MiFiD II Best Execution Compliance with Cloudera and TickSmith

1© Cloudera, Inc. All rights reserved.
MiFiD II Best Execution
Compliance with
Cloudera and TickSmith
Francis Wenzel
CEO, TickSmith
@TickSmith
Richard Harmon
FS Director, Cloudera
@ClouderaUK

Our relationship with data is changing

Boardroom thinking
DRIVE CUSTOMER
INSIGHTS
IMPROVE PRODUCT &
SERVICES EFFICIENCY LOWER BUSINESS RISK

Boardroom thinking
DRIVE CUSTOMER
INSIGHTS
IMPROVE PRODUCT &
SERVICES EFFICIENCY LOWER BUSINESS RISK
MODERNIZE ARCHITECTURE

Areas Affecting Business Risks
CYBERSECURITY FRAUD COMPLIANCE
• Insider threat
• Advanced persistent
threats
• Account takeovers
• Anti Money
Laundering (AML)
• Payments fraud
• Insider threats
• Regulatory compliance
(PCI, HIPPA, Dodd-Frank)
• Internal compliance
• External & internal audits

Our Customers Include
Over 180 financial companies (banking, capital markets, insurance)
19 of the top 30 global systematically important banks (G-SIBs)
5 of the top 6 asset management firms
2 of the top 3 multi-national payment processing firms
3 of the top 5 Fortune 500 insurance companies (p&c and life)

Regulatory Compliance & MiFID II

Comprehensive Regulatory Compliance-Key Drivers and Objectives
Drive
Efficiencies
Reduce Risk of
Non-Compliance
Reduce Time to
Compliance
• Unify data governance across
lines of business
• Scale data volume and
processing cost-effectively
• Improve data quality
• Use all available current and
historical data to improve
accuracy
• Apply machine learning
• Use advanced analytics for
better controls, including
proactive and predictive
• Break silos so that reporting can
be performed seamlessly, on one
data hub
• Flexible/adaptable platform
• Automate e-discovery
• Automate data lineage tracking
Unified Data Platform Supports a Comprehensive Compliance Framework

Cloudera: Managing Data for Comprehensive Regulatory Compliance
Handle real-time
data ingest from
diverse sources
Governance and
Security
Data
Streams
Deployment Flexibility
Machine Learning
Capabilities
Diverse Analytical
Options
Combine Data from Different Sources
Data Mgmt. Hub
Scale easily & cost
effectively
Batch or Real- time
Data Streams
Data Sources
A comprehensive data management platform to support more accurate and efficient compliance
Data Sources
Data Storage &
Processing
Reporting, Analytics &
Auditing
Data Ingest
Other
Data Governance (Data Lineage, Data Protection, Data Lifecycle Management)
MiFID II, FRTB, IFRS-9, BCBS-239, MAD/MAR, GDPR, ….

MiFID II – Markets in Financial Instruments Directive
Investor
Protection
Transparency
Transaction
Reporting
Micro-
Structural
Issues
Data
Publication
& Access
Commodity
Derivatives
Market
Infrastructure
Governance
Authorization,
Branches &
Passporting
MiFID II / MiFIR
Trading
&
Clearing
Four Objectives for MiFID II
1. To strengthen investor protection
2. To reduce the risks of a disorderly
market
3. To reduce systemic risks
4. To increase the efficiency of
financial markets and reduce
unnecessary costs for market
participants.
Active: January 3, 2018

MiFID II – Data Governance & IT Infrastructure Challenges
Best Execution Validation

MiFID II: New Requirements for Best Execution
Best Execution standards are being enhanced & expanded
⎻ These changes are designed to protect investor interests.
⎻ They require both buy-side and sell-side firms to document, monitor and demonstrate
best execution based on quantitative and qualitative metrics – such as price, cost,
speed, size, likelihood of execution, settlement, size and nature of the trade.
• Firms are required to explain their execution policies in sufficient detail to allow clients to
easily understand how orders will be executed;
• Firms are required to disclose the top five execution venues used on an annual basis;
• Firms are to disclose on at least an annual basis the quality of execution;
• ESMA has upgraded the obligation to achieve the best execution result from an obligation to
use "all reasonable steps" to a more stringent requirement to take “all sufficient steps”.

