“Technology is really becoming an enabler to stay compliant because you can understand the huge amount of data in these complex networks that you have to store, structure and provide to the authorities if requested. That is lot of big data management.”
Karl Hagerman works in the engineering team for the Sweden-based corporate bank SEB. He witnessed the regulations and financial innovations that have shaped the Nordic markets over the past thirty years and will “radically change” markets in 2018.
Before 2007 and after some early exchange consolidation, all the trading in Sweden was done at one exchange, OMX, in Stockholm. The local market underwent deregulation during the 1990s and a new options market was started. As the OMX stock market went public, markets became increasingly electronic and adopted the market model of an open, centrally-linked order book, which allowed exchange members to offer direct market access so they could create equity and equity derivatives without a middleman.
As new alternative markets opened, complexity increased exponentially, creating the need for new regulation. The result was MiFID, which broke the exchange monopoly, allowing for multiple venues to compete and for trading to be fungible. Hagerman explained how liquidity became distributed, algorithms arose to deal with multiple venues and finally HFT became a factor.
In 2018, when MiFID II is enforced, it will radically change market dynamics, and “RegTech” will be in high demand, Hagerman said. It will be necessary to manage the complexity of storing huge amounts of data that exchanges must provide to the authorities under the new rules.