OPEN SOURCE CANONICAL MODELSA Proposal to Enhance Regulatory Compliance

May 2017

REGNOSYS CORE MISSIONTransform the Industry’s Regulatory Compliance ApproachBased on the Digitalisation of Standards & Practices

2

Canonical Modelsin the open source domain

WORMS Storage, with Audit Capability

Data Storage, Encryption & Segregation

Eligibility Assessment

Reporting & Exception Handling

Reference Data Management Regulatory Computations & Projections

Client Data

Marketplace Data Adjustment Reporting Tools

Scaling & Resiliency Management

Version Management (market participants, clients, regulators, standards)

Compliance & Performance Monitoring

§ REGnosys provides a digital repository of market standards and practices as way to facilitate data and workflow normalisation and uses it as a foundation for its regulatory platform

§ REGnosys’ Programmatic Compliance solution exposes market standards and practices through a common syntax, that is accessible to non-technicians and also provides automatic code generation

§ The cohesiveness and efficiency outcome will benefit all market participants and regulators, who will be incentivised to further leverage and contribute to such marketplace repository

Open Source Component Licensed Component

Regulatory Platform Implementationbased upon the canonical models, to facilitate integration

and ensure strict compliance

Open Source Canonical Modelwith associated programmatic

implementation

COMPREHENSIVE APPROACH

3

Data Standards &Best Practices

RegulatoryProvisions

Open SourceWorkbenches

Workflow Standards &Best Practices

Framing a Comprehensive Canonical Model byLeveraging Solutions Available in the Open Source

IMPLEMENTATION PRINCIPLESThe Platform’s Unique “Programmatic Compliance” Approach

4

Current Common Approach

REGnosys Implementation Expected Benefits

Data Representation

Data standards mapped to internal representations through distinct technology stacks, with subsequent mapping throughout the front-to-back flow

Rule compliance approach documented as part of functional specification documents

Compliance logic buried deep into the code across a wide range of applications

Loose relationship between the actual implementation and its various inputs: standards, rules and compliance specifications

Data model explicitly tied once to all relevant data representations, with effective mapping tools associated

Regulatory provisions references associated to the model and the generated code base

Data and workflow constraints expressed through explicit rules which are associated to the model

Model driven development, whereby executable code is generated from the model, which is in turn tied to the standards and rule provisions

Robust Mappingamong the respective data

representations – e.g. from a FIX execution, to an FpML trade, to an

ESMA ISO 20022 report

Facilitate Auditingof the implementation, which can

be systematically evaluated

Mitigate Tail Riskof non-compliance implied by the

opacity and complexity of most current implementations

Cohesive Implementationthroughout the implementation

and maintenance lifecycle

RuleReferences

Compliance Logic

Programmatic Implementation

COHESIVE FRAMEWORKClear and Transparent ModelTied to a Programmatic Implementation

5

Domain Specific Language

Graphical Projections Automatic Code Generation

Model

VALUE PROPOSITIONDigital Repository of Marketplace StandardsCombined with a Programmatic Compliance Implementation

6

Canonical Data Model

Encompassing the whole financial flow and bringing together the relevant standards

Canonical Workflows

Based upon the canonical model, reflected by sequence diagrams and explicit validation rules

Workbench

Domain Model

Mature Open Source

Solution

Artefacts expressed through appropriate languages and translated into executable code

To drive the canonical model adoption the repository must:§ Be openly accessible to market participants§ Directly integrate with their technology stack§ Update as changes take place

An effective domain model must combine 2 sets of artefacts:

Key Benefits for All Stakeholders

Regulators

§ Rosetta Stone for information sharing among agencies when using distinct data standards

§ Leading to higher reporting quality over time§ Digital repository of workflows and practices of

the marketplace, facilitating further rulemaking

Market Participants

§ Opportunity to converge data standards and market practices

§ Integration into participants’ own ecosystemsthrough a programmatic implementation

§ Further analytical capabilities leveraging the comprehensive business flow model

RegulatoryTechnologyEcosystem

§ Marketplace positioning of REGnosys’ regulatory technology platform founded on a long term commitment to open source canonical models

§ Open collaboration expected over time with other service providers similarly positioned around such platform