This year’s Finance Magnates London Summit, FMLS 2022, held at Old Billingsgate on 21-23 November saw the FX and CFD industry gathering in a post-pandemic world.
There FinanceFeeds’ Nikolai Isayev spoke with Andreas Roussos, Partner at regtech firm Point Nine, who agreed that face-to-face meetings are much better to build relationships and make deals than the remote ways of the COVID-19 days.
Point Nine is a regulatory reporting firm providing trade and transaction reporting services to legal entities across the globe, helping them to remain compliant with EMIR, MiFID II, SFTR, and other requirements.
Point Nine at the heart of CFD brokerage ecosystem
Headquartered in Cyprus, at the heart of the CFD brokerage ecosystem, the physical proximity to the local retail FX environment allows Point Nine to provide personalized experiences to customers and partners.
The firm, however, is a global provider (EU, UK, Australia, Canada, US) and has plans to open offices in the UK, USA, and central EU to further expand its physical presence to customers and partners.
Andreas Roussos, a published author on subjects associated with regulatory reporting and European Market Infrastructure Regulation (EMIR), has been with Point Nine for over seven years, having developed the firm’s strategic plans and contributed to corporate performance, which includes the processing of more than five billion derivative trades on behalf of customers globally.
Brokers, asset managers, and banks face more regulatory fines
Firms like Point Nine have experienced growing demand from brokers, asset managers, and banks as regulators increase their pressure with more fines and warnings for trade reporting issues.
Andreas Roussos pointed to the UK FCA, Italy’s CONSOB, German’s BaFin and Luxembourg’s CSSF as the key enforcers putting out significant fines. What kind of clients approaches Point Nine to enhance their reporting capabilities?
“The vast majority of enquiries we get are from clients that have a solution either internal or through a vendor and recognize the problem themselves. A few of them are already getting warning letters from regulators”, he explained, adding that some tap Point Nine after six months or a year without submitting any report.
EMIR Refit “takes the pain away” as regulation becomes very onerous
The latest product launched by Point Nine was EMIR Refit, which helps firms upgrade outstanding derivatives to the new format from 29 April 2024. One year and a half seems plenty of time to prepare, but surely is not because the requirements are much stricter this time around.
EMIR was first introduced in 2014, but it quickly became clear that the regulators’ wishes didn’t lead to perfect insight into counterparty risk. The same took place in other jurisdictions, with the United States, the UK, Australia, Japan, and Singapore, rewritting derivatives regulation.
According to the Point Nine executive, “we’re going from a regime with 100 refills to double that, using .xml to submit and receive back […] Everything you report must be reconciled. If you outsource your reporting to anybody, you still need to exhibit to regulators that you have full control and full oversight, which basically means you need to have the same knowledge or expertise either internally or externally. It’s become very onerous.”
40% of transactions submitted to regulators do not pair
Although onerous, it is the new way going forward because if firms under report, transparency goes away, which beats the whole purpose of the derivatives regulation. “Why would you have a regime about transparency and then 10% of the trades of a broker, asset manager, or bank, are not reported?”
“EMIR is all about counterparty risk. Nobody wants another Lehman Brothers”, he said, adding that until now, 40% of transactions submitted do not pair. That is why the new regime requires reporting to be reconciled and matched. “If there’s no unique identifier, how do regulators know counterparty risk?”
The revamped EMIR will ensure that evaluations are updated daily for better knowledge of counterparty risk and collateral. What it means for participants? It means doubling data fields using .xml files, which “sounds easy but it’s not”. Firms will submit and receive from trade repositories the acknowledgment of reports in .xml.
Point Nine offers to take the pain away by providing a full outsource solution, that even includes reconciliation, data analysis, and mapping. The regtech firm generates the report and answers any questions from regulators or internal auditors. Clients still have full oversight as mandated by regulators, namely the FCA and CySEC.
Point Nine teamed up with Kaizen, FIS, and Alpha FMC for all-in-one solution
This year, Point Nine partnered with Kaizen and FIS. How these collaborations strengthen the firm’s product and expansion?
Recent partnerships with industry leading players such as Kaizen, FIS, and Alpha FMC, have served to enlarge the ecosystem in order to provide an all-in-one solution for trade and transaction reporting.
Andreas Roussos says Kaizen is the best company providing independent accuracy testing for trade reporting and FIS is the biggest technology vendor, with a 90% market share in cleared derivatives and providing data on securities trading, derivatives, and OTC. Alpha FMC is the biggest consultant in the asset management space. This allows Point Nine to have a foothhold everywhere and go to a client and say: “This is a whole ecosystem. This is all you need. We can provide all that”.
Regulators are getting tech savvy
Asked about 2023 and beyond, the Point Nine executive warned that regulation will get tougher and tougher, although many firms are still not ready to address the requirements because of their legacy systems which don’t process the necessary data. Others use in-house solutions that were developed many years ago and whoever built them doesn’t work there anymore.
In the meantime, regulators are getting tech savvy, bringing data scientists in, analyzing the data and saying “not good enough, try harder”, he added. On top of that is the 10% inflation that is increasing labor costs. “The solution is technology”.
The interview with Andreas Roussos also covered crypto and the need for regulation in order to end the drama surrounding cases like FTX, which operated as a market operator, counterparty and issuer all at the same time. “If you’re a regulated entity you cannot do this”.