The Swiss Financial Market Infrastructure Act (FMIA), commonly known by its German name, FinfraG, spells out regulations for global derivative trading platforms and central clearing parties, including reporting, clearing, platform trading and risk mitigation. The act also incorporates laws pertaining to insider information/market abuse and shareholdings/public offers.

1. FinfraG: Opportunities & Challenges
for Global Trading Platforms
FinfraG, the Swiss Financial Market Infrastructure Act,
provides a single code of law for financial institutions’
organizational and operational infrastructures.
Executive Summary
The Swiss Financial Market Infrastructure
Act (FMIA), commonly known by its German
name, FinfraG, became effective on January 1,
2016. In addition to assuring that Switzerland’s
regulatory framework complies with interna-
tional standards, the act spells out regulations
for global derivative trading platforms and
central clearing parties. FinfraG also reflects
lessons learned from global regulatory reforms,
including Dodd-Frank;1
MiFID I;2
MiFID II;3
EMIR;4
and REMIT.5
This paper describes the various aspects of
FinfraG, as well as a framework companies can
use to help achieve and maintain compliance,
and heighten efficiencies throughout the
enterprise.
A Single Code of Law for Financial Markets
FinfraG aims to create a single code of law
for financial markets’ organizational and oper-
ational infrastructures, with regulatory obli-
gations around reporting, clearing, platform
trading and risk mitigation (see Figure 1,
next page).
FinfraG also incorporates laws pertaining to
insider information/market abuse and sharehold-
ings/public offers.
Figure 2 (next page) shows timelines for imple-
menting FinfraG’s key regulations. The details
of counterparty classifications, exposures and
effective dates of obligations may vary based on
classification.
As shown in Figure 3 (page 3), under FinfraG,
market participants’ obligations differ, and also
depend on the scope and volume of their business.
cognizant 20-20 insights | september 2016
• Cognizant 20-20 Insights

2. cognizant 20-20 insights 2
Regulating Organizational & Operational Areas
Figure 1
• Obligation to clear eligible contracts
through FMIA-recognized CCP
• Small entities exempt from
clearing obligation
• Procedure for portfolio
reconcilliation
• Identification and resolution
of disputes
• Daily valuation and timely
confirmation
• Exchange of collateral
• Obligation to trade standardized
derivative on trading platform
(exchange, trading facilities
multilateral/organized
trading facilities)
• Reporting obligation for all
derivative contracts
• Reports must be sent to
an approved trade repository
• T+1 reporting
Reporting
Obligation
Clearing
Obligation
Risk
Mitigation
Platform
Trading
FinfraG Implementation Timelines
Figure 2
Trade reporting of ETD
2016
Bilateral margining
Platform trading, new trades only
Central clearing, new trades only
Trade reporting
+18 months+15 months+12 months+9 months+6 months
Timely confirmation
Valuation of outstanding derivatives
Risk mitigation, portfolio reconciliation and
compression, dispute resolution
FinfraG
Enforcement

3. cognizant 20-20 insights 3
Deconstructing FinfraG,
Dodd-Frank & EMIR
Following are areas where FinfraG, Dodd-Frank
and EMIR obligations vary.
Reporting: All derivatives transaction data,
including OTC and exchange‑traded derivatives
(ETD), must be reported to a trade repository
recognized by FMIA, similar to EMIR, whereas
in the U.S., ETDs do not have to be reported.
FinfraG and Dodd‑Frank reporting obligations
are “single‑sided”, i.e., only one of the counter-
parties will have to report the transaction to
the repository. A “cascade” principle is used to
determine the reporting party. EMIR requires
reporting by both sides. A counterparty can
connect to a recognized trade repository and
report in a specified format within the T+1
deadline.
Clearing: All eligible contracts must be cleared
through a central clearing counterparty
recognized by FMIA. Similar to the U.S., FinfraG
provides exemption to small financial coun-
terparties, whereas EMIR does not. Also, FX
transactions have been kept out of the scope of
clearing obligations, unlike EMIR.
Risk mitigation: To reduce counterparty and
operational risk, contracts not traded through an
exchange or centrally cleared are subject to risk
mitigation. The main elements of risk mitigation
(confirmation timeframe, portfolio reconcilia-
tion, dispute resolution, portfolio compression)
remain the same across regulations.
Platform trading: Eligible derivatives must
be traded via trading facilities or an operator
of an organized trading facility authorized or
recognized by FMIA. The U.S. has introduced
swap execution facilities (SEFs) for trading of
standardized OTC derivatives. In Europe and
in Switzerland, the trading obligation requires
trading on a regular market/exchange, mul-
tilateral trading facilities (MTFs) or recently
introduced ordinary trading facilities (OTFs).
Developing a Compliance Roadmap
Unprecedented demand and evolving regulatory
requirements in the OTC space requires an
overhaul of the organizational spread and a
holistic approach to building a process and
technology infrastructure with an eye on future
regulatory requirements (see Figure 4, next
page). Traditionally, many financial institutions
have chosen tactical solutions over strategic
approaches simply to meet the deadline –
limiting benefits and, in the long run, resulting
in cost and effort overruns. A sustainable, agile
solution is the best, most efficient way to assure
compliance.
How Companies’ Obligations Differ
Figure 3
Requirement Financial
Counterparty
Small
Financial
Counterparty
Non-
Financial
Counterparty
Small Non-
Financial
Counterparty
Clearing Yes No Yes No
Trade reporting Yes Yes Yes Yes
Basic risk
mitigation for
non-cleared
trades
Timely
confirmation
Yes Yes Yes Yes
Portfolio
reconciliation
Yes Yes Yes Yes
Dispute resolution Yes Yes Yes Yes
Portfolio
compression
Yes Yes Yes Yes
Risk mitigation Valuation Yes No Yes No
Collateralization Yes Yes Yes No
Electronic
trading
Yes No Yes No

