The 11th Financial Centre Meeting in Frankfurt – “the best Financial Centre Meeting ever” (Quote: Jens Zinke, Managing Director of WM Group).

Almost 700 registered participants from institutions ranging from A (like ABN Amro) to Z (like Ziraat Bank) filled the conference rooms, formed long queues at the buffet and attended the stands of the numerous exhibitors, including our company.

The first talk by a surprise speaker, Michael Schmidt of Deka Investments, focused on an interesting subject: a sustainable financial system for Europe – with many insights into the work of the EU High-Level Expert Group on Sustainable Finance. The Group prepares a report about the challenges and chances of a sustainable financial system considering topics such as population growth, climate change and digitisation.

The asset management industry plays a major role in investment decisions by means of asset allocation. Hence, it has to tackle the conflict between investors’ orders and the social goal of sustainability. In the long run, both goals do not exclude each other: sustainable companies also make good profits. However, many prices on the market, e.g. the CO2 price, are still too low to make sustainability attractive for short-term investments.

Our impression: The financial industry has changed drastically during the past few years. Such a presentation would not have been possible under the logo of a major asset manager ten years ago. A good omen!

Brexit – chance and challenge

The Brexit is a chance as well as a challenge for the financial centre Frankfurt. One of the major concerns is the relocation of euro swap clearing to the EU. Deutsche Börse and the entire financial centre strongly advocate Frankfurt as location, since Paris has been chosen as the centre of European banking supervision.

Our impression: Frankfurt will definitely not be one of the losers of Brexit. A pragmatic BaFin could entice more institutions to come to Germany, which would surely be no harm for any of the participants of the Financial Centre Meeting.

MiFID II – much work still to be done in the area of investor protection

More than three years and many millions of euro after adoption, MiFID II has been in force for several weeks. As expected, not a perfect start, but no catastrophe either. Elisabeth Rögele (BaFin) dealt with the key issues in her talks: need for action regarding tick size (assignment of instruments to the liquidity bands specified by MiFID II and the resulting tick), pre-trade transparency (publication obligations for exchanges, MTFs and systematic internalisers) and reporting obligation for commodity derivatives. The new provisions for investor protection are gradually becoming established. There are some initial problems regarding cost transparency, also because of insufficient supply with product data.

Our impression: MiFID II did not have a smooth start. Particularly in the field of investor protection, much work remains to be done and standards are likely to become stricter. The remaining activities will probably not be completed before the end of 2019.

Digitisation in the financial industry

The FinTech Germany Award was the first opportunity for FinTechs to present themselves at the Financial Centre Meeting. Apart from young startups, well-established companies presented their approaches for a digitised world. Especially the roles of the settlement banks and their infrastructure are a controversial issue. Lively discussions also resulted from the talk given by Götz Röhr, HSBC Transaction Services, about his vision of settlement banks as provider of an infrastructure compliant with the Securities Supervision Act and MiFID II. In addition, our presentation addressed the impact of the digital revolution on software solutions such as our securities software solution GEOS. During this talk we had the chance to present prototypes for user experience and the use of artificial intelligence in settlement systems.

Our impression: There are FinTechs but at the moment primarily as users of the traditional financial industry infrastructure. It is an enormous technological challenge to make this infrastructure attractive for new market participants. What is really important: New technologies have to ultimately reach the customers and satisfy their needs.

We are looking forward to the Financial Centre Meeting 2019!

For years, we have been hearing only one thing in software development: “We have to become agile!”. Nevertheless, many companies are still developing their software products in sequential and linear processes, in which the requirements to the product are placed at the beginning of the software development process and testing is located at the far end. For this reason, this procedure with its clearly defined phases for all stakeholders can be understood and managed easily.

But does it always have to be the rigid waterfall, which stubbornly flows downstream without any detours? We know the answer: No. Especially if multiple companies work together – ordering parties, external software development companies and (software) testing services – and if the software products are embedded in a complex system environment with many interfaces, it is quality assistance, where all ends meet at the end of the project.

Agile testing methods sustainably increase the quality

At SDS, we have developed an approach to compensate potential weak points which a rigid, linear procedure may entail, and try to unite both worlds, waterfall and the agile procedure. As a result, we can selectively offer our customers the usage of agile methods in project operation to achieve the highest software quality without having to establish the completely formalised process, such as “scrum”.

A project which proves the success of agile methodology is definitely the testing of the new offer “FamilyBytes” of T-Mobile Austria. This summer, we had the pleasure to carry out the quality assurance for this new telecommunication product on behalf of our long-standing customer T-Mobile Austria . The special challenge for this project, on the one hand, was that the complete life cycle of a product had to be tested with many involved systems and interfaces (from mobile web applications up to complex database structures). On the other hand, a delay was no option in the tough timetable due to marketing and advertising plans.

More efficiency due to the elimination of the “black box”

The decisive agile factor for the project success of FamilyBytes was the intensive exchange already during the test specification and test case creation. In extensive coordination meetings the requirements were introduced and explained to the testers. The contact persons on the customer side (software architects, business analysts and delivery management) were available for further explanations of unclear points at any time. We were ideally prepared for the test start and could say with a clear conscience: Let‘s do it! The reasons for that were the intensive discussion and analysis of the requirements as well as their selective adaptation in case of changes and, above all, the active exchange in the project team during the test preparation.