RTS-27: Best Execution Requirements For Execution Venues
RTS-27: Regulatory Technical Standards (Execution Venues)
⎻ Coverage: Applies to all trading venues, systematic internalisers, market
makers, or other liquidity providers.
⎻ Cost Disclosures: Requires full disclosure of all order execution charges
⎻ Execution Likelihood: Requires metrics to be created to assess the likelihood
of execution of a specific financial instrument on a specific venue.
⎻ Execution Comparison: Requires order execution comparisons to be sized
ranged based upon the type of financial instrument and its liquidity to ensure
an adequate sample of executions in a size that is typical in that instrument.
⎻ Public Data Access: Requires trading venues to enable public website
access for all provided data

RTS-28: Best Execution Requirements for Investment Firms
RTS-28: Regulatory Technical Standards (Investment Firms)
⎻ Data will need to be captured at each transaction/order level, such as the
percentage of passive/aggressive/directed orders; which will need to be stored
for future recall if necessary.
⎻ The data must then be mapped and attached to every order for reporting
purposes.
⎻ To maintain the data’s accuracy and reliability, consistent management and
control will also be required.
⎻ This controlled data can then be fed into various post-trade feeds for allocations,
confirmations, affirmations and surveillance or global order and risk monitoring.

MiFID II’s Best Execution Related Data & Technology Challenges
⎻ Extensive benchmark data across all relevant markets must be sourced,
stored and accessible.
⎻ Where benchmark data is not available, firms will need to devise proxy
methodologies to compute the required best execution metrics.
⎻ Many firms will need to modify & enhance their data feeds and coded “best
execution” logic in their trade capture systems and market data sources.
⎻ Agile Big Data solutions will be required to process, store and analyze the
vast amounts of benchmark and proxy data required for “best execution”.

© TickSmith Corp. All rights reserved.
Leveraging “big data”
To solve this big data problem: MiFID II RTS 27 & RTS 28
You need proven big data technology:
And an award winning solution:

TickVault
Big data problem
MiFID II
RTS 27
RTS 28
Proven big data
technology
Award winning
innovative solution

Introducing TickVault
TickVault: Hadoop-based big data management platform for capital markets
TickVault is a complete software application built on a modular architecture
Accumulate/transform/analyse/disseminate Terabytes and Petabytes of financial data
Used by trading and risk groups, regulators, exchanges and data vendors
Ideal for compliance and trading
Complete workflow from data centralization to delivery with entitlements and standard access
tools
Abstracts the complexities of big data technology into a ready to use platform

TickVault
Deployment
● In-house, on client hardware and Hadoop cluster
● On client’s cloud infrastructure
● Capacity driven by infrastructure and supports Terabytes to multi-Petabytes
TickVault is a Cloudera Certified Technology that supports CDH 4.7, 5.2, 5.3, 5.4, 5.7,
5.8

TickVault for data producing firms
Exchanges & data vendors
● Centralize & normalize
● All trade & quote data
● All asset classes and +
● Analyze & enrich
● Reconstruct & report
● Interact & distribute
https://nasdaq-cx.ticksmith.com
https://datamine.cmegroup.com
https://trdata.tickvault.com

TickVault for data consuming firms
Systematic trading groups, market
makers, regulators and compliance
● Accumulate & centralize
○ Data from quote feeds, trading systems,
event feeds, etc.
○ All asset classes, depths and data types
○ Up to nanosecond resolution
○ Supports multiple timestamps
● Normalize, combine, analyze, reconcile
● Rebuild point in time market depth
● Provide time series & reports
● Interact & integrate with in-house apps
National Bank of Canada case study at
https://aws.amazon.com/solutions/case-studies/national-bank-of-canada/

