Transcript Mantas MiFID Overview

Compliance Solutions for Capital Markets
MIFID
Pal Ribarics
Oracle, Financial Services Solution Team
EU Enlargement Countries
[email protected]
Dubrovnik, 9 May 2007
Mantas Overview

Overview of Mantas/Reveleus/Oracle

MIFID

Mantas Trading Compliance Solution

Competitive Differentiation
Latest news
 Oracle stake in i-flex goes up to 83%
 Reveleus acquires Mantas
 Citigroup signs Reveleus Operational Risk for an Enterprise-wide RCSA deployment
 Reseller Agreement signed between Oracle & Reveleus for Reveleus Operational
Risk
 Reveleus Basel II solution is ranked in the Gartner leaders quadrant for 2006 as well,
most competitors fall behind
 Reveleus Operational Risk ranked among the top Operational Risk solutions globally
by analysts
 Reveleus ranked 4th in a Chartis Research Report covering the Top 100 Risk
Management vendors worldwide.
i-flex Completes Acquisition of Mantas for $122M
03-Oct-06
i-flex solutions Completes Acquisition of Mantas
Mantas Now a Wholly Owned Subsidiary of i-flex solutions; S.Ramakrishnan Appointed as
CEO
Mumbai, October 3, 2006: i-flex® solutions (Reuters: IFLX.BO & IFLX.NS), a leading IT
solutions provider to the global financial services industry, announced the closing of its
previously announced acquisition of Mantas Inc., a provider of regulatory compliance, loss
prevention and revenue generation solutions headquartered in Herndon, Virginia, USA.
Under a definitive agreement announced on August 14th, Mantas was acquired in an all cash
transaction of US $ 122.6 Million. With the completion of all regulatory approvals, Mantas is
now a wholly owned subsidiary of i-flex solutions.
S.Ramakrishnan, CEO of Reveleus-i-flex's Business Analytics division, will take additional
charge as CEO of Mantas. SR has nearly 25 years of banking and technology experience
spanning India, the Middle East, Singapore, New York and Silicon Valley, and has led Reveleus
from a start-up to a leading product in the Risk and Compliance space.
Reveleus Enterprise Risk & Compliance Offerings
Risk & Compliance
Infrastructure
Enterprise Risk & Compliance Applications
Reporting &
Analysis
Capital & Performance Management
Internal Reporting
& Analysis
EDW
Basel II/
1A
Economic
Capital
Risk & Compliance
Repository
Risk Based
Pricing
RAPM
Credit Portfolio
Optimization
Enterprise Risk Analytics
Loan
Systems
Treasury
Systems
Aggregated &
Relational Reporting
Risk & Compliance
Business Metadata
Liquidity
Risk
Retail
Credit Risk
Corporate Funds Transfer
Pricing
Credit Risk
Operational Risk & Compliance
Collateral
Systems
General
Ledger
Rule/Run Framework
Information
Vendors
OpRisk
Data
Interest
Rate Risk
Process Loss DB
Mapping
RCSA
Internal
Controls
KRI
External
Reporting
Home/Host
Reporting
Action Economic
Planning Capital
Capital Adequacy
Reporting
Anti - Money Laundering, Fraud & Surveillance
Modeling Framework
KYC/CDD
Transaction
Trading
Monitoring Compliance
Broker Fraud & Anti
Theft
Compliance
Local Regulator
Reporting
Mantas Overview
Introduction and Differentiators
Only company demonstrably proven to provide
integrated, single source compliance for all FS
businesses anywhere in the world.
Current surveillance statistics for Mantas Software:

125+ production deployments

211 jurisdictions - Trading Compliance

122 countries - AML

700 million transactions per day

16 languages
The most coverage of any provider - nearly 300
different exposures/risk monitored
10 patents pending.
Only compliance company in BTN Top 10, Waters
“Best Compliance Firm” 2 years in a row.
Only company providing surveillance for:

Retails Banks

Wholesale Banks

Private Banking and Asset Management

Institutional Brokerage

Prop Trading

Capital Markets

Retail Brokerage

Investment Banking

Mutual Funds

Insurance
…. and hence offers a compliance TCO
substantially lower than alternative compliance IT
costs or piecemeal vendor selection.
ROI counted in months if not weeks.
Market Leadership
A worldwide leader in enterprise AML, compliance, fraud, operational risk and business record assurance solutions for the most
sophisticated financial institutions globally
Representative Customers
Industry Awards
2005 Waters Names Mantas as Best Anti-Money
Laundering Solution For The 2nd Year In A Row
2004 Waters Editorial Awards: Best Anti-Money
Laundering Solution
Mantas Named Best AML Solution in Waters
2004 Rankings
Mantas Named Among “BTN Top Ten
Technology Companies To Watch”
Mantas Highly Commended in The Bankers 2004
Technology Awards
2003 Waters Editorial Award: Best Compliance
Solution
Mantas Named a Leading Force in New
TowerGroup Report on AML Vendors
Butler stated, “Mantas is ‘A Powerful Response’ to
Compliance Needs”
Celent Ranked Mantas as a Leading AML
Solution
Summary of Mantas
Every Product, Every Business, Every Country, Every Size – Our Track Record is Impeccable
Mantas is worldwide leader in AML, compliance, fraud, operational risk and business record assurance
solutions to the most sophisticated Financial institutions globally. Examples:
150,000.000
Trades a day
analyzed.
300,000 accounts
in Chicago area
10 million trades a
day in London,
Singapore and
New York
covering 150
exchanges.
50,000 High Net
Worth Accounts in
NE United States
200 million
accounts in 61
countries.
2 million accounts
in Switzerland.
Mantas Behavior Detection Platform
 Unmatched product coverage across
widest set of possible transactions
and events
Fraud Management

Operational Risk Management
Identity Theft
Basel II
Anti-Money
Laundering
Trading Compliance
Broker Compliance
 Unparalleled accuracy of powerful
behavior detection engines
Capital Adequacy
Self Assessment
Consumer Credit
Regulation
Client Assurance
Margin Management
USA Patriot Act
Cross-Selling
EU MiFID
Customer Churn
EU Market Abuse
Directive
Terrorism Act 2000
BEHAVIOR
DETECTION
PLATFORM
250+ different exposures / risks /
opportunities monitored
Contact Management

