Market Conformity Checks (MCC) and Best Execution Solution

Xenomorph’s Market Conformity Checks (MCC) solution is an out-of-the-box module that assesses whether trades have been executed at fair value against validated market prices. It provides a configurable framework for price validation and benchmarking with calculations and data analytics built into the data management workflows.

Market conformity checks (or MCC) are a regulatory obligation specific to the German market, but share similarities with other best execution workflows. The base requirement is to check that trades have been executed at a price that is in line with the prevailing market. In that sense, these checks share many characteristics to other data validation workflows (such as independent price verification).

Under the German rules, the obligation to carry out market conformity checks can be waived when the trade is executed on an exchange or other regulated market. That means MCC is particularly geared towards less liquid instruments that trade infrequently. Finding an appropriate benchmark can therefore be a key part of the challenge as market data can be difficult to source.

Xenomorph is a complete enterprise data management platform that includes an add-on module for market conformity checks. Our solution can integrate all required trade data and benchmark market data sources, manage and execute necessary workflows, and retains records of all processes for reporting purposes. All aspects can easily be configured to suit the requirements of each firm. Business users can define which data source to use as a benchmark and how to manage any exception handling processes without the need for any additional development resources.

Xenomorph enables firms to consolidate data from any number of sources – with pre-built adapters to independent providers of market data and evaluated pricing services, as well as a range of options to integrate data from internal trading / risk management systems. All data sources are then normalised into a consistent, multi-source data model, allowing for ease of aggregation, comparison and consolidation between different sources of pricing data.

Xenomorph is adept at all forms of analytical data management. The platform can be used to derive any benchmark used for market conformity checks. Whether you are calculating the average from a range of evaluated prices, deriving more complex time-series analytics like moving averages, volume or time-weighted average prices, or calculating statistical metrics like standard deviations, Xenomorph easily meets your requirements. In addition, pre-built interfaces to leading financial analytics platforms such as FinCad, Numerix and Matlab, popular analytical programming languages such as Python, R and F#, and leading risk management applications, makes it easy to integrate model inputs and outputs into verification/validation workflows.

To carry out market conformity checks across the majority of a firm’s trades invariably requires a flexible rules engine. Xenomorph enables users to easily configure the rules governing each conformity check, setting thresholds and defining exception management workflows to suit their requirements.

Any regulatory requirement ought to be carried out with careful consideration to data lineage and process auditability. Xenomorph enables firms to show how market prices were sourced, who carried out relevant checks, and the details of MCC workflows.