Interview with Ronen Kertis, Head of Global Regulatory Reporting at IHS Markit
In January 2021, Cappitech was purchased by IHS Markit and folded into IHS Markit’s Global Regulatory Reporting business. Our answers therefore reflect IHS Markit overall, in the context of regulatory reporting, and not Cappitech.
Let start with a brief introduction, what can you tell us about IHS Markit and your RegTech offering?
Ronen Kertis: We are a leading provider of regulatory reporting, best execution analysis and business intelligence solutions for the financial services industry. Our cloud-based, cross regulation SaaS platform offers clients a single intuitive dashboard and removes the need to interface with the ARM, TR or regulator directly. Our solutions cover MiFID, EMIR, RTS27/28, MAS, ASIC, SFTR, Canadian Derivative Reporting, CFTC, HKMA and FinFrag and are constantly being expanded to accommodate new regulations or changes to existing regulations eg CFTC rewrite and the introduction of SEC reporting.
An important aspect of our solution is that we have built it to be as user-friendly and convenient for our customers as possible. We can interact with client data in whatever format they prefer (ie they don’t have to write to our spec to use our services), we offer significant additional data visualisation tools and our automation processes not only reduce the need for manual interaction, they increase efficiency.
What are some of the biggest challenges your solutions you solve for your clients?
Ronen Kertis: Regulatory reporting is absolutely essential for the financial services industry, with regulators having made it extremely clear that while they might accommodate minor issues, particularly when new regulations are implemented, they expect firms to fully comply. While it doesn’t change or impact the way firms do business with their clients, our customers need to have efficient, effective, cost-effective and above all compliant regulatory reporting solutions that are robust and flexible enough to incorporate changes and new requirements but that don’ absorb disproportionate amount of compliance and trading teams’ time and resources. Our technology, quick and efficient client onboarding process, deep industry and regulatory expertise and global reach mean that we can take all of these on with as little impact on clients’ day-to-day operations as possible.
The sheer volume of data involved in regulatory reporting is also a challenge and an opportunity. Increasingly, clients see the value in finding ways to use this data to help them make better and/or more profitable business decisions and again, we can offer this level of analysis and understanding, in a convenient format and with powerful insights.
Reconciliation is becoming a hot topic in the regulator’s eyes. Yet despite trade reconciliation being mandated for a while under RTS 22 Article 15 clause 3 “Investment firms must have arrangements in place to ensure that their transaction reports are complete and accurate,” many firms still struggle to implement it correctly. We offer an easy way for clients to perform a 3-Way Reconciliation between their source books and records (OMS/EMS/PMS/Risk systems) ARM files and the NCA data. A 3-way reconciliation can alleviate the need to perform backreporting to fix errors in the original reporting which costs each time you send to the ARM and on to the NCA or Trade repository.
Could you give us a use case of why a client came to you and how they are using your solution to solve their particular challenge?
Ronen Kertis: For many clients, CME’s announcement in 2020 that it would no longer be operating in the regulatory reporting space, was a huge challenge. The world was in the middle of a pandemic, resources were already stretched thin and now clients needed to move their entire regulatory reporting business to a new vendor, or find internal solutions and connect to a new Trade Repository and ARM.
A key issue for many clients was that if they had to move vendor, they didn’t have the time nor resource to make major internal changes to how their data is delivered. Because we can accept data in any format and adapt it as needed for the TR/ARM, often with better automation than what they’d previously received, we were able to take on more of these clients than any other vendor. We were also very clear with potential clients that we believed the act of porting their data needed to happen as soon as possible and so implemented processes to simplify this, starting the process in August, well ahead of the November deadline.
How would you describe the differences between your offering from others in your RegTech category?
Ronen Kertis: We offer an end-to-end solution that automates trade reporting process and enhances controls. Our key differentiators include the following:
Single platform for multi-reg reporting. We offer a single dashboard for monitoring multi-regulatory reporting and provide comprehensive coverage. Our solution supports all asset classes (credit, rates, equity, fx and commodities) as well as valuation and collateral reporting across multiple jurisdictions (US, Canada, EU, Japan, Hong Kong, Singapore and Australia) and fulfil connectivity with major trade depositories across multiple technical requirements.
