Climbing the compliance mountain with PLIA by PLATO
Bill Stephenson, CEO of Urvin.Compliance
In the wake of MiFID II, ensuring that investment managers were ‘taking all sufficient steps’ to get the best results for client orders was the hot topic at almost every trading conference. But the reality was that, despite all the talk, no one had created a viable single solution that could tick all the compliance boxes.
Anyone who has worked on a trading desk will understand how important it is to have a globally consistent process for managing all aspects of the best execution process. It was this search for consistency that spurred me, along with my colleague Dave Lauer, to seek support of the Plato Partnership in developing PLIA by PLATO.
Currently, the expectation on investment managers relates not only to execution quality but also to the appropriateness of execution arrangements and counterparty policies. A proper review of these factors can be time consuming and resource intensive. The onus is placed on investment managers not just to review the full lifecycle and outcomes of trade execution, but also to understand the policies and procedures of each counterparty with which they trade. This expectation is not just for a point-in-time either, investment managers must have a process in place for doing these reviews on a regular basis.
This expectation can create a significant workflow management challenge because an investment manager’s best execution policy should include a process for gathering, processing, interpreting, and collaborating on each counterparty’s policies and procedures. It is also incumbent upon each investment manager to determine whether or not a counterparty’s policies and procedures align with their own firm’s objectives. This requires an investment manager to have its own clearly defined perspective on best execution as well as a strong sense of what is or is not appropriate.
The fragmentation of liquidity and the need for many counterparties and trading venues has complicated this process. As a consequence, it has become increasingly difficult for investment managers to comply with MiFID II. Once again, the expectation is that this is an ongoing process.
Even if an investment manager is comfortable that their representations are an accurate reflection of their practices, and that their counterparties align with their execution objectives, the trading desk is a dynamic environment where changes can occur regularly. It’s expected that managers ensure that their representations continue to be accurate and that their counterparties continue to align with their execution objectives.
In an effort to solve these challenges in my previous head of global trading role, I had utilised several platforms in a bid to centralise all due diligence responsibilities, especially given the sheer number of counterparties that executed on our behalf. As global regulations ultimately matured into the new MiFID II best execution rules, it became increasingly clear that existing platforms did not cover all the necessary criteria. This is why Dave and I started building PLIA by PLATO, guided by the specific needs we were hearing from Plato Partnership members.
What is PLIA by PLATO?
PLIA by PLATO provides market participants with an automated, technology-driven central repository for all best execution-related due diligence questionnaires and data requests
This central repository stores a fully transparent and auditable record of communication between counterparties
The platform also allows for a customisable response grading and reporting process
We believed we could invest in the features that would profoundly improve workflow for both investment managers and their counterparties. In speaking with many investment managers over the past year, we found a clear need for a single platform; a de-facto standard for all counterparty due diligence across all asset classes. Not only was trading becoming more electronic and complicated, but it was becoming even more difficult to manage all the risks associated with evolving trading paradigms.
The Plato Partnership’s enthusiasm for developing a relationship in this space and their commitment to protecting their members were the deciding factors as we agreed to partner around this important compliance challenge.
The PLIA by PLATO platform creates standardisation at both the platform and question-level: counterparties can begin to utilise more automation and, ultimately, achieve greater timeliness in their response to client requests. The platform will also ensure consistency across all counterparty clients, reducing the operational hazards and regulatory risks associated with helping investment managers comply with MiFID II and other regulations.
Further, the PLIA by PLATO platform will be implementing features that allow investment managers to efficiently manage their venue routing preferences and risk limits as well as provide customised instructions to their counterparties. This will create a centralised source of truth between the counterparty and the investment manager, which could even be programmatically ingested into the routing code as needed. In the near future, the platform will also act as a central repository for all best execution reports supplied by counterparties, which can be uploaded, amended, and reviewed as necessary or as part of the defined best execution process.
Ultimately, PLIA by PLATO will be an end-to-end best execution management platform supporting all the important activities performed by best execution committee members, heads of trading, and trading compliance officers. There is a huge opportunity here to de-risk some of the compliance challenges related to the best execution process and PLIA by PLATO is well positioned to be a solution that can be utilised today.
A word from Mike Bellaro, CEO of Plato Partnership:
I am pleased to contribute to bringing this next generation product to the marketplace. PLIA by PLATO will allow for a significantly enhanced governance process and best execution oversight, raising the bar on reg-tech for buy-side traders trying to meet and exceed exacting regulatory standards. The suite of tools available on the new platform will help improve trading results for end clients while protecting the interests of your firm.