 Outstanding add-on tools that
enhance the applicability of the
Mantas products

“Outstanding Coverage” – Trading Compliance User Group Meeting, December 2005
(ABN AMRO, Bear Stearns, Barclays Capital, Credit Suisse, Goldman Sachs, SSB)
Tremendous intellectual property and
domain knowledge (10 patents
pending)
Positions Mantas as a key integration
component for workflow systems
Mantas Behavior Detection Platform Architecture. Packaged,
Proven & Powerful...
Case
Management
Alert
Management
Life
cycle
Data
Ingestion
Data Ingestion
Tasks / Phases
► Provides data
consistency and
transparency across
the enterprise
► Enables seamless,
cost-effective
expansion and
customization
► Required step in
implementation of
Mantas’ solution
Data Model
► Enables the world’s
most accurate and
sophisticated
behavior detection
analytics
► Leveraged by Mantas
customers, as part of
their Six Sigma
programs, operational
dashboards and
reconciliation
processes
Behavior
Detection
► 10 patents pending
► The most powerful
set of approaches to
solve each specific
business situation
being addressed
► Flexible definition of
behavior of interest
that caters to each
institution for any
type of transactions
Data Model
& Behavior
Detection
Alert
Management
► Highly flexible alert
management
allowing certain alerts
to go to specific
individuals and be
scored in the most
effective manner
► Enables users to
view alerts with full
documentation and
reporting
requirements
Document
Management
► Fully integrated
investigative workflow
that connects to any
other sources
► Transparency and
compliance to all
activities within each
investigation
► Direct interface to
other systems
including law
enforcement
Active Pages
► Ad hoc real-time
reports can be
created in a matter of
hours
► Flexible and ad hoc
visualization without
encroaching on the
discipline and rigor
needed to manage
compliance and risk
► Very powerful
graphical interface
Financial Services Data Model (FSDM) - Subject Areas
CUSTOMER
MARKET
ENTERPRISE
SECURITY
ACCOUNT
TRANSACTION
TRADE
Trades in FSDM
All Supported Asset Classes
Demand for financial instrument
to be bought or sold
Means by which order is satisfied
Combined demand and means by which
Financial instrument is bought or sold
0
1
Order Summary
M
1
Trade Summary
1
M
1
1
0
M
Execution Summary
M
1
Order Events
New
Cancel
Route
Cancel & Replace
Modify
Desk
M
Trade Execution Events
New
Cancel
Correction
Cancel & Replace
Order Interface
Trade Execution Interface
1
M
At The Heart - Detection Engines
•Mantas uses a tested and proven combination of 5 behavior detection engines
to apply the right technique to identify complexity and accumulate evidence.
(most competitors use one , 2 at maximum)
•Mantas currently has 14 patents pending around these activities and algorithms.
Profiling
Profiling
Text Mining
Mining
Text
Rule Patterns
Sequence
Sequence Matcher
Matcher
Link Analysis
Increasing Detection Accuracy
ACCURACY
Tune thresholds
as necessary
Suppression of
non-exposures
Score
against risk
Profiling
Profiling
Outlier Detection
Outlier
Detection
Text
Mining
Text
Mining
Rule
Patterns
Rule
Patterns
Rule Patterns
Link
Analysis
Link
Analysis
Sequence Matcher
Sequence
Matcher
Set
transaction
thresholds
Tune patterns
to the data
DAY-TO-DAY
OPERATION
FOCUSING
IMPLEMENTATION
STAGES
BEHAVIORS
Scenario Threshold Editor
Suppression of
non-exposures
Score
against risk
Tune scenarios
to the data by setting
initial limit thresholds
Tune scenarios to the
deployment by setting
initial filter thresholds
IMPLEMENTATION
STAGES
Tune thresholds
as necessary
DAY-TO-DAY
OPERATION
Increasing Accuracy
The Goal…an alert
Integrated Alert Management and Workflow
Identification of risk, complete end to end investigation
Transaction & Alert Repository
Mantas Overview

Overview of Mantas

MIFID

Mantas Trading Compliance Solution

Competitive Differentiation
Introduction to MiFID
What is it?

Introduces a consolidated regulatory framework for European markets in financial
instruments in order to deliver
i) Retail Investor Protection
ii) Investment Services ‘passport’ to market transparency

Part of the EU Financial Services Action Plan (FSAP)

One of the Lisbon 2000 Strategy reforms to create a single market for wholesale financial services

Supercedes the EU Investment Services Directive (ISD)