TickVault modules
3
4
5
6 7
21
Complete software platform
1. Load all exchange, trade and other data from exchange feeds,
network appliances, (Corvil, Solace, Exegy, etc.), aggregators,
OMS, order routers, FIX engines, trade venues, etc.
1. Connect directly to your data on local and cloud storage (SAN, NAS,
file servers, S3…).
1. Retain original data. Normalize through time and across sources.
1. Create combined and derived datasets. Turn data into time-series.
Run analytics, create reports and statistics. Reconstruct market
activity and market depth.
1. Entitle and control data and features access to users and systems.
Interface with existing billing system.
1. Provide data via easy to use web interfaces and Rest APIs.
1. Monitor and manage all tasks and processes.

Addressing MiFID requirements
TickVault is able to store, normalize, and run calculations on terabytes to multi-petabytes of
financial data as required for MiFID II compliance. Leveraging Hadoop, it provides a future-proof
to address:
RTS 27/28 best execution reports
Public portal for data queries
File inventory centralization (RTS1, 2, 6, 22, 23 & 24)
Timestamp validation of accumulated data

TickVault’s RTS-27 Solution
Takes book by order data from trading venues and automatically generates best execution tables for MiFID II RTS 27
data retention and publication.
Reports are organized by TickVault’s internal custom search and statistics engine. TickVault also provides
alerts on specific unfilled table fields that may require ad hoc descriptions to be inputted.
TickVault is able to automatically generate tables 1, 2, 3, 4, 6, 7, 8 and 9 given the following trading venue
data:
Financial instrument directory
System event information (halts, suspensions, outages, failed transactions)
Book by order for all price levels including number of market makers and specific types of orders
All timestamped execution information of every financial instrument

Custom Search displays Top of Book HITS or Rollups (one second/minute time intervals) for each queried
financial instrument which can be exported as a csv file. The export button can also produce RTS-27
tables.
Statistics page displays calculated information for each queried financial instrument including, but not
limited to:
● Daily VWAPs
● OHLC
● Trading Value
● Number of Passive/Aggressive Orders
● Mean time elapsed between order acceptance and execution
● Number of suspensions
● Average Spread at Best Bid and Offer
Statistics information can be exported as a csv file and RTS 27 tables.

Custom Search page
Top of Book interface and
charting available trading
venue data
Book by Order interface
from trading venue data
Statistics page

TickVault Generated machine-readable Table 6 for an
example trading venue and financial instrument
TickVault Generated machine-readable Table 7 for an example trading venue and financial instrument

Whenever a client investment firm executes an order, TickVault logs all relevant best execution
information for that order and organizes it for reporting requirements. Tables 1, 2, and 3 can be
automatically generated.
Investment firm can add notes and descriptions in trade analysis report in the case of irregular
executions.
TickVault contains an Access and Identity Management module which manages user
authentication and access to private data.
The investment firm’s execution statistics can be exported into a csv file.

Private data portal
TickVault Generated machine-readable Table 2

Beyond compliance
Usable data is valuable data. Using TickVault with Cloudera CDH allows your firm to leverage existing
Hadoop clusters and provides an ideal solution to organize and exploit trading and market data on
Hadoop.
Example of machine learning application using data from TickVault
In addition to its specialized tools and interfaces,
TickVault’s easy to use APIS provide in-house
developers and applications access to data and
analytics for:
● Back-testing
● Quantitative research
● RISK data management
● Compliance
● Financial econometrics
● Machine learning and algorithmic models.

Thank you
Francis Wenzel
CEO, TickSmith
@wenzelware
Richard Harmon
FS Director, Cloudera
@ClouderaUK

MiFiD II Best Execution Compliance with Cloudera and TickSmith

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