Translation of data from client source system into trade reporting requirements: Our solution is flexible and accepts any file type from any source and using our plugin engine customers are not bound to write to our spec. It can take trade data from customers as well as publicly available trade data and normalizes it and enrich it. Our validation engine provides coverage of all regulation validations as well as specific client defined validation rules. We also offer eligibility functionality which defines which instruments and trades should be reported per regulation.
Reconciliation ensures that clients can validate what has been reported to the regulator vs what is available in their internal records and systems. We help our clients overcome the challenges associated with reconciliation and shift their focus towards ensuring that their front office trade data and the data they are reporting to the regulator is meticulously checked, complete and accurate.
Best execution: ESMA introduced Best Execution monitoring as part of MiFID I in 2007. Since then, standards for complying with Best Execution have gotten stricter with investment firms being required to put in place methods to systematically monitor execution quality of client trades. With our Best Execution solution, firms can improve operational efficiency and have a direct impact on performance numbers as well as meet their regulatory best execution requirement.
Unmatched expertise: Combining technological proficiency with deep domain expertise, our team is unique in its ability to deliver a level of value-added service extending to expert knowledge sharing about regulatory issues, technological features and cross-market experiences to help clients address issues from a holistic perspective.
What advice would you give to decision makers when choosing a RegTech solution such as the ones your offer?
Ronen Kertis: What’s very important is that clients looking at regtech solutions consider how they can ensure they’re getting the best technology, the most efficient automation along with regulatory expertise and service. Embedding best-in-breed technology now, alongside ensuring the vendor has the expertise to adapt to changes, is the most effective way to future-proof your regulatory reporting solutions to accommodate changes such as the implementation of new regulations, changes to existing regulations or changes within your own business processes.
For example, the more robust your technology is, the more it can handle big data, extract compliance insights or provide greater transparency.
For a lot of our clients, this also translates into the depth of the product and service offering. For example, vendors who can be ARM/TR agnostic are much more appealing to market participants who want to ensure that they can send their data in whatever format they like and know that it will then be transformed and sent on to whatever TR/ARM they choose, even if this changes. Multiple end-point connectivity is therefore essential.
Firms considering a new solution should also strongly consider what value-add their vendor can offer. If you’re changing your regulatory reporting service provider, you should take the opportunity to do a health check on your existing business and reporting process and then consider what changes can be provided to enhance this and how the new vendor can support this. Improved control functions are a key example of this, and are likely to be ever more important in the future. Similarly, the opportunity to review your reporting across jurisdictions and asset classes can be extremely useful.
Finally, when searching for a solution, buyers often neglect the importance of the onboarding process and the role the relationship manager plays. For instance, cost as a factor alone can be deceptive because an unsuccessful onboarding process can spell countless problems down the line and the product could land up costing far more in the long run to fix. Often, the buyers who complain about not getting the promised benefits of the technology sold to them either had a poor onboarding process or after signing on the dotted line their relationship manager was nowhere to be seen. Find the vendor that believes that onboarding and support are non-negotiables and where the relationship manager is invested in your success.
Due to the global pandemic a lot has changed in the world in the last year. How has your company changed in the in the last 12 months?
Ronen Kertis: It’s been a very busy time for us. For the last few months, the integration of Cappitech into IHS Markit Global Regulatory Reporting has been a key focus and we continue to work to ensure that both expertise, products and technology are integrated for the benefit of our clients.
We’ve grown significantly over the last 12 months, and this continues, with significant investment in R&D, including the hiring of new people in our offices around the world to support this growth.
A key feature of the business over the last 12 months has also been the focus on the implications of Brexit and the implementation of SFTR. Both were extremely important for our clients. Our SFTR solution has been deployed at all levels of the industry, and we’re now responsible for the majority of SFTR reporting in Europe. Ahead of Brexit we ensured all products and services could support reporting customers by connecting to both EU and UK TRs and ARMs and ensuring that transaction reporting could be directed according to the regulatory requirements for EMIR, MiFIR and SFTR. We also supported firms who are no longer being offered delegated reporting via a simple automated solution.
Can you tell us about some of your most recent achievements or milestones you’ve reached?
Ronen Kertis: In 2020, at the time of CME’s announcement that it would be exiting the regulatory space, we (via Cappitech), become the leading vendor of choice for clients looking for a new reporting home. We received categorically excellent feedback from clients. Clients responded to our ability to provide a seamless and early transfer of data – we were the first to start the porting process in August, ahead of the November deadline – and valued the enhanced service offering that included a level of automation not seen with other vendors and that reduces manual efforts while simultaneously improving accuracy.
