RFC - Rules for MiFID Regulation on NDFs

Our aim is to allow clients related to Entities not regulated by MiFID (EPAU, EPCA, EPCH) to create NDFs trades.

Problem Description

Ebury needs to update their internal forward creation rules in order to allow new NDF's creation workflows that were not required before.

Right now in order to create NDF trades, a client needs to be under MiFID regulation. If the client is not allowed to create this type of trade, an error message is displayed: "Client has not completed On-boarding for Regulated products please contact the Onboarding team".

Salesforce is enabling forward products to clients that belong to EPAU, EPCA, EPCH but they are not filling the MiFID information as it is not mandatory in those countries. For this reason clients will not be flagged as MiFID clients and by the current logic they are not allowed to create NDF trades.

Background

MiFID, also known as Markets in Financial Instruments Directive (2004/39/EC), has been applicable across the European Union since November 2007. It is a cornerstone of the EU's regulation of financial markets seeking to improve their competitiveness by creating a single market for investment services and activities and to ensure a high degree of harmonised protection for investors in financial instruments.

Currently, Ebury has entities created around the world, based on different countries, time zones and regulations. As we are growing and expanding around the world we expect to meet all regulations and apply them only to the related entity. In certain cases, entities will share the same regulation (Entities in Europe as Ebury UK and Ebury Belgium).

In salesforce they can allow clients to create the following forward products: Fixed Forward, Window Forward, Synthetic Forward, Non Deliverable Forward.

Solution

  • We are going to add a new field into the company entity model in BOS to flag if the entity is regulated under MiFID or not. This new field will be filled through a BOS migration, but eventually after the Salesforce migration we will sync this information through salesforce sync.
  • The logic where we are checking the MiFID regulation in forward creation will be updated to check this new field. This method "allow_mifid_forward_creation" will be expanded to allow NDF trades for specific entities no MiFID as required.

This is the first step in the development. In the future, this field should be managed by Salesforce being approved by the compliance team. Then BOS just needs to replicate the information coming from Salesforce.

Alternatives

This is a tactical solution in order to fix this issue temporarily, the Salesforce alternative is not possible because of team resources, but it will be done in a few months and the BOS solution will adapt to it.

Security Impact

We are updating our workflow to only allow a few selected entities to perform NDF trades. We do not need to worry about security concerns, the other entities will keep working as before.

Performance Impact

N/A

Deployment

Current BOS releases process.

Dependencies

None.

Developer Impact

None.