Compliance Solutions for Capital Markets

MIFID
Pal Ribarics
Oracle, Financial Services Solution Team
EU Enlargement Countries
pal.ribarics@oracle.com
Dubrovnik, 9 May 2007
Mantas Overview

 Overview of Mantas/Reveleus/Oracle

 MIFID

 Mantas Trading Compliance Solution

 Competitive Differentiation
Latest news

 Oracle stake in i-flex goes up to 83%

 Reveleus acquires Mantas

 Citigroup signs Reveleus Operational Risk for an Enterprise-wide RCSA deployment

 Reseller Agreement signed between Oracle & Reveleus for Reveleus Operational
Risk

 Reveleus Basel II solution is ranked in the Gartner leaders quadrant for 2006 as well,
most competitors fall behind

 Reveleus Operational Risk ranked among the top Operational Risk solutions globally
by analysts

 Reveleus ranked 4th in a Chartis Research Report covering the Top 100 Risk
Management vendors worldwide.
i-flex Completes Acquisition of Mantas for $122M

03-Oct-06

i-flex solutions Completes Acquisition of Mantas

Mantas Now a Wholly Owned Subsidiary of i-flex solutions; S.Ramakrishnan Appointed as
CEO

Mumbai, October 3, 2006: i-flex® solutions (Reuters: IFLX.BO & IFLX.NS), a leading IT
solutions provider to the global financial services industry, announced the closing of its
previously announced acquisition of Mantas Inc., a provider of regulatory compliance, loss
prevention and revenue generation solutions headquartered in Herndon, Virginia, USA.

Under a definitive agreement announced on August 14th, Mantas was acquired in an all cash
transaction of US $ 122.6 Million. With the completion of all regulatory approvals, Mantas is
now a wholly owned subsidiary of i-flex solutions.

S.Ramakrishnan, CEO of Reveleus-i-flex's Business Analytics division, will take additional

charge as CEO of Mantas. SR has nearly 25 years of banking and technology experience
spanning India, the Middle East, Singapore, New York and Silicon Valley, and has led Reveleus
from a start-up to a leading product in the Risk and Compliance space.
Reveleus Enterprise Risk & Compliance Offerings
Risk & Compliance Reporting &
Enterprise Risk & Compliance Applications Analysis
Infrastructure

Capital & Performance Management

Internal Reporting
& Analysis
EDW
Basel II/ Economic Risk Based RAPM Credit Portfolio
1A Capital Pricing Optimization
Risk & Compliance
Repository
Enterprise Risk Analytics
Loan
Aggregated &
Systems
Relational Reporting

Treasury
Liquidity Interest Retail Corporate Funds Transfer External
Systems
Risk & Compliance Risk Rate Risk Credit Risk Credit Risk Pricing
Reporting
Business Metadata
Operational Risk & Compliance Home/Host
Collateral
Systems Reporting

General
Ledger Process Loss DB
RCSA Internal KRI Action Economic
Rule/Run Framework Mapping Controls Planning Capital
Capital Adequacy
Reporting
Information Anti - Money Laundering, Fraud & Surveillance
Vendors

OpRisk Local Regulator

Data Modeling Framework Reporting
KYC/CDD
Transaction Trading Broker Fraud & Anti
Monitoring Compliance Compliance Theft
Mantas Overview
Introduction and Differentiators

Only company demonstrably proven to provide Only company providing surveillance for:
integrated, single source compliance for all FS
businesses anywhere in the world.  Retails Banks
Current surveillance statistics for Mantas Software:
 Wholesale Banks
 125+ production deployments
 Private Banking and Asset Management
 211 jurisdictions - Trading Compliance
 Institutional Brokerage
 122 countries - AML
 Prop Trading
 700 million transactions per day
 16 languages  Capital Markets

The most coverage of any provider - nearly 300  Retail Brokerage

different exposures/risk monitored
 Investment Banking
10 patents pending.
 Mutual Funds
Only compliance company in BTN Top 10, Waters
“Best Compliance Firm” 2 years in a row.
 Insurance

…. and hence offers a compliance TCO

substantially lower than alternative compliance IT
costs or piecemeal vendor selection.

