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Using Regulatory Reporting to Improve Your Business Processes and Revenue

Often firms view complying with regulation as solely an obligation to avoid penalties and fines. However, have you considered how compliance can not only improve your business processes but add to your revenue as well? In this article, we will step you through the various ways in which you can use your regulatory reporting data to benefit your business.

Understand Product Demand

The data obtained from regulatory reporting enables you to easily see which asset classes your clients are trading most or not trading at all. Such information will help you tailor your products to client demand, saving you expenditure on products (especially costly data feeds and server space) with little to no return. Furthermore, understanding product demand can better inform your firm’s communication and marketing strategies, particularly in terms of very expensive and competitive paid advertising. This minimises the risk of ineffective promotional activities by targeting and encouraging the trade of your most popular products.

Spot Your Weaknesses

The process and sustained discipline of producing daily data exports can identify deficiencies that, once rectified, can deliver improvements in other parts of the business. The ability to produce daily reports enables you to determine inadequacies in both your internal and outsourced processes. It’s not uncommon that the oversight of these processes can result in non-compliance, as was the case with ASIC infringements issued to AMP Capital and AMP Life in 2020 for ‘serious inadequacies in AMP’s internal and outsourced processes and procedures for monitoring the accuracy of its reporting’. Resolving any shortfalls in your operations will lead to improved efficiency and accuracy of your reporting as well as reduce the burden on your compliance resources.

Eliminate Unnecessary Losses

Utilising Best Execution monitoring can help identify transactions that indicate scalpers or significant slippage, allowing you to take relevant action early to eliminate the associated financial losses. Depending on the monitoring system and procedures implemented in your firm, you should at least be able to analyse and compare your transaction data against either market reference data or data from your previous transactions to compute representative benchmarks that enable consistent and fair evaluation of performance. The ability to quickly and effectively identify a trade execution that is outside of your execution parameters and market prices is crucial to minimising financial loss.

Stay Competitive in a Growing Market

As trading platforms such as eToro and Robinhood continue to enter the market with ‘zero brokerage’ and ‘payment-for-order-flow’ fee structures, it’s becoming increasingly difficult for traditional brokers to maintain a competitive advantage. In contrast, regulatory reporting serves as a barrier to entry for many new brokers due to its complexity. New entrants to market are often deterred by the high costs associated with both unpacking and complying with the regulation in the initial stages of business operations. This means established brokers with concrete compliance frameworks and regulatory reporting processes will face less competition. Thus, the potential loss of clients to new competitors is minimised.

If you are overwhelmed by your reporting obligations, we highly recommend considering outsourcing your obligations to a third-party delegated reporting service provider. These service providers have expertise in multi-jurisdictional regulatory reporting which helps to ensure you are not only compliant but maximises your firm’s productivity and effectiveness.

Often firms view complying with regulation as solely an obligation to avoid penalties and fines. However, have you considered how compliance can not only improve your business processes but add to your revenue as well? In this article, we will step you through the various ways in which you can use your regulatory reporting data to benefit your business.

Understand Product Demand

The data obtained from regulatory reporting enables you to easily see which asset classes your clients are trading most or not trading at all. Such information will help you tailor your products to client demand, saving you expenditure on products (especially costly data feeds and server space) with little to no return. Furthermore, understanding product demand can better inform your firm’s communication and marketing strategies, particularly in terms of very expensive and competitive paid advertising. This minimises the risk of ineffective promotional activities by targeting and encouraging the trade of your most popular products.

Spot Your Weaknesses

The process and sustained discipline of producing daily data exports can identify deficiencies that, once rectified, can deliver improvements in other parts of the business. The ability to produce daily reports enables you to determine inadequacies in both your internal and outsourced processes. It’s not uncommon that the oversight of these processes can result in non-compliance, as was the case with ASIC infringements issued to AMP Capital and AMP Life in 2020 for ‘serious inadequacies in AMP’s internal and outsourced processes and procedures for monitoring the accuracy of its reporting’. Resolving any shortfalls in your operations will lead to improved efficiency and accuracy of your reporting as well as reduce the burden on your compliance resources.

Eliminate Unnecessary Losses

Utilising Best Execution monitoring can help identify transactions that indicate scalpers or significant slippage, allowing you to take relevant action early to eliminate the associated financial losses. Depending on the monitoring system and procedures implemented in your firm, you should at least be able to analyse and compare your transaction data against either market reference data or data from your previous transactions to compute representative benchmarks that enable consistent and fair evaluation of performance. The ability to quickly and effectively identify a trade execution that is outside of your execution parameters and market prices is crucial to minimising financial loss.

Stay Competitive in a Growing Market

As trading platforms such as eToro and Robinhood continue to enter the market with ‘zero brokerage’ and ‘payment-for-order-flow’ fee structures, it’s becoming increasingly difficult for traditional brokers to maintain a competitive advantage. In contrast, regulatory reporting serves as a barrier to entry for many new brokers due to its complexity. New entrants to market are often deterred by the high costs associated with both unpacking and complying with the regulation in the initial stages of business operations. This means established brokers with concrete compliance frameworks and regulatory reporting processes will face less competition. Thus, the potential loss of clients to new competitors is minimised.

If you are overwhelmed by your reporting obligations, we highly recommend considering outsourcing your obligations to a third-party delegated reporting service provider. These service providers have expertise in multi-jurisdictional regulatory reporting which helps to ensure you are not only compliant but maximises your firm’s productivity and effectiveness.


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