Are you managing regulatory compliance of trader communications?

By Vangelis Tsianaxis, Head of Consulting, IPC

In my recent blog
in the lead up to the MiFID compliance deadline, I highlighted some key operational considerations for maintaining effective compliance oversight of trader voice communications.

A key area of focus is ensuring effective management of communications data and includes: 

  • Clear definition of its retention and management and
  • Control of the accuracy and completeness of this data.

Practically, the initial focus of such controls inevitably falls on the trading floor itself, given a risk-based approach and an environment heavily dependent on the use of turrets for voice-driven trading activities.

In recent conversations with customers, I found that some business and compliance stakeholders do not have oversight of their compliance efforts for these key aspects of their regulatory obligations, even well after the MiFID deadline passed in January. In some cases, stakeholders are still trying to define the universe of communication channels and employees in their business for which they need oversight, sometimes allowing the most obvious environment, i.e., the trading floor, to remain unaddressed., Many seem to believe that controlling potential risk for trader voice communications is something limited to MiFID and the EU, so oversight actions are not yet being taken for Americas or APAC based operations.

This situation translates to organisations having gaps in operational processes where they may need to demonstrate end-to-end compliance. A few questions to consider on that front:

  • Who has access to your turrets and what market information do they receive to make trading decisions?
  • Who do you actually record? What’s the business risk rationale for doing so?
  • Do you have oversight of your recording systems’ effectiveness, meaning:

o   Do you actually record the users you think you are recording?

o   Is the data you collect meeting quality requirements? Is it complete and accurate? Can you use it when you need it or to proactively control the risk of trading activities?

Without the requisite level of oversight and clear controls, business and compliance stakeholders remain exposed to potential risks, including the following possible failure points:

  1. Manual management of recording policies in communications and recording platforms
  2. Failure to enforce established compliance policies (e.g., retention rules, what calls to record, etc.)
  3. Poor quality of captured voice data
  4. Failure to archive due to infrastructure limitations 
  5. Failure of underlying infrastructure or software platforms

IPC is keenly aware of the trading floor environment and its vital voice communications, and as such is uniquely able to deliver end-to-end compliance oversight and control for recording systems integrated with IPC platforms. 

A recently published case study demonstrates how IPC has addressed some of the potential risks listed above by working with our customers to implement oversight solutions for their trading floors and regulated user community.

Just over two months into the MiFID regulatory regime, it is already time to ask how we are addressing compliance of trader communications in our most business-critical environments. The choice is clear: Do it now and acknowledge potential gaps you can address in the months to come.

© 2018 IPC Systems, Inc. All Rights Reserved. The contents of this publication are intended for general information purposes only and should not be construed as legal or regulatory advice.