Regularly financial product control and review

Product assessment

MiFID II will demand greater product control - firms will need to regularly review the financial instruments they offer to clients to ensure that they are appropriate for the target market they sell to.

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Tighter control

The need for tighter product control, particularly for more complex instruments and derivatives, applies both to products that are created by the firm, which will require specific approval processes, and those which are remarketed by the firm.

Mapping product complexity to client sophistication

In order to make these assessments and manage the control processes surrounding the sales and trading of a specific instrument, you need to identify and classify the product, fully understanding its characteristics.

The first is whether the instrument actually falls under the remit of MiFID II as a financial instrument.

For example, MiFID II doesn’t consider FX Spot or an FX Forward in certain circumstances as financial instruments. For the remaining bulk of instruments, you must recognize both the broad MiFID complex/non-complex instrument categories and also ensure the characteristics of the product are understood, map its complexity and assess its suitability to individual client types.

This mapping of product complexity to client sophistication forms the basis on which to define an appropriate control framework.

Secondly, particular instruments and derivatives are mandated to trade only on a trading venue and this must be enforced within the sales processes.

Support in place

We already provide comprehensive product and instrument reference data through real-time and reference data solutions.

DataScope Select is a strategic data delivery platform for non-streaming content, which provides instrument reference data, corporate actions, legal entity data, end-of-day/intraday pricing and evaluated pricing services. It already provides a comprehensive view over which instruments fall under the scope of MiFID I and the specific instruments that must comply with the existing transparency regime.

As the scope of legislation increases under MiFID II, DataScope Select will not only be updated with these scope changes, but also each instrument record will come with additional tags that provide information about product complexity and any MiFIR venue trading mandates as they come in force.

Much of this data will also be reflected in the Elektron Real Time data and on the Eikon desktop.