7 december 2017 - niceactimize.com · • trade reconstruction can be used as a proactive and...
TRANSCRIPT
Impact of Global Regulations on Trade Reconstruction
Dodd-FrankUnited States Legislation
for Swaps
• Record Keeping
including Voice records
• 72-hour Trade
Reconstruction
MAREuropean Directive
• Detecting Market Abuse
• Detect and Prove Intent
Even if Unsuccessful
Code of ConductGlobal Guidance for FX
MiFID IIEuropean Directive
January 2018
Refers
to
• Surveillance in Place to Detect Market Abuse
• Record Keeping of all related conversations
• Readily Available Evidence
2013 2016
3
Started with Dodd-Frank Trade Reconstruction Requirements
• “Shall maintain daily trading records of the swaps of the registered swap dealer and major swap
participant and all related records and recorded communications, including electronic mail, instant
messages and recordings of telephone calls”. - 731 Dodd-Frank Act
• “Provide a full SWAP timeline of events including all trades and/or communication within 72 hours”
PRE-TRADE TRADINGTRADE
OPERATIONSCLEARING
- 764 Dodd- Franck Act, SEA Section 15F(g)(4)
4
Evolved with MiFID II Trade Reconstruction Requirements
• “Records shall include the recording of telephone conversations or electronic communications relating to
financial transactions.”
• “…Shall also include those intended to result in transactions…even if those conversations or communications
do not result in the conclusion of such transactions or in the provision of client order services.”
• “… Must provide the evidence of ability to detect behaviors that may be relevant to market abuse –
in all recordings. This evidence must be readily available for regulatory investigation.”
- Article 16(7) and Recital 57 of the MIFID II Directive
PRE-TRADE TRADINGTRADE
OPERATIONSCLEARING
5
APAC is Now Coming Online Too
• “We’ve just declared intentions to outline China’s version of MiFID II.” - Han Chen, Chief Executive of Ceinex
• “Financial regulations in China will be stricter in the future as regulators seek to control financial risk and maintain
stability.” - Guo Shuqing, Chairman of the China Banking Regulatory Commission (CRBC)
• “The Hong Kong Monetary Authority expects Authorized Institutions to adopt a holistic and effective framework
for fostering a sound culture…examples of indicators include risk limit breaches, compliance breaches,
transactional communication surveillance…” - Hong Kong Monetary Authority, 2 March 2017
PRE-TRADE TRADINGTRADE
OPERATIONSCLEARING
6
Trade Reconstruction – Complicated to Navigate
PRE-TRADE TRADING TRADE OPERATIONS POST-TRADE
“Can I get a
quote for..” “Done deal..”
“Have a large
deal coming
for...”
“Will make the
changes..”
“Confirmed..”
“The deal has
cleared..”
Sales Trader with Client Trade Support with Back OfficeTrade Support with Sales TraderTrading Desk with Sales Trader
“Can you
recommend..”
“What are you
hearing
about..”
Market Views Bid / Ask Market Sounding News Negotiations Confirmations Settlements TransfersQuotes Amends Cancels Reconciliation
To reconstruct a trade, you need to identify and present all of the voice and electronic
conversations that contributed to the process of the trade execution throughout the organization
8
Trade Reconstruction – Data is Everywhere
9
Disparate systems of structured & unstructured data complicate the process of trade reconstruction
Desk Phone
Trading Turret
Mobile Phone
Instant Messages
Corporate Emails
• Siloed archives of relevant trade data
• Multiple data types and formats
• Inconsistent Metadata and Identity Properties
• Variety of tools to identify and access the data
What do you have?
Trades
Where do you start?
• How do you identify all the relevant and related
data?
• How do I correlate information across multiple
data sources?
• How do I create and share a timeline of events
Chat Rooms
Executions
Orders
• Needed to reduce investigation times and improve
the process of identifying and reconstructing
communications related to trading activity
• The existing process was manual, inefficient and
error prone which resulted in the inability to satisfy
the expectations of the compliance teams and to
the regulator
• The vast amount of communications data and
related trade information was stored in silos which
made identifying, correlating and packaging the
information difficult
Case Study: Global Bank
Trade Reconstruction Challenge
• This customer consolidated all their trade, order, execution, trading alerts, email and
chat communications data into a single global Hadoop data lake.
• They used NICE Communication Surveillance platform to index the Hadoop big data
and included the NICE voice integration to make all trade data instantly searchable
from a single portal.
• The NICE big data analytics solution sorted and organized all the trades and
communications data providing a smarter way of searching for required content
through better understanding of the data.
• The NICE correlation search analytics provided a simplified process for finding
related information. The customer is able to start with a single trade or
communication and systematically find all other trade, order, execution, chat, email &
voice that could be related in seconds.
• Perform trade reconstructions using all of the trading data and prove all steps of the identification, reconstruction and review process
• The process improved a time-consuming, error-prone manual process that previously took hours and reduced it down to just minutes resulting in a significant cost savings for the customer
13
The Solution – NICE Trade Reconstruction
Aggregate
Analyze
Act
Use Case Examples
14
• Perform a trade
reconstruction of all other
activity for an individual such
as trading alerts, email and
chat exchanges which
occurred around the event
Voice CommunicationContains LanguageSuggesting Collusion
• Need to perform contextual
reviews of trading activity
with no alerts by
performing a trade
reconstruction
Trade Review Process
• Need to reconstruct the
related trade events around
the alert details, voice, email
and chat communications
that provide context
Trading Activity Triggers
an Alert
Trade Reconstruction – Bringing It All Together
Turrets MobileVoice Email NewsChat Trades Orders
Text Analytics RelevancyNatural Language IndexingCorrelationBehaviours
InvestigateTimeline
ReconstructionDocument
• Identify potential anomalies
• Create full trade event reconstruction with
timeline review
• Policy-Driven Workflows with Automated
Actions to collaborate
Packaging
Making Trade Reconstruction Efficient
Speech Analytics
Central Access to Relevant Trade Data
Provides Contextual Results
With Efficient and Effective Applications
• Aggregate the data in a single solution
• Index, clean and enrich the data
• All data is fully searchable in an central
system
• Convert Voice Conversations to Text
• Analytics to sort and categorize the data
automatically
• Machine driven correlation to instantly find
related conversations and content across
100% of the data within the system
Aggregate
Analyze
Act
Identify
15
16
,
Regulators Expect…
Current approach…
Multi-channel Trade
Reconstruction
Siloed channels of info
Specific Trader
Behavior
Suspicious Traders
Continuous
Reporting
Ad-hoc Reporting
Proactive
Surveillance
Approach
Reactive Compliance
The Way Forward
in Compliance
Why NICE?Simplify – Allow automation and
analytics solve the complicated
challenges of trade reconstruction
and managing investigations
Efficiency – Significantly reduce
time in searching for data and related
communications
Assurance – Demonstrate
proactive compliance through
advanced analytics and auditable
process
• Automated trade reconstructions allows you to more effectively meet MiFID II and Dodd-
Frank Regulations
• Also will allow you to more efficiently manage risk and better understand the activity that
is going on in your firm
• Helps uncover unknown risk that could impact your firm
• Disprove potential market abuse
• Trade Reconstruction can be used as a Proactive and repeatable process and not limited
to a triggering event or request
From Reactive to Proactive Risk Management