ROI counted in months if not weeks.

Market Leadership

A worldwide leader in enterprise AML, compliance, fraud, operational risk and business record assurance solutions for the most
sophisticated financial institutions globally

Representative Customers Industry Awards

2005 Waters Names Mantas as Best Anti-Money

Laundering Solution For The 2nd Year In A Row

2004 Waters Editorial Awards: Best Anti-Money

Laundering Solution

Mantas Named Best AML Solution in Waters

2004 Rankings

Mantas Named Among “BTN Top Ten

Technology Companies To Watch”

Mantas Highly Commended in The Bankers 2004

Technology Awards

2003 Waters Editorial Award: Best Compliance

Solution

Mantas Named a Leading Force in New

TowerGroup Report on AML Vendors

Butler stated, “Mantas is ‘A Powerful Response’ to

Compliance Needs”

Celent Ranked Mantas as a Leading AML

Solution
Summary of Mantas
Every Product, Every Business, Every Country, Every Size – Our Track Record is Impeccable

Mantas is worldwide leader in AML, compliance, fraud, operational risk and business record assurance
solutions to the most sophisticated Financial institutions globally. Examples:

150,000.000
Trades a day
analyzed.

10 million trades a
day in London,
Singapore and
300,000 accounts New York
in Chicago area covering 150
exchanges.

50,000 High Net

200 million
Worth Accounts in
accounts in 61
NE United States
countries.

2 million accounts
in Switzerland.
 Mantas Behavior Detection Platform

 Unmatched product coverage across

widest set of possible transactions
and events
Fraud Management
 250+ different exposures / risks /
Operational Risk Management
opportunities monitored
Identity Theft
Basel II
Anti-Money
 Unparalleled accuracy of powerful
Capital Adequacy
Laundering behavior detection engines
Self Assessment
Trading Compliance Client Assurance
Broker Compliance
Consumer Credit
Margin Management  Tremendous intellectual property and
Regulation domain knowledge (10 patents
USA Patriot Act Cross-Selling
pending)
EU MiFID Customer Churn
EU Market Abuse BEHAVIOR Contact Management
Directive DETECTION  Outstanding add-on tools that
Terrorism Act 2000 enhance the applicability of the
PLATFORM Mantas products
 Positions Mantas as a key integration
component for workflow systems

“Outstanding Coverage” – Trading Compliance User Group Meeting, December 2005

(ABN AMRO, Bear Stearns, Barclays Capital, Credit Suisse, Goldman Sachs, SSB)
Mantas Behavior Detection Platform Architecture. Packaged,
Proven & Powerful...

Case
Management

Alert
Management

Data Model
& Behavior
Data Detection
Ingestion
cycle

Behavior Alert Document

Life

Data Ingestion Data Model Active Pages

Detection Management Management

► Provides data ► Enables the world’s ► 10 patents pending ► Highly flexible alert ► Fully integrated ► Ad hoc real-time
consistency and most accurate and management investigative workflow reports can be
transparency across sophisticated ► The most powerful allowing certain alerts that connects to any created in a matter of
Tasks / Phases

the enterprise behavior detection set of approaches to to go to specific other sources hours
analytics solve each specific individuals and be
► Enables seamless, business situation ► Transparency and ► Flexible and ad hoc
► Leveraged by Mantas scored in the most compliance to all
cost-effective being addressed effective manner visualization without
expansion and customers, as part of activities within each encroaching on the
customization their Six Sigma ► Flexible definition of ► Enables users to
investigation discipline and rigor
programs, operational behavior of interest
dashboards and view alerts with full ► Direct interface to needed to manage
► Required step in that caters to each documentation and other systems compliance and risk
implementation of reconciliation institution for any
processes reporting including law
Mantas’ solution type of transactions requirements enforcement ► Very powerful
graphical interface
Financial Services Data Model (FSDM) - Subject Areas

