Compliance Matters spoke today to Tom Pfister, the global head of regulatory reporting solutions at Confluence, the regulatory IT giant.

Confluence has been in operation for 26 years, a relative rarity for a software firm in the compliance area. Its present focus is on data automation and post-trade reporting, although it previously concentrated on firms' disclosures to shareholders. Tom Pfister of Confluence told Compliance Matters that his firm is used to coping with regulatory change but that this change has ramped up a notch in the last decade.

"Now the regulators have changed their focus from investor protection to systemic risk. MiFID II is a manifestation of that, as is the European Securities and Markets Authority's money market fund reform, which will be here shortly. The Americans came out with their initial money-market fund regulation in 2009 and made a very substantial upgrade two years ago, which came into force last year thanks to the Securities and Exchange Commission.

"Stability is the preferred focus of the asset-management industry. If they know the rules are going to be the same tomorrow, they can plan. Things don't get difficult for them when there is more regulation or less regulation but when there's change. This is because when that happens, you don't understand the rules. On top of this, the costs of complying are ever-increasing, with 50% of costs being compliance costs in some divisions of financial businesses. Compliance staff have doubled in value over the last five years and many firms need a good 20 more compliance people than they have. Many of the new people now are data scientists or have data analytic skills - they're not SEC prosecutors."

Pfister thought that every financial firm should, if possible, design its IT in expectation of regulatory change rather than as a mere reaction to it. He did acknowledge, however, that this would be almost impossible for a really big corporation.

"You need new compliance IT to handle new business, or when your business is moving into another jurisdiction, or when you're distributing funds in new regions, or when you're using new platforms. When this happens, the amount of regulation that concerns you increases and it's hard to unify all the subjects. As the landscape changes, these things compound and become more difficult. For example, with each new initiative you have to understand how your accounting department is going to deal with it. MiFID II had - and has - multiple unknown quantities, as shown by the SEC's response to it last week when it issued an edict that allowed EU banks to benefit from US research. Before that came out, no software designer knew what to plan for. The SEC could have said any number of things instead."

On the subject of data streams, Pfister thought that it was a silly idea for a financial firm to draw a difference between the data that it displays publicly and the data that ends up being reported to the regulators.

"Data management structures can't evolve unless firms rethink this. They must make change a design requirement. They must ask themselves how to change their thinking from the artifacts they are producing to the ability to handle any artifact. Prospecti need not come out from a different set of information - that's all no good; it's a waste of time and money. Also, firms should make sure that the information is available in whatever format anyone wants. It could be the investor, or the market, or the regulator. When all of those end-points change, it shouldn't be that much of a problem. People won't be reading giant PDFs of fund information in 10 years. They should stop organising their organisation through the deliverables and start organising it according to the information they want to disseminate."