Regulators are finding that the devil is in the details as financial institutions prepare for MiFID II’s server-clock synchronization mandate.
Peter Lankford, STAC
“If you think about time-synchronization across the enterprise, there are a lot of links in that chain,” said Peter Lankford, founder and director of the Securities Technology Analysis Center. “With traceability, you have to be able to work backward up that chain and demonstrate that your timestamps were within specified accuracy based on the maximum errors along the way.”
Proving that traceability of those timestamps and providing that as acceptable evidence to regulators, is more involved than what many had thought.
Lankford doubts that regulators will examine each firm’s network diagram, test data, and test-application code themselves.
“They either will hire consultants, at your expense, to come in and make those decisions, or ask for independent certification,” he said. “In either case, standards are going to be key because I don’t think that anyone wants to get into a game of opinions between consultants on what is considered a good design or not.”
As such, STAC has created an invitation-only working group to develop a time-stamp traceability standard.
Although MiFID II’s approaching deadline is a major driver, it is not the only driver for the working group.
“The standards will be useful for whatever level of accuracy someone wants to establish,” said Lankford. “The ultra-low latency crowd is interested in a lot higher accuracy than what MiFID II requires, so we will be looking at both of those.”
The working group has divided the traceability issues into four categories: enterprise time references;
enterprise time distribution; application timestamping; and network timestamping and wire capture.
The working group has made progress in all four areas and has products coming into the lab that are ready for testing, according to Lankford. “Regarding logistics and timelines, we are going to have the first standards in trial this summer.”
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