CUSTOMER
MARKET

ENTERPRISE

ACCOUNT SECURITY

TRANSACTION

TRADE
 Trades in FSDM
All Supported Asset Classes

Demand for financial instrument Means by which order is satisfied Combined demand and means by which
to be bought or sold Financial instrument is bought or sold
0
1 1
Order Summary M Trade Summary
1
M 1 1 1 M

0
M
Execution Summary
M
1

Order Events

New
Cancel
M
Route
Cancel & Replace
Modify
Desk
Trade Execution Events

New
Cancel
Correction
Cancel & Replace

Order Interface Trade Execution Interface

At The Heart - Detection Engines

•Mantas uses a tested and proven combination of 5 behavior detection engines (most competitors use one , 2 at maximum)

to apply the right technique to identify complexity and accumulate evidence.

•Mantas currently has 14 patents pending around these activities and algorithms.

Profiling
Profiling

Text Mining
Text Mining

Rule Patterns

Sequence
Sequence Matcher
Matcher

Link Analysis
Increasing Detection Accuracy

BEHAVIORS FOCUSING ACCURACY

Tune thresholds

DAY-TO-DAY
OPERATION
as necessary

Suppression of
non-exposures

Score

IMPLEMENTATION
against risk

STAGES
Set
Profiling
Profiling transaction
thresholds
Outlier Detection
Outlier Detection Text
Text Mining
Mining

Rule
Rule Patterns
Patterns
Rule Patterns
Tune patterns
Sequence Matcher
Sequence Matcher to the data
Link
Link Analysis
Analysis
Scenario Threshold Editor

Increasing Accuracy

Tune thresholds
DAY-TO-DAY
OPERATION

as necessary

Suppression of
non-exposures

Score
against risk
IMPLEMENTATION
STAGES

Tune scenarios
to the data by setting
initial limit thresholds

Tune scenarios to the

deployment by setting
initial filter thresholds
The Goal…an alert
Integrated Alert Management and Workflow
Identification of risk, complete end to end investigation
Transaction & Alert Repository
Mantas Overview

 Overview of Mantas

 MIFID

 Mantas Trading Compliance Solution

 Competitive Differentiation
Introduction to MiFID
What is it?

 Introduces a consolidated regulatory framework for European markets in financial

instruments in order to deliver

i) Retail Investor Protection

ii) Investment Services ‘passport’ to market transparency

 Part of the EU Financial Services Action Plan (FSAP)

 One of the Lisbon 2000 Strategy reforms to create a single market for wholesale financial services

 Supercedes the EU Investment Services Directive (ISD)

 Enforced regulation in 28 EU countries

 Implementation by November 2007

Introduction to MiFID
Provisions
Post-trade Transparency
• Whether on regulated markets, MTFs
or OTC, trading in shares are subject to
a post-trade transparency obligation
Pre-trade Transparency
• Establishes minimum
standards of pre-trade
transparency for shares
traded on regulated markets
and MTFs
• Obliges systematic
internaliser to undertake
public market-making
obligation - must provide
definite bid and offer quotes
in liquid shares for orders
below 'standard market size'
MiFID
Order Handling &
Execution
• Firms must ensure best
possible deal for clients
taking into consideration
price, cost, speed and
likelihood of execution and
settlement
Passporting Rights
• Improves operation of single
passport for investment activity
• Firms able to establish branches in
other member states and offer cross-
border services
• Host country responsible for
ensuring compliance with conduct of
business requirements
Client Management
• Extensive and requires
significant changes to the
FSA's Handbook
• Most sensitive is requirement
for firms to conduct full
suitability test on clients when
providing investment advice or
portfolio management
Markets in Financial Instruments Directive (MiFID)
The Market in Financial Instruments Directive (MiFID) - Executive Summary

The Market in Financial Instruments Directive (MiFID) shares many commonalities with the Market Abuse Directive, enacted
late last year. Both directives are aimed at the creation of a common financial services market throughout Europe. In most
cases, the 42-step process derived by the European Union towards this goal has focused on a “harmonization” of existing
regulations between member states. MiFID is a departure from this approach and instead introduces regulations more akin to
best execution and advice regulations currently in force in the United States of America. MiFID, like any new regulation,
presents financial institutions with a variety of choices:

