Compliance

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Careful What You Wish For

Just a few weeks ago, the providers of technology, services or just plain advice for Reg NMS compliance were anxiously awaiting this year's SIA Technology Management show in New York in hopes of signing many new deals and having a robust fiscal quarter.

Just a few weeks ago, the providers of technology, services or just plain advice for Reg NMS compliance were anxiously awaiting this year's SIA Technology Management show in New York in hopes of signing many new deals and having a robust fiscal quarter. While the new contracts will come, they may take a little longer to materialize now that full Reg NMS implementation has been delayed until October 2007, with a series of five deliverable dates between Oct. 16, 2006, and October 8 of next year.

But while financial firms are relieved by the extension -- most knew that the original June 29 deadline was unrealistic -- now Reg NMS bumps up against the Nov. 1, 2007, compliance deadline for the European Market in Financial Instruments Directive (MiFID). MiFID is a sweeping set of changes for the European markets, like Reg NMS is for the U.S. And analysts estimate, as they do for Reg NMS, that MiFID will be tremendously expensive to implement; TowerGroup projects that the European financial markets will spend in excess of $1.3 billion on compliance.

So where does that leave the industry? Immediately, there is some more breathing room between now and when full compliance with Reg NMS is mandated. That's a good thing. While many firms have publicly claimed they are ready for Reg NMS, privately, most are admitting that they are far from ready -- especially since it is very hard to be "ready" when no one actually knows for what exactly they are getting ready. That's why the industry is waiting until Oct. 16 for the final Reg NMS technical specifications to be released.

But the Reg NMS postponement will mean that firms will need to work on Reg NMS and MiFID preparations simultaneously. Many in the industry feel that MiFID will have little impact on U.S.-based firms, while others are starting to talk about the large impact that the European regulation will have on all players that do business across the pond (see related article, page 26).

Compliance with MiFID and Reg NMS will require some investment, that's for sure. Reg NMS will require a significant allocation, and MiFID could require an equally large investment in technology for compliance, depending on the amount of business a firm has in Europe. Either way, vendors that offer products and services geared toward helping with compliance should enjoy a promising remainder of 2006, although, thanks to the extended deadlines, the actual contracts and improved fiscal results may come a little later than expected.

Greg MacSweeney is editorial director of InformationWeek Financial Services, whose brands include Wall Street & Technology, Bank Systems & Technology, Advanced Trading, and Insurance & Technology. View Full Bio

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Stressed Out by Compliance, Reputational Damage & Fines?
Stressed Out by Compliance, Reputational Damage & Fines?
Financial services executives are living in a "regulatory pressure cooker." Here's how executives are preparing for the new compliance requirements.