As we sit here in 2024, nearly 15 years past the Pittsburgh G20 Summit, it is evident that the pace of regulatory change has only accelerated. Core participants of capital markets, whether locally or globally, are finding they need to deal with complexity, ambiguity, and accelerating change. There is also a real cost to not complying. So, now more than ever, it is time for a compliance rethink.

Why is this important for the buy side?
The challenges facing the buy-side mirror those of the sell-side, yet with distinct nuances. Juggling a multitude of jurisdictions, the buy-side seeks to stay ahead of reporting requirements, particularly as they approach the limits that would trigger disclosure thresholds. The buy-side is seeking simplicity from its technological solutions and is, therefore, often opting for turnkey solutions to seamlessly integrate into existing systems.

Introducing Endoxa and its consensus decision-making approach
Enter Endoxa, an industry consortium whose executive committee is made up of some of the most sophisticated financial institutions with a deep understanding of market best practices. The first regulatory use case Endoxa is focusing on is called position reporting (also called disclosure of interest or shareholding disclosure), which is a market transparency initiative that spans hundreds of jurisdictions affecting sell-side institutions and buy-side clients.

Droit is the chosen technology provider for Endoxa, which provides a new methodology for consensus, and it starts with regulatory text. From the regulatory text, a decision model is built and enhanced with legal analysis (coming from Aosphere Limited), which is then reviewed by working groups of industry practitioners. Any remaining questions are reviewed with legal experts from Allen & Overy and, if needed, taken directly to the regulator for clarification. This waterfall approach not only ensures compliance, but signals to the regulator that involved firms are making a serious effort to understand and model regulatory intent.

How is consensus decision-making evolving?
While Endoxa’s primary focus remains position reporting, this detailed model for decision-making across different jurisdictions is applicable to other regulatory domains. As the consortium grows, so should its influence, attracting interest from market players who might not necessarily want to engage in the building process but do want to benchmark themselves against the newly established best practice.

Amidst an ever-changing regulatory landscape, consensus decision-making has emerged as a welcome point of clarity. The Endoxa framework offers the industry a blueprint for unified, standardised approaches to regulatory decision logic. With a common understanding established, institutions can be confident in their regulatory interpretations.

If you are interested in learning more about the Endoxa consensus decision-making approach, please get in touch with sales@droitfintech.com.

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