Instead of testing in a black box and introducing the new software to the stakeholders from the specific department in a big launch event at the end of the testing phase, as customary in a linear development process, we maintained an intensive exchange also during testing in this project. Immediately after the software delivery to the testing environment, a meeting for an application integration test (AIT) was scheduled. Here all persons involved (design, architecture, business analysis, development and testing) met for the evaluation of the software maturity. Contrary to the classic AIT, our clear focus was not only to identify and analyse basic errors during the meeting but also their prompt correction. Therefore, already at the first QA the go/no-go decision by the project management regarding the market launch date was made easier. After all, it shall not be underestimated that these meetings strengthen the team spirit and the focus on the success of the project in case multiple companies work together.

Integration of the responsible departments already in the early project phase

The test reviews were another important agile element. They were held during the ongoing testing phase together with the stakeholders from product management and marketing and were similar to the sprint reviews with respect to structure and procedure. Also here the agile principle was able to benefit from having all stakeholders together at one table: the customers could get to know the software already before the official acceptance and at this point still had the possibility to provide input from a functional point of view. Due to the early review, it was also possible to improve the software quality within the same release through change requests, which originated from the customer‘s early analysis of the almost completed product. In the final acceptance meeting no unexpected surprises occurred, as all questions and potential misunderstandings had already been clarified beforehand.

The organisation of testing led to the big success of the entire testing project. Delivery management on the customer side and testing management at SDS were closely cooperating with each other on a continuous basis and therefore allowed a clear framework the implementation.

In a nutshell, the following agile aspects led to the project’s success:

• Bringing together all stakeholders for a shared information and expectation horizon instead of “thinking inside the box”
• Intensive exchange before and during the testing phase instead of one-way communication
• Short communication channels instead of a hierarchical system
• Open and transparent exchange among all persons involved, instead of silo mentality between departments and roles

Especially the last aspect is, of course, does not only depend on testing, but depends to a large extent on the modern and open approach of the involved companies. And here we were lucky to be part of a highly motivated project team. The above-mentioned agile measures, however, also had a positive effect on a solution-oriented “Let‘s do it” mindset in the testing phase, and hence selectively replaced the classic waterfall. The result: efficiency, transparency and high quality of the products!

One of the repercussions of the crisis in 2008 was and is the re-regulation of the financial markets. This wave, which in the industry is often referred to as “regulatory tsunami”, has peaked in the last few years. The most prominent example for this is MiFID II/MiFIR, which entailed projects with a duration of many years. Even though there is a legitimate reason to assume that this wave of re-regulation is over for the time being, and supervisory authorities and politicians like to consider and analyse the effectiveness now before new adaptations are carried out, in 2018 a not to be underestimated number of old and new topics are also to be addressed.

Together with our customers we put together an overview of these topics every year to ensure that analysis and implementation can be carried out in time and in a reliable way.

The issue of MiFID II/MiFIR is still relevant, as several topics with low priority still require some final touches. They include, for example, transaction reporting according to Article 26, for which in the area of corporate actions (reports for stock dividends with selection option) changes still occur as well as the reporting of securities financing transactions (simultaneous purchase and disposal of a financial instrument without change of the ownership of this financial instrument with the requirement for post-trade publication).

Securities financing transactions are at the same time the core of the SFTR. For its implementation, data model enhancements of repo/lending/collateral and the processing of new attributes in the reporting records are required.

Two additional topics from MiFID II/MIFIR are still being implemented until 2018: One topic is the optimised creation of documents for cost transparency via m:Cost and another one the taxation and posting of inducements to be transferred to the client. Inducements from the sale of financial products must be forwarded to the final customer under specific circumstances and are therefore subject to taxation. For these amounts determined outside of GEOS, customer invoicing, posting, determination of CYT/non-resident taxation and loss pool adjustment (for Austria), customer reporting, output in tax reporting, CYT registration and automatic information exchange (via i:Reg) are carried out in GEOS.

Thus, solely with the fine tuning of MiFID II a significant work load has to be dealt with. In addition, there are the “usual” tax topics, in Austria concerning non-resident taxation (CYT) and CYT, which are discussed in experts panels regularly.

There is no lack of new topics either: The question of the legal reporting obligation to the FMA concerning in-house transactions which are not settled via CSD (CSDR reporting), is to be clarified starting January 2018. With regard to the General Data Protection Regulation (GDPR), the relevant changes are implemented in our software products within a tough deadline. The Shareholders’ Rights Directive (which is, however, only valid as of 2020) should be examined as of autumn 2018 on a larger scale.

In a nutshell, these are the most important points. Of course, we have to be aware that in the course of 2018 additional topics – which are today not yet foreseeable – could come up. In any case, with the representation of these requirements in GEOS, we will also make an essential contribution to ensure a structured and efficient capital market in Austria in the upcoming year.