Forty-six percent of financial institutions claim not to understand the implications of the EU Markets in Financial Instruments Directive (MiFID), according to the results of a survey by Sun Microsystems UK, despite 92% stating that regulatory compliance would be an “important” or “very important” driver of business strategy.
In addition, 16% of respondents said that MiFID should be pushed back again if organizations were going to comply.
“The European MiFID directive will transform the range and volume of financial market data published across the EU. It will affect all points along the data distribution chain, with the pain of compliance being felt most acutely in London and Frankfurt, Europe’s largest trading centers,” says Brian Hackett, UK Head of Financial Services, Sun Microsystems. “MiFID is all about structuring the market to improve customer service. It will require increased disclosure and transparency and the establishment of a new set of architectures and will require a culture of compliance across the whole organization.”
The survey also revealed that cost reduction would be the most important driver of business strategy during 2006. 100 percent of those surveyed believe cost reduction to be either “important” or “very important,” illustrating industry consensus that all business strategy should exercise an element of financial prudence. 72 percent of financial institutions expect their IT budgets to rise in 2006, compared with 82% in 2005. Sixteen percent expect budgets to fall.
Respondents were also asked to identify the key technologies that will enable them to achieve IT and business goals during 2006. Server consolidation topped the list, with 86% of those surveyed labeling it “important” or “very important.” Web services (80%), virtualization (73%) and utility computing (72%) also scored highly.
“Belt tightening seems to be a common theme moving forward, and although most financial sector institutions still expect to increase their IT budgets in 2006, all of the financial institutions surveyed will be aiming to obtain a bigger bang for their buck,” said Hackett. “Many financial institutions are looking towards server consolidation as a way of reducing total cost of ownership and improving system efficiency.”
“Our own dialogue with buy-side firms who form the mainstay of our client base in Europe shows many of the same issues that the survey uncovered. This is particularly true of MiFID. We have therefore launched a proactive program of participation in the working groups,” said Tim Rudlin, Director and Officer, Business Strategy, DST International. “We plan to involve our clients as soon as things become clearer, and hopefully help them to be ahead of the MiFID game.”