Finos Sees Opportunity for Open Source in RegTech Space

If you can’t beat ’em, join ’em.

As much as they want to move fast and break things like their tech peers on the West Coast of the US, financial services firms operate in a heavily regulated space. Gabriele Columbro, founder and executive director of the Fintech Open Source Foundation (Finos), says that while the debate between regulation and deregulation will persist, the focus should be on streamlining the reporting process using newer, more sophisticated tools in conjunction with existing systems and in a collaborative way.

To that end, Open Source FinReg is an initiative created by Finos that aims to bring together financial institutions, technologists, and regulators to potentially build common data standards and platforms specific to financial regulation technology, though it is still early days, Columbro tells WatersTechnology.

“If you put these three requirements together—[the projects are] common across the industry, [they’re] non-competitive, and [they] can resolve or improve the bottom line—then it becomes pretty obvious that we could and should be collaborating on financial regulation, implementation of financial regulation, [and] standardization of data,” Columbro says.

• Read More: Driven by common industry pain points and unforeseen complications, capital markets firms have begun using open-source technology more widely. Click here to read more.

In addition to those use-cases, Finos has started a campaign centered on a new vision for open source and regulators. Through FinReg, Finos hopes to work with regulators with the goal of making machine-readable regulation the norm. Rather than firms having to scramble to find patchwork solutions for each new rule that comes down the pike, through the use of open-source collaboration tools, financial institutions can pool their efforts. Creating common standards and platforms will allow banks and asset managers to better focus their tech spend on bigger projects that provide value, rather than regulatory projects, which do not serve as competitive differentiators.

Coumbro adds that Finos has engaged with more than 30 regulators as part of this conversation. However, regulators’ ultimate role in Open Source FinReg is still to be determined.

“We would love for them to be involved in how the sausage is made, in the very process of open source, but we also know that [regulators] are not very forthcoming when it comes to blessing or even associating themselves with any sort of activity out there,” Columbro says.

Not only is Finos figuring out how best to work with the regulators, it still hasn’t settled on a name: While Open Source FinReg is the working title, consultations are ongoing within the community about whether to call it Open Source RegTech, Open Source FinReg, or some other variation.

Morgan Stanley/Goldman Sachs Efforts

Finos is currently looking at open-source projects that already exist in the regulatory sphere where they can could potentially add value or guidance.

One such project that stands out is an initiative by Morgan Stanley called Morphir, which is similar to Goldman Sachs’ open-source Alloy project—a visual modeling environment and system that creates, maintains, and helps distribute models built in the PURE modeling language.

Morgan Stanley, which participated in the Alloy pilot, introduced Morphir in March of this year, and announced it as “a multi-language system built on a data format that captures an application’s domain model and business logic in a technology agnostic manner.” It is aimed at turning business logic into actionable data that can be translated between languages, visualized, shared, and stored across the organization.

“Morphir simply turns that intermediate representation into a developer-friendly data format that makes it easy to build automation on top of it,” according to Morgan Stanley’s documentation of the project on GitHub.

Finos is working with Morgan Stanley on the project by discerning datasets that would be relevant to a regulator for a particular rule, and developing ways to send those datasets forward. The foundation is also looking at potentially standardizing Goldman’s Alloy model, which the bank already uses internally for regulatory reporting, so there’s an opportunity for collaboration there as well, Columbro adds.

“Yes, we’re going to be looking at existing projects, either within financial institutions or [projects that] are already open-sourced,” that are specific to regulatory reporting needs, he says. “I will just call it projects or support, rather than contributions. … There are existing initiatives whereby Finos could help—rather than necessarily being a contribution of Finos, it could be us providing a legal and governance framework for several parties to contribute.”