RegTech for Quants

A quant perspective is critical to tackling core technology, language, and data challenges like regulatory glossaries, disambiguating data requirements, reference data, and standards, says PJ Di Giammarino

The RegTech conference, organized by JWG, is back for its sixth year in November. This year the event will be focusing on three themes for the next generation of RegTech (Regulatory Technology) and SupTech (Supervisory Technology) deployment:

  • Strategists will discuss the winners and losers from embedding high fidelity, low-cost data and digital compliance into new markets. 
  • Technologists and compliance experts will share future strategies for technology and data controls.
  • Risk management and reporting experts will explore lessons learned from the first wave of RegTech and SupTech in action and debate what happens next. 

Wilmott had a chat with PJ Di Giammarino, founder and CEO of JWG, about the future of RegTech as well as the opportunities from a quant perspective.

How can quants contribute to the RegTech discussion? 

We see opportunities for quants in analyzing the business and risk control opportunities from a digitizing market. Regulations and technology are the biggest change drivers for the marketplace. As latency is reduced, volumes rise, and steps are disintermediated, quants can spot and help evaluate new business opportunities that will emerge from digitalization.  

Tomorrow’s regulatory dashboard needs to provide a real-time radar for the whole system across the entire globe to head off systemic risks with measurement tools fit for fast-paced, low-touch interaction with the system. To measure better, we need to make the system more measurable. A quant perspective is critical to tackling core technology, language, and data challenges like regulatory glossaries, disambiguating data requirements, reference data, and standards.  

COVID has effectively unleashed the second wave of global regulatory reform. In 2020 alone, JWG filtered over 700,000 events from 700+ regulatory publishers to capture 380,000 pages of regulatory dialogue – a 300% increase from 2019. With a bit more time and technology in their hands, our customers have been making their ‘democratized’ access felt. We’ve also seen the bar for non-financial risk controls has risen significantly with a new, systemic perspective on operational resilience and new technologies like Cloud, PETs, and Quantum. Conduct, culture, diversity, and senior management accountability have also shot up the agenda. All of this means a better understanding of the global regulatory framework, deeper controls, and better RegTech/ SupTech with trusted, digitized, and collaborative models are required. 


PJ Di Giammarino, Founder and CEO of JWG

From a financial risk management perspective, what sorts of issues should finance practitioners be thinking about when it comes to Regtech? 

Regulators are rethinking the risk information system for Finance. The EBA has consulted on the feasibility of a new integrated reporting system for all EU competent authorities, which would formalize the way data is defined, the granularity of it, and possibly how it is collected. In the derivatives sector, JWG is helping to lead a collation of firms, trade bodies, and their suppliers to deliver Digital Regulatory Reporting (DRR). We have been thinking about how to align ‘top down’ data collection efforts like statistical and prudential returns with ‘bottom up’ data collection of trade and transactional data like EMIR Refit or MiFID III. Supervisors need a new, bold, and long-term approach to aligning data and technology strategies – let us know if you’d like to join our new Digital Regulatory Reporting Taskforce to help out!  

Tell us a bit about the relationship between data management and agility in this space, how it’s influenced the regulators. Has the profile of regulators changed since the last round of major regulatory changes – post-2008 global financial crisis? 

Six years after the G20 agreed on the post-GFC action plan, regulators started regulatory innovation functions, and the term ‘RegTech’ took off. A few of these RegTech teams managed to engage the industry in collaborative sprints to understand how new technology could be deployed for better compliance and the term ‘SupTech’ emerged. In the last couple of years, we’ve seen wholesale turnover at most of the top regulators and whole new teams being built. Some have clearly prioritized ‘data-driven supervision,’ which requires upgrading of their antiquated infrastructures, but this requires funding and talent, which are both in short supply. Supervisors need to work with policymakers and internal digital transformation agents to engage the private sector, agree on priorities and map out the transformation journey ahead. However, those actors are rarely in the same room and working to very different agendas right now. 

As a firm with its finger on the pulse of regulation, what’s JWG’s perspective on crypto market development? 

Regulators are busy with legal definitions and organizational mandates as they look to establish appropriate oversight for distributed Finance. Their approach, like with ‘normal’ banking, is to demand systems and controls like KYC are deployed. Fundamental to the policy debate is the question ‘Is data capital’? If the answer is ”yes”, then we need to find some way to recognize it on the balance sheet for FinTech, DeFi , and Financial institutions. A framework that recognizes the value of the investment in good RegTech and SupTech would revolutionize compliance.  

If a quant was looking to work on the regulatory side of the fence, what opportunity exists now? 

Central Bankers are telling us that Statistics or Supervision have the most immediate needs for freshly minted mathematicians. Stress testing, Financial stability monitoring, Payment system, and Risk Management functions are dealing with huge volumes of disparate data sources that need Quants. Conduct regulators are also in the market for people able to cope with high volumes of market data to spot market abuse or financial crime. These areas could also use quants that have experience in large-scale change programs.  Bottom line: regulation presents great opportunities to be the new kid on the block, no matter how much grey hair you have! 

For more details visit RegTech Conference