4. cognizant 20-20 insights 4
There are several steps institutions can take
to help assure that their critical assets – tech-
nologies, processes, data and people – align and
comply with FinfraG regulations.
Assess Regulatory Readiness
• Understand the existing trading environ-
ment, determine your company’s exposure
to FinfraG, and gauge the impact on your
organization.
• Validate OTC counterparties; analyze OTC
derivatives products (transaction validation).
• In view of the new regulatory requirement,
perform a gap analysis of current processes
and systems.
• Carry out a cross-border trade compliance
assessment; determine the overlaps, gaps and
equivalences with other applicable legislations,
such as Dodd-Frank and EMIR.
Design & Update Contracts/Policies/Procedures
• Set up a contractual framework and documen-
tation for central counterparty clearing and
client clearing.
A Reference Architecture for Regulatory Reporting
Figure 4
Trade
Repository
Reference
Counterparty
data
Asset class data
Client data
Market data
Legal identifier
Transformation & Enrichment
Source Source Source Source Source
ETL Layer
Validation & Reconciliation
Report development based
on the templates
Workflow
Centralized data warehouse
Rules-based engine (asset class & event-based)
FpML FTP/SFTP Swift Web Service Others
Trade & Position Collateral & Margin Market Valuation Risk Data
Staged Data
Regulatory
Reporting
Client
Reporting

5. cognizant 20-20 insights 5
• Develop a contractual framework and docu-
mentation for trade repository reporting.
• Establish internal processes that satisfy the
new requirements – incorporating all involved
departments.
• Update bilateral contracts for non-clearable
trades to comply with the new rules.
Adjust Collateral Management
• Shift responsibilities to the front office.
• Centralize collateral management for groups of
companies to better utilize collateral.
• Implement an organizational structure across
asset classes (derivatives and repo).
• Integrate processes for bilateral and centrally
cleared transactions.
• Optimize regulatory figures (RWA, LCR, etc.).
Develop an Information Architecture for Data
Management & Central Reporting
• Extract data from different sources (reporting
transaction, instrument, counterparty, and
lifecycle-event data) at stipulated frequencies
(near-real time, intra-day), including newer
uniform type identifiers (UTI).
• Develop a data transformation model for
refining and enriching raw data.
• Update collateral and database asset classes.
• Centralize validation and reconciliation using
a configurable engine (IRS, CDS & FX) and
specific events.
• Implement a rules-based engine to cater to
accounts, region and asset class, and to quickly
respond to changing requirements.
• Prepare data per repository (message ID and
transformation according to format, e.g. FpML).
• Improve messaging/communications via a
trade repository; evaluate reporting formats
provided by the repository.
• Enable transaction and position reporting for
internal and external clients.
The Way Forward
For companies competing in the continually
evolving regulatory space, a tactical solution
can be useful for achieving short-term gains.
However, institutions will be better served by
adopting a holistic approach that addresses the
following questions:
• What type of regulatory changes can we expect
down the road?
• Are regulatory requirements and responsibili-
ties clearly understood across the company?
• Are we making the best use of our internal and
external data?
• Do we have the information, processes and tools
needed to achieve and maintain compliance?
• Are our technology assets – hardware,
operating systems, networks and applications
– equipped to meet the heavy-duty demands
of a highly regulated, increasingly competitive
global market?
• Is our infrastructure – people, processes and
systems – well planned, well governed, and
highly efficient?
• Have we established a solution roadmap
and reasonable timelines – short, standard
and long-term – for meeting the compliance
deadline?
Companies that view compliance as an oppor-
tunity to rationalize, optimize and synchronize
their technologies, operations, processes and
workforce teams will set the pace for others.
Footnotes
1 www.gpo.gov/fdsys/pkg/PLAW-111publ203/content-detail.html.
2 http://ec.europa.eu/finance/securities/isd/mifid/index_en.htm.
3 http://www.economist.com/news/finance-and-economics/21601294-bold-new-law-will-reshape-
europes-capital-markets-bigger-bang.
4 http://www.hsbcnet.com/gbm/financial-regulation/emir.
5 http://www.acer.europa.eu/en/remit/Pages/Background.aspx.

6. About Cognizant
Cognizant (NASDAQ: CTSH) is a leading provider of information technology, consulting, and business
process services, dedicated to helping the world’s leading companies build stronger businesses. Head-
quartered in Teaneck, New Jersey (U.S.), Cognizant combines a passion for client satisfaction, technol-
ogy innovation, deep industry and business process expertise, and a global, collaborative workforce that
embodies the future of work. With over 100 development and delivery centers worldwide and approxi-
mately 244,300 employees as of June 30, 2016, Cognizant is a member of the NASDAQ-100, the S&P
500, the Forbes Global 2000, and the Fortune 500 and is ranked among the top performing and fastest
growing companies in the world. Visit us online at www.cognizant.com or follow us on Twitter: Cognizant.
World Headquarters
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Email: inquiry@cognizant.com
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About the Author
Shantanu Dubey is a Consultant within Cognizant Business Consulting’s Banking & Financial Services
Practice. He has over nine years of business and IT consulting experience in the implementation of
BASEL / regulatory reporting and banking solutions. He works with leading banks on product devel-
opment, business process optimization, business requirement management and gap analysis across
various geographic locations. He holds a bachelor’s degree in information and technology engineering,
and a post graduate diploma in management. He can be reached at Shantanu.dubey@cognizant.com.
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