institutional financial services - sia partners · firms can be impacted by a number of factors...
TRANSCRIPT
INSTITUTIONAL FINANCIAL SERVICES
CONSOLIDATED AUDIT TRAIL (CAT)
SUMMARY02
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06
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CAT OVERVIEW
CAT TIMELINE
KEY CAT CONSIDERATIONS
SIA PARTNERS – CAT SERVICE OFFERINGS
SIA PARTNERS – RELEVANT QUALIFICATIONS
MORE ABOUT SIA PARTNERS
CAT OVERVIEW
WHY IS THE CAT BEING IMPLEMENTED?On May 6, 2010 the Dow Jones plummeted 1,000 points in a mat-ter of minutes. A one-trillion dollar equity loss that rebounded 70% by the end of the trading day. This is known as the Flash Crash, and it made clear to the SEC and exchanges that additio-nal measures needed to be taken to protect markets from the spoofing risks of high frequency trading algorithms.
WHAT IS THE CAT?On July 11, 2012, the U.S. Securities and Exchange Commission (SEC) voted to adopt SEC Rule 613 requiring FINRA and the na-tional securities exchanges (SRO's) to jointly submit a National Market System (NMS) plan to create, implement, and maintain a consolidated audit trail (“CAT”) that would allow regulators to track all activity in U.S. equity and listed options markets.
WHO IS IMPACTED?The CAT NMS Plan requires SRO’s to adopt rules requiring its members to comply with all the provisions. Specifically, bro-ker-dealers conducting business in the U.S equity and options markets will be required to report order events for equities and options markets on a daily basis, including orders, quotes, can-cels, routes (including internal routes), and allocations.
• The CAT impacts National Securities Exchanges (i.e., BOX, CBOE, CHX, ISE, IEX, MIAX, NASDAQ, NSX, NYSE) and Natio-nal Securities Associations (i.e., FINRA)
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HOW IS YOUR FIRM IMPACTED?Firms can be impacted by a number of factors while preparing for CAT reporting, including:
Design of new risk management frameworks
Assessment of technical and architectural designs
Understanding internal data flows and source systems
Testing internal units, systems, and integration
Comprehension of changes to control environment
The costs associated with implementing the new system
Broker-dealers must define their readiness and planning efforts, determine budgets, and establish governance structures. The process of implementing the CAT will lead to direct and indirect improvements as existing systems and their process are revi-sited and re-examined. During this time the industry will confront many of the issues that led to the requirement of the consoli-dated audit trail.
CAT presents many challenges to U.S broker-dealers. To comply, firms will be required to implement new tech-nology and reengineer their existing operating model.
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CAT TIMELINEThe SRO's implemented a phased rollout for CAT adherence for a proper transfer of industry rule and allows firms to continue with compliance programs in flight with minimal change and disrup-tion. The CAT roll-out, and accompanying processes & activities are expected to continue through 2022.
2020Tech Specs V1.0
& Reporting Scenarios V1.0 published
10/2018
2019Tech Specs V2.1
& Reporting Scenarios V2.0 published
05/2019
Industry Members registration with FINRA
CAT deadline06/2019
Industry Testing for Phase 2A/2B begins
12/2019
Internal Testing for Phase 2A/2B begins
09/2019
Phase 2B Options Go Live06/2020
Phase 2A Equity Go Live04/2020
Go LiveIndustry Communications
Internal Testing
Industry Testing
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2021 2022Internal Testing for Phase 2C begins
09/2020
Internal Testing for Phase 2D begins
03/2021
Industry Testing for Phase 2D begins
06/2021
Phase 2D Complex Options Go Live
12/2021
Phase 2C Complex Equities Go Live
04/2021
Industry Testing for Phase 2C begins
01/2021
Go LiveIndustry Communications
Internal Testing
Industry Testing
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KEY CAT CONSIDERATIONSThe CAT program will require firms to change transaction management and reporting, impacting a number of areas and processes within an organization. To achieve successful implementation, firms will require the framework and resources to facilitate program development.