Enforced regulation in 28 EU countries

Implementation by November 2007
Introduction to MiFID
Provisions
Post-trade Transparency
Passporting Rights
• Whether on regulated markets, MTFs
or OTC, trading in shares are subject to
a post-trade transparency obligation
• Improves operation of single
passport for investment activity
• Firms able to establish branches in
other member states and offer crossborder services
• Host country responsible for
ensuring compliance with conduct of
business requirements
Pre-trade Transparency
• Establishes minimum
standards of pre-trade
transparency for shares
traded on regulated markets
and MTFs
• Obliges systematic
internaliser to undertake
public market-making
obligation - must provide
definite bid and offer quotes
in liquid shares for orders
below 'standard market size'
MiFID
Client Management
Order Handling &
Execution
• Firms must ensure best
possible deal for clients
taking into consideration
price, cost, speed and
likelihood of execution and
settlement
• Extensive and requires
significant changes to the
FSA's Handbook
• Most sensitive is requirement
for firms to conduct full
suitability test on clients when
providing investment advice or
portfolio management
Markets in Financial Instruments Directive (MiFID)
The Market in Financial Instruments Directive (MiFID) - Executive Summary
The Market in Financial Instruments Directive (MiFID) shares many commonalities with the Market Abuse Directive, enacted
late last year. Both directives are aimed at the creation of a common financial services market throughout Europe. In most
cases, the 42-step process derived by the European Union towards this goal has focused on a “harmonization” of existing
regulations between member states. MiFID is a departure from this approach and instead introduces regulations more akin to
best execution and advice regulations currently in force in the United States of America. MiFID, like any new regulation,
presents financial institutions with a variety of choices:
 They can take no action, and hope that current systems will satisfy the new regulatory requirement.
 They can address each new directive and regulation independently.
 They can adopt a comprehensive and holistic approach towards compliance that protects the firm
MiFID can be summarized into eight categories:
MiFID Category
Description
Conflicts of interest
Establish organizational structure and procedures that avoid conflicts of interest
Conduct of business
Common conduct of business standards are established
Best Execution
Client must receive the best possible execution quality and price
Passporting rights
Firms will have access to consistent banking practices across all EU member states
Investor classification
Establishes a common EU framework for classifying counterparties and clients
Regulated market and MTF standards
Opens all trading venues between member states
Pre-trade equity transparency
Establishes minimum standards of pre-trade transparency across all trading venues
Post-trade equity transparency
All transactions are subject to post-trade transparency obligations and reporting
Markets in Financial Instruments Directive (MiFID)
 The Market in Financial Instruments Directive – What is it?
MiFID, is aimed at the creation of a common financial services market throughout Europe.
Industry Problem Statement
MiFID Correction
There are currently 25 member states, each with individual and
unique regulatory requirements
MiFID seeks to create a consolidated suite of trading rules
across all EU member states. Essentially creating regulatory
harmonization of trading operations.
Regulations across asset classes are not consistent, create
confusion and opportunity for malfeasance
MiFID extends regulatory coverage from Equity transactions to
Commodities and Over the Counter Instruments.
Client trades are often executed on exchanges that favor the
financial institution and not the client
MiFID demands that customer trades are executed on the best
exchange for the best price at the time of order fulfillment.
This is known as Best Execution.
Trading venues are not always favored for price or best
bid/offer
MiFID ensures that best bid/offer are considered as primary
criteria when executing orders thus ensuring the best venue
wins the execution.
Implementation Date: November 1, 2007

Level 1 – Directive, adopted April 2004

Level 2 – Technical implementing measures, Released February 2006
MiFID – Challenges Facing the Industry
MiFID Category
Conflicts of interest
Conduct of business
Best Execution
Post-trade equity
transparency
Investor classification
Regulated market and MTF
standards
Passporting Rights
Pre-trade equity
transparency
Challenge
Resolving conflicts of interest and considering business practices and conduct all require firms to
evaluate their processes, procedures and policies This can create a daunting challenge as
investment firms need to consider, change and manage their processes with respect to MiFID. In
addition, firms need to monitor trades and transactions to assure that no breaches of their fiduciary
responsibility have occurred.
Mantas provides a suite of control self assessment features that allows firms to automate the
assessment, review and reporting of these critical policies, controls and procedures. This allows the
client to spend more time conducting business rather than continually checking the state of their
controls and procedures in order to satisfy the compliance requirements of MiFID. Mantas’ Control
Room Package facilitates the monitoring process identifying potentially illicit trades.
The challenges represented in these categories are considered the most difficult aspects of the
MiFID requirement. From monitoring every transaction, to ensuring compliance with best execution
rules, to providing an effective reporting and analysis framework, to the storage of five years of
order, execution and market data, firms are struggling and in some cases resisting the MiFID
requirement.
Mantas provides a full range of automated transaction monitoring software specifically focused on
the surveillance demands of MiFID. The Mantas Trading Compliance Solution is designed to meet
the demanding MiFID requirements across the complete spectrum of trading exchanges in the
European Union. Additionally, Mantas’ Financial Services Data Model provides comprehensive data
storage capabilities, designed to meet the challenging data shortage requirement of MiFID with the
ability to output all relevant transaction reports into the formats prescribed by the various regulatory
and reporting organisations within the T+1 timeframe.
Solution/Partner
 Mantas Control Self Assessment
 Mantas Control Room
 Mantas PS Group (Implementation)
 i-flex / PrimeSourcing (Data Sourcing)
 Mantas Trading Compliance Solution
 Mantas Broker Surveillance Solution
 Mantas PS Group (Implementation)
 i-flex / PrimeSourcing (Data Sourcing)
Although MiFID rules are somewhat ambiguous, firms are increasingly seeking vendors and
partners that can help decipher MiFID’s final and ultimate requirements while assembling practical
approaches and software solutions that meet the MiFID requirement.
 IBM
Mantas as part of establishing the industries leading Trading Compliance solutions have collected
decades worth of practical and valuable industry experience through its products, peoples and
services and is uniquely positioned to assist firms implement a strong and practical approach to
MiFID.
 Accenture
Mantas captures Order Book data as part of its underlying platform. This helps compliance
organisations prove and investigate pre-trade transparency as part of on-going monitoring of best
execution policy.
 Mantas Trading Compliance Solution
 Cap Gemini
Mantas Overview