We have also continued to invest in the breadth of our product along with deep functionality. Last year saw the go-live of our SFTR solution and technology that has been deployed at all levels of the industry. Ahead of Brexit, all products and service were ready to support reporting customers. By connecting to both EU and UK TRs and ARMs, transaction reporting is directed according to the regulatory requirements for EMIR, MiFIR and SFTR and our solution offers an easy way for sell-side firms to continue to provide delegated reporting to their customers. We also support firms who are no longer being offered delegated reporting via a simple automated solution for their needs.
More recently, the acquisition of Cappitech and its integration have been a huge achievement. It was clear that IHS Markit and Cappitech had great potential to work together (we had worked together on an industry-wide SFTR solution), so the process of completing that acquisition and now managing the integration process has been excellent. Our clients are already benefiting from the combined offering, thanks to the right combination of global expertise and best-in-breed technology along with covering a wider range of regulatory regimes.
What is drives you as company what is IHS Markit long term vision?
Ronen Kertis: Regulatory reporting burdens are only getting bigger. We are on a mission to bridge the gap between the regulator/regulation and between firms that have an obligation to comply.
We do this by automating the transaction reporting process into one single compliance platform so that firms can easily comply in a complete, accurate and timely manner. No exposure to hefty fines. No wasting unnecessary time on regulatory reporting. We are also here to turn our clients compliance obligation into something of value for their company, by providing intelligence and actionable insights from their already collected compliance data.
What are some of the important developments you are seeing in the RegTech industry?
Ronen Kertis: The RegTech industry is dynamic and constantly changing due to new regulations coming into play and/or industry players demanding improvements to the space. On top of this, we are seeing many more firms entering this space which is driving innovation and competition for better products and services for the reporting community.
We also seeing that the use of data is gaining momentum; not only to perform a business process, but also to gain insights about one’s business. This trend also applies to using compliance data to derive business insights and making data-driven decisions. Furthermore, the use of big data techniques and the ability to benefit from ones’ peers anonymous information to improve processes such as surveillance or transaction reporting is another significant area finding traction in the industry.
Finally, the use of cloud-based reporting solutions is becoming dominant and this in turn is allowing for economies of scale, efficient and agile processes as well as the ability to reduce costs.
What’s next for IHS Markit Regulatory Reporting?
Ronen Kertis: Since the announcement of the acquisition of Cappitech by IHS Markit early this year, we are currently focused on the integration of Cappitech within IHS Markit and with ensuring that we continue to offer the widest variety and the best regulatory reporting services available on the market.
We are furthering our coverage of MAS OTC derivative transaction reporting ahead of the last phase of MAS OTC Derivative Transaction Reporting taking effect later this year. We’re also planning to offer CFTC reporting following the long-awaited rewrite to the CFTC trade reporting rules that are expected to be implemented next year. We will also continue to improve and enhance our product capabilities.
Most buyside firms have their EMIR reporting handled by their counterparties, what should firms review when its delegated?
Ronen Kertis: Delegated reporting by a bank for its counterparties is by far the most common way certain firms comply with EMIR. However, in EMIR data quality reviews conducted by ESMA and NCAs, they found many problems with delegated reports. Notably, the Central Bank of Ireland (CBOI) has recently notified many fund companies of errors. Problems included reporting the incorrect underlying fund, failure to correctly allocate trades, late reports and missing submissions altogether.
The bottom line is that firms can outsource their reporting but they can’t outsource their regulatory responsibilities. Therefore, the ultimate responsibility of report submissions being done incorrectly falls on the firm. This means that if there are errors in delegated reporting, the firm bears any regulatory risk of this.
Clients reporting with us can leverage our technology and platform to provide delegated reporting to counterparties. The system supports automatic submissions of counterparty trades to internal or external submission folders at Trade Repositories. Once reporting, our customers gain access to a ‘Master’ view dashboard to review both their own reporting and that of clients. Separate dashboard views can also be provisioned for specific counterparty LEIs to ensure full transparency of reporting and allow them to monitor and audit their own reports albeit being reported by their delegating broker.
What’s the best way for potential clients or investors to get in touch with you?
Contact Details:
Email address: regreporting@ihsmarkit.com
Phone: +44-(0) 808-189-1177
www.cappitech.com | www.ihsmarkit.com