Reducing Compliance Stress on the Trading Floor

“Buy”,” Sell”, “Take em”, “Hit the bid”, “Sold” and so it goes.  Everyone has seen a movie depicting the trading floor of a financial firm.  Although the movies often depict a higher level of commotion, the constant back and forth between firms and potential customers is very real.  The part the movies leave out is that someone, or a team of people, are responsible for monitoring all those communications to ensure their traders are following the rules.

Under the new Dodd Frank regulations, when a regulator requests to examine the communications surrounding a specific trade, firms must be able to respond within 72 hours by providing a full and accurate reconstruction of all communications, both pre- and post-transaction.

Historically, when such a request came in, the regulator would turn separately to each IT or Voice manager in charge of the various communication channels. Many firms have separate divisions responsible for each channel (voice, email, documentation). It was then up to the compliance officer to review all communications and reconstruct the interactions in sequential order. Not only is this process extremely time-consuming and inefficient, it also creates silos of communication.

A more ‘proactive’ approach by compliance officers can save a lot of time and reduce stress. This approach has two elements:

  • First, the compliance officer should be able to independently search for all communications needed for the regulatory inquiry, including across multi-channel threads (voice, e-mail, chat).
  • Second, the compliance officer must be able to analyze the ‘content’ of all the communication, instead of using only meta-data such as date and time. 

This approach will allow compliance officers to quickly find all relevant communication and review the actual content of the conversations. This doesn’t mean that IT and Voice departments will become obsolete, but it will reduce the search and analysis time needed to meet the Dodd Frank regulations. IT and Voice departments will continue to make sure all ‘communication’ on the Trading Floor is captured and securely stored. At the same time, compliance officers will have a more independent role, which will help improve efficiency and alleviate stress while facing the challenge of constantly changing regulations.

  

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