Under the latest rules in the world of finance, trading platforms operated by financial institutions now need to be highly transparent, so that investors can be certain that they’re getting the fairest deal at any given time. Regulators will have a greater insight into the daily goings-on across trading floors and sales desks, and trading in bonds and other derivatives may increasingly be done over electronic platforms.
While this is all good and well for promoting transparency and fairness, what exactly does it entail from a capacity management point of view? We’ve compiled some key tips and advice for your organisation to consider when it comes to capacity management and MiFID II.
Essentially, trading venues must continually assess whether their trading systems have adequate capacity, with some trading desks having to completely rethink the way that they do business. As these new regulations impact the technology that underpins the financial world, many organisations may now have to educate their employees to ensure they’re following best practices and are compliant.
They may also have to update systems that have been being used for years and ensure they have the necessary capacity to perform. This is particularly important when considering the number of messages per second, and determining capacity with regards to the historical peak.
So, what must we consider?
The first step should be to understand and then agree with the regulator what is meant by ‘messages per second’ when it comes to your organisation’s trading systems. Once you’ve established this, it will be much easier to put a capacity management plan in place and stick to this.
Ideally, when establishing the historical peak value for the number of messages per second, you should aim to collect information from the previous five years; this provides enough data and historical information to make an informed decision, however, if five years’ worth is not available, then you should aim to collect data for as long as is possible.
Once data has been collected, it’s time to establish the capacity usage of your trading systems at this rate, and then create a capacity model of your trading system which accounts for and can support twice the rate of your historical peak value.
With this information, you should then be able to define your organisation’s requirements, and ensure that the appropriate IT infrastructure is in place to support future growth. And in order to stay on top of capacity management, reviewing the number of messages per second on a daily basis will be crucial; if the new rate is higher than the previous value, then the capacity plan will need to be updated and then implemented. You’ll also need to analyse the capacity impact to any middle and back-office systems, and ensure that these cater for and work with peak trading rates.
Finally, in addition to a daily review of the number of messages/second, it’s important to keep a track of all data, and to report back on both a daily and monthly basis.
Complying with the new MiFID II regulations should be a top priority for any business owners working within the financial world, and the first step to ensuring compliance is ensuring that there is a strong understanding of what is required, how capacity management can be planned for, and how it must be implemented.
By reviewing IT performance metrics available for any trading systems which are covered by MiFID II, establishing if the data required for capacity management is available, and defining where any data is missing, we can offer audits and assessments to ensure you’re adhering to the new regulations and complying as is necessary.