BAU Process: Transaction reporting requirements are going to impact the different func-tions and processes of entities concerned (i.e., front office, middle office)
Counterparty Connectivity: Reporting process requires all the chain participants to ex-change information and work together by leveraging a standard format
Cost: CAT reporting requirements will add to the significant increase in data being reported. Therefore, high costs associated with implementing a new infrastructure
Data Management: Transaction reporting requirements will produce a whole new volume of data that will require storage
Data Standardization: Customer Account data received from multiple internal and vendor systems is required to be formatted using a standardized approach in an effort to ingest the information using a centralized repository
Exception Management: Implementing efficient rejection management procedures and processes for resolving issues
Information Retrieval: Customer Account information needs to be accessed from a cen-tralized repository for the purposes of regulatory reporting. The centralized repository will need to pull in data from various sources
Reporting Quality: Policies and procedures must be implemented to review and change the reporting process when new standards / requirements are published. Over time, standards can change, as well as projects or other parameters
Business and Organizational
Technical and Data
Management
Reporting Process
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SIA PARTNERS CAT SERVICE OFFERINGSSia Partners can support firms in their CAT compliance initiatives in several ways. We have outlined the approaches for providing assis-tance below:
Coordinate with regulators and industry members
Leverage network to obtain industry best practices
CAT Insight
Create testing approach
Develop testing plan and test scripts
Oversight of test execution (daily calls and status reporting)
Conduct vendor testing
Testing Support
Gather functional and non functional-requirements
Document business scenario mapping for internal / external vendor systems
Design exception management process
Reconcile active client accounts in front office systems against client data repositories
Business Analysis
Obtain budget approval support
Engage in stakeholder management
Setup program structure
Register Organization with the Plan Processor (FINRA CAT)
Program Setup
Develop a control framework (i.e., Permissible, Assertive, Audit Trail) to manage and correct data, and reporting exceptions
Engage with Order Sending Organizations (OSO’s) to determine CAT services provided
Develop implementation plans
Go-live support
Target Operating Model Design and Implementation
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SIA PARTNERS RELEVANT QUALIFICATIONSA selection of Sia Partners' credentials around CAT and other relevant Projects
Consolidated Audit Trail – Compliance Integration Lead
Engaged the National Securities Associations to provide transparency around regulatory requirements for the client
Participated in Industry working groups to discuss technical specifications and proposal of additional requirements
Documented firm wide policies and procedures
Facilitated business engagement by drafting and distributing functional and nonfunctional requirements
Global Investment
Bank
PROJECTCLIENT
Control Framework – Volcker
Facilitated process re-engineering efforts across several business lines and regions, iden-tifying key risk indicators and performance metrics to develop enterprise and business unit policies and procedures, training, and control checklists in order to create more efficient operational processes
Developed and established a risk and control framework and global implementation plan for the operations team to ensure proper monitoring and communication of risk ongoing compliance
Identified possible suppliers of Governance Risk and Compliance (GRC) software and as-sembled business requirements to effectively implement and monitor the program status
Global Investment
Bank
Middle and Back Office Target Operating Model Design and Implementation
Designed and implemented a Target Operating Model to define new process flows, policies and procedures, and a new governance framework between Compliance, Ops, Business Units and IT for regular oversight and issue resolution
Established a standard metrics reporting framework and templates for various client screening functions that allows for the regular production and distribution of metrics
Wealth/Asset Manager/
Trust Company
Global Investment
Bank
Blue Sheets – Remediation and Regulatory Inquiry Support
Developed an efficient data collection and reconciliation process to quickly pinpoint im-pacted Blue Sheets and isolate missing Blue Sheets data
Created a reconciliation tool and trained client staff to incorporate the process into their monthly Blue Sheets validation and quality assurance activities
Coordinated with numerous stakeholders across various departments (legal, compliance, technology) to ensure a unified approach for data collection, analysis, and re-submission
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SIA PARTNERS OVERVIEW OF OUR U.S. ADVISORY SERVICESWe help clients build, assess and implement strong capabilities for today and for the future
Risk, Regulatory and Finance Services
COO Advisory (Control assessment, process optimization, automation enablement)
CFO Advisory (Performance management, risk and internal controls, financial process efficiency)
CIO Advisory (Governance, IT strategy / innovation, IT efficiency and security, IT cost optimization, Digital IT)
Human Resources (Change management, training)
Procurement and Sourcing (Supplier relationship management, RFQs / RFPs, cost reduction planning)
Pricing and Revenue Management
Marketing and Customer Experience
Process Reengineering Services
Diagnostic Tools (Regulatory / Risk / Cybersecurity assessments, Process optimization, Automation enablement)
Data Management (Data Science, Dashboarding, Data Quality and Reporting Automation)
Software Implementation (Industry-specific platforms, Moody’s Analytics for Credit Risk, Axiom Regulatory Reporting)
Digital Transformation (RPA, AI, Blockchain, Smart Workflow, Chatbots, Cloud, and Digital IT Enablement / Procurement)
Change Management (Project Management, Policies and Procedures, Training and Education, Digital Transformation)
Capabilities and Methodologies
Operational Risk Management (Third-Party Risk Management, Model Risk Management, Conduct and Culture)
Financial Risk Management (Credit, Market, Liquidity, Insurance)
Compliance, AML and Financial Crime Management (KYC, Sanctions screening, Transaction monitoring)
IT Risk Management (Cybersecurity, Data privacy, BCP)
Finance Management (SOX, Accounting standards, Regulatory reporting)
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C O N TA C T U SERIC BLACKMAN
Partner+1 (917) 769 - [email protected]
CRAIG MOYLAN
Managing Director+ 1 (732) 614 - [email protected]
ANKIT SHAH
Senior Consultant+1 (201) 926 - [email protected]
Sia Partners is a next generation consulting firm focused on delivering superior value and tangible results to its clients as they navigate the digital revolution. With over 1,400 consultants in 16 countries, we will generate an annual turnover of USD 280 million for the current fiscal year. Our global footprint and our expertise in more than 30 sectors and services allow us to enhance our clients' businesses worldwide. We guide their projects and initiatives in strategy, business transformation, IT & digital strategy, and Data Science. As the pioneer of Consulting 4.0, we develop consulting bots and integrate AI in our solutions.
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