Overview of Mantas

MIFID

Mantas Trading Compliance Solution

Competitive Differentiation
Mantas Trading Compliance in the Market (MiFID)

What is the solution ?
-
Mantas Trading Compliance Solution

What does the Mantas Trading Compliance Solution consist of?
-
1. Scenarios & Analytics (E.g: Best Execution)
-
2. Applications (E.g: Control Room)
-
3. Platform (E.g: Ingest, Detection Engines, Data Model & User Interface)

Mantas Trading Compliance Overview:

Mantas Platform supports the automated review of processes, policies & controls (Governance) while providing solutions for risk
assessment, case investigation & management (Risk)

Existing Mantas technology lends itself to key aspects of the directive, including best execution, trade transparency, conflicts of interest
and best advice/customer suitability (Compliance)

Best Execution Class – Evaluates the quality of individual order execution

Proven & Deployed - Scenarios in this class examine prices and timing of orders and executions by comparing them to market conditions,
and they generate alerts when customers did not get the best execution of their orders.
Examples include:

Price Improvement Scenario

Price Disimprovement Scenario

Market Order Execution Untimeliness Scenario

Limit Order Execution Untimeliness Scenario

Unfilled Marketable Orders Scenario

Limit Order Display Scenario

Limit Order Protection Scenario
Mantas Trading Compliance in the Market (MiFID)
 Trading Compliance Class – Detects behaviors that violate regulatory and internal policies and procedures
Examples include:

Indications that one or more parties arranged trading activity for their own benefit
 Cross Trading Listed Options and Futures Within A Narrow Time Window Scenario
 Parking to Conceal Fixed Income Position Scenario
 Parking Via Settlement Date Scenario
 Monitors trading activity to detect situations when traders exchanged, or acted on, advance information
about their customers’ orders.

Trading Ahead of Customer Scenario

Front Running Large Orders Scenario

Front Running with Related Products Scenario
Mantas Trading Compliance in the Market (MiFID)
 Control Room Package – Detects behaviors that potentially indicate conflicts of interest and insider
dealing/trading
Examples Include:

Monitoring of trading activity against restricted securities (research, underwriting and primary market, book
building, loans, credit derivatives)

Employee Trade Approval and Monitoring

Watch List and Restricted List Maintenance
 Customer Suitability – Identifies trades and portfolios that may be inappropriate given a customer’s profile
Examples include:

Customers with unsuitable trades

Customers whose portfolios don’t match investment objectives

Portfolio Visualization and Analysis
Mantas Trading Compliance in the Market (MiFID)
Mantas Trading Compliance Solution – Most widely adopted Trading Compliance Solution on the Market
2002
2003
2004
2005
2006
Mantas Overview

Overview of Mantas

MIFID

Mantas Trading Compliance Solution

Competitive Differentiation
Functional Comparison:
Mantas offers cross enterprise Compliance and Operational Risk Management. Mantas wins when client
understand this cross enterprise exposure challenge.
AML
Trading Compliance
Broker Compliance
Mantas
Actimize
Retail Brokerage
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Retail Banking
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Institutional
Brokerage
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Capital Markets
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Correspondent
Banking
Searchspace
SAS
Norkom
NetEconomy
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Private Banking
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Insurance
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Foreign Exchange
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Fixed Income
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Equities
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Derivatives
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Best Execution
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Employee
Surveillance
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Supervision
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Suitability
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