Modern trading rooms have become more and more complex in recent years. Decisions regarding what, where, when, how and with whom to trade are based on a wide variety of data sources. The incoming data flow of prices, news, analysis and other relevant information is constant. Trades can be executed in many different ways as traders communicate with their clients and counterparties via multiple channels, including dealerboard turrets, electronic order and execution management systems, instant messaging (IM) and chat platforms, mobile phones and tablets running various apps, and even e-mail.
To meet increasing compliance requirements, this data needs to be captured and stored for easy analysis, so that not only trades, but the events leading up to those trades, can be reconstructed on demand. Compliance teams and trading technologists face complex challenges in making sure the relevant data can be pulled together in a structured and transparent way to satisfy the growing global compliance demands.
For electronic trading platforms and order management systems the process is relatively straightforward, as order messages are already in a format (e.g. FIX) that generates clear, time-stamped audit trails, allowing for fairly easy retrieval and reconstruction. Chat, IM-based and e-mail conversations are more difficult given their unstructured nature in comparison to electronic trades. But things get much more complicated when it comes to voice-based interactions.
Historically, firms might have recorded voice conversations using legacy technologies where all voices were recorded to a single channel in a highly compressed format, often to tape. But because of the way these recordings are archived and indexed (or not), finding conversations that pertain to a particular trade can be like searching for the proverbial needle in a haystack. When trying to uncover information relating to a particular set of trades, some firms have been known to draft in staff who have spent hours, days, weeks and sometimes even months listening to bad recordings, which is obviously a hugely expensive and inefficient use of resources.
Firms can of course just stick their heads in the sand and hope that they won’t face the kind of regulatory investigation that would require trades to be reconstructed on demand. But even for a firm that is squeaky clean in all its dealings, this is very short-term thinking. Any firm, at any time, can come under regulatory scrutiny. So it is important be able to respond without diverting money and resources away from day-to-day operations. Not only that, but if the right sort of technology, process and infrastructure is put in place to address compliance needs on a pre-emptive basis, a wide range of business benefits can also be realised.
The first step in all of this is for firms to ensure that every relevant interaction – regardless of the communication channel - is not only captured but also indexed with appropriate metadata. From a dealerboard/turret perspective, the move towards IP-based systems such as Telstra's Trader Voice offering, which is powered by enepath, open up all kinds of possibilities in this regard, which never existed in the past. An example of this is multi-track recording of calls where the voice of each person is recorded – in uncompressed format – to its own individual channel; indexed, tagged and time-stamped. Because there is no crosstalk between participants, the accuracy when running each of these channels through voice recognition software to convert speech to text is far greater than it would be otherwise, enabling further use of indexing around particular keywords for example. Trade reconstruction solutions such as those provided by Insightful Technology, which can be hosted within Telstra's global data centres, can then cross-reference those conversations against data from other sources such as electronic trading systems and IM/chat platforms for example, thus providing compliance teams with a much fuller picture of events relating to a particular trade. All on demand.
The business benefits when adopting this kind of approach can be huge. Aside from helping reduce business disruptions resulting from compliance investigations, firms can take a more pro-active approach to meeting their compliance obligations. Not only that, but because trading-related data from all communication channels is being captured systematically, firms can gain much greater levels of business intelligence, which can be used to improve customer service and identify new opportunities.
The technology is available today to address trading room compliance needs. Firms just need to implement it and use it.
To learn more, access "New Initiatives in Compliance Technology" – a Financial Markets Insight from The Realization Group and Telstra.