 They can take no action, and hope that current systems will satisfy the new regulatory requirement.
 They can address each new directive and regulation independently.
 They can adopt a comprehensive and holistic approach towards compliance that protects the firm

MiFID can be summarized into eight categories:

MiFID Category Description

Conflicts of interest
Conduct of business
Best Execution
Passporting rights
Investor classification
Regulated market and MTF standards
Pre-trade equity transparency
Post-trade equity transparency
Establish organizational structure and procedures that avoid conflicts of interest
Common conduct of business standards are established
Client must receive the best possible execution quality and price
Firms will have access to consistent banking practices across all EU member states
Establishes a common EU framework for classifying counterparties and clients
Opens all trading venues between member states
Establishes minimum standards of pre-trade transparency across all trading venues
All transactions are subject to post-trade transparency obligations and reporting
Markets in Financial Instruments Directive (MiFID)
 The Market in Financial Instruments Directive – What is it?
MiFID, is aimed at the creation of a common financial services market throughout Europe.

Industry Problem Statement MiFID Correction

There are currently 25 member states, each with individual and MiFID seeks to create a consolidated suite of trading rules
unique regulatory requirements across all EU member states. Essentially creating regulatory
harmonization of trading operations.

Regulations across asset classes are not consistent, create MiFID extends regulatory coverage from Equity transactions to
confusion and opportunity for malfeasance Commodities and Over the Counter Instruments.

Client trades are often executed on exchanges that favor the MiFID demands that customer trades are executed on the best
financial institution and not the client exchange for the best price at the time of order fulfillment.

This is known as Best Execution.

Trading venues are not always favored for price or best MiFID ensures that best bid/offer are considered as primary
bid/offer criteria when executing orders thus ensuring the best venue
wins the execution.

Implementation Date: November 1, 2007

 Level 1 – Directive, adopted April 2004
 Level 2 – Technical implementing measures, Released February 2006
 MiFID – Challenges Facing the Industry
MiFID Category Challenge Solution/Partner

Conflicts of interest Resolving conflicts of interest and considering business practices and conduct all require firms to  Mantas Control Self Assessment
evaluate their processes, procedures and policies This can create a daunting challenge as
investment firms need to consider, change and manage their processes with respect to MiFID. In  Mantas Control Room
addition, firms need to monitor trades and transactions to assure that no breaches of their fiduciary
responsibility have occurred.  Mantas PS Group (Implementation)
Conduct of business
Mantas provides a suite of control self assessment features that allows firms to automate the  i-flex / PrimeSourcing (Data Sourcing)
assessment, review and reporting of these critical policies, controls and procedures. This allows the
client to spend more time conducting business rather than continually checking the state of their
controls and procedures in order to satisfy the compliance requirements of MiFID. Mantas’ Control
Room Package facilitates the monitoring process identifying potentially illicit trades.

Best Execution The challenges represented in these categories are considered the most difficult aspects of the  Mantas Trading Compliance Solution
MiFID requirement. From monitoring every transaction, to ensuring compliance with best execution
rules, to providing an effective reporting and analysis framework, to the storage of five years of  Mantas Broker Surveillance Solution
order, execution and market data, firms are struggling and in some cases resisting the MiFID
requirement.  Mantas PS Group (Implementation)
Post-trade equity  i-flex / PrimeSourcing (Data Sourcing)
transparency Mantas provides a full range of automated transaction monitoring software specifically focused on
the surveillance demands of MiFID. The Mantas Trading Compliance Solution is designed to meet
the demanding MiFID requirements across the complete spectrum of trading exchanges in the
European Union. Additionally, Mantas’ Financial Services Data Model provides comprehensive data
storage capabilities, designed to meet the challenging data shortage requirement of MiFID with the
ability to output all relevant transaction reports into the formats prescribed by the various regulatory
and reporting organisations within the T+1 timeframe.

