach. Especially with the continuing pressure to be more cost efficient and automate manual processes."
Peter Rippon, CEO, OpenGamma, said: "Collating the vast swarms of data required to enable full disclosure of costs was never going to be a piece of cake. Though the FCA is right to call out any inaccurate calculations and data inconsistencies, addressing the problem is easier said than done for any asset manager trading complex derivatives.
"The problem is that reporting the cost of trading less liquid, over the counter (OTC) derivatives is a much bigger challenge than reporting on a simple cash equity. There is simply not enough price information available to easily work out a fair mid-price. Trying to get a handle on these previously hidden costs is what makes disclosing fees to the level required such a headache.
"However, those who can run this analysis will not only be able to provide the transparency the FCA is demanding, but will also be able to unlock information that increases their buying power with counterparties, ultimately pushing down overall trading costs."