Investor classification Although MiFID rules are somewhat ambiguous, firms are increasingly seeking vendors and  IBM
partners that can help decipher MiFID’s final and ultimate requirements while assembling practical
approaches and software solutions that meet the MiFID requirement.  Cap Gemini
Regulated market and MTF
standards Mantas as part of establishing the industries leading Trading Compliance solutions have collected  Accenture
decades worth of practical and valuable industry experience through its products, peoples and
Passporting Rights services and is uniquely positioned to assist firms implement a strong and practical approach to
MiFID.

Pre-trade equity Mantas captures Order Book data as part of its underlying platform. This helps compliance  Mantas Trading Compliance Solution
transparency organisations prove and investigate pre-trade transparency as part of on-going monitoring of best
execution policy.
Mantas Overview

 Overview of Mantas

 MIFID

 Mantas Trading Compliance Solution

 Competitive Differentiation
Mantas Trading Compliance in the Market (MiFID)

 What is the solution ?

- Mantas Trading Compliance Solution
 What does the Mantas Trading Compliance Solution consist of?
- 1. Scenarios & Analytics (E.g: Best Execution)
- 2. Applications (E.g: Control Room)
- 3. Platform (E.g: Ingest, Detection Engines, Data Model & User Interface)
 Mantas Trading Compliance Overview:
 Mantas Platform supports the automated review of processes, policies & controls (Governance) while providing solutions for risk
assessment, case investigation & management (Risk)
 Existing Mantas technology lends itself to key aspects of the directive, including best execution, trade transparency, conflicts of interest
and best advice/customer suitability (Compliance)
 Best Execution Class – Evaluates the quality of individual order execution
 Proven & Deployed - Scenarios in this class examine prices and timing of orders and executions by comparing them to market conditions,
and they generate alerts when customers did not get the best execution of their orders.
Examples include:
 Price Improvement Scenario
 Price Disimprovement Scenario
 Market Order Execution Untimeliness Scenario
 Limit Order Execution Untimeliness Scenario
 Unfilled Marketable Orders Scenario
 Limit Order Display Scenario
 Limit Order Protection Scenario
Mantas Trading Compliance in the Market (MiFID)

 Trading Compliance Class – Detects behaviors that violate regulatory and internal policies and procedures

Examples include:
 Indications that one or more parties arranged trading activity for their own benefit

 Cross Trading Listed Options and Futures Within A Narrow Time Window Scenario

 Parking to Conceal Fixed Income Position Scenario

 Parking Via Settlement Date Scenario

 Monitors trading activity to detect situations when traders exchanged, or acted on, advance information
about their customers’ orders.

 Trading Ahead of Customer Scenario

 Front Running Large Orders Scenario

 Front Running with Related Products Scenario

Mantas Trading Compliance in the Market (MiFID)

 Control Room Package – Detects behaviors that potentially indicate conflicts of interest and insider
dealing/trading

Examples Include:

 Monitoring of trading activity against restricted securities (research, underwriting and primary market, book
building, loans, credit derivatives)

 Employee Trade Approval and Monitoring

 Watch List and Restricted List Maintenance

 Customer Suitability – Identifies trades and portfolios that may be inappropriate given a customer’s profile
Examples include:

 Customers with unsuitable trades

 Customers whose portfolios don’t match investment objectives

 Portfolio Visualization and Analysis

 Mantas Trading Compliance in the Market (MiFID)

Mantas Trading Compliance Solution – Most widely adopted Trading Compliance Solution on the Market

2002 2003 2004 2005 2006

Mantas Overview

 Overview of Mantas

 MIFID

 Mantas Trading Compliance Solution

 Competitive Differentiation
Functional Comparison:
Mantas offers cross enterprise Compliance and Operational Risk Management. Mantas wins when client
understand this cross enterprise exposure challenge.

AML Trading Compliance Broker Compliance Mantas Actimize Searchspace SAS Norkom NetEconomy

Retail Brokerage   
Retail Banking     
Institutional
Brokerage  
Capital Markets  
Correspondent
Banking     
Private Banking   
Insurance     
Foreign Exchange 
Fixed Income  
Equities  
Derivatives  
Best Execution 
Employee
Surveillance  
Supervision  
Suitability  