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First published by Joe Morgan in e-Forex Magazine – first published October 2, 2017.

Alex Walker, executive vice president and managing director of Transaction Network Services’ (TNS) Financial Services Division in London, says the increasing importance of financial extranets across FX markets is intertwined with the evolution of trading after the collapse of Lehman Brothers, the US investment bank. “Post-Lehman, when the equity side of the market had a poor time, we saw a significant move by our customers into other asset classes as a way of making money,” he says. “That was quite a big change which increased demand for FX services and many firms turned to TNS as a strategic partner that could easily help streamline the resulting complex connectivity requirements.” With more than 20 years’ experience serving the financial markets, TNS now has an extensive global financial community of interest which includes more than 2,000 endpoints supported by over 125 points-of-presence.

FRAGMENTING LIQUIDITY

“Participants need access to more and more pools of liquidity in more and more locations,” says Yousaf Hafeez, head of business development at BT Financial Technology Services in London. BT links directly into five major third-party global datacenters located in London, New York, Singapore, Tokyo and Hong Kong.  These hubs account for 77 percent of the US $5.1 trillion daily traded volume in FX markets, according to the 2016 Triennial Central Bank Survey. “If you are sitting in London and you want to access FX pools in, say, Tokyo or Singapore you can have access to them very quickly, within a matter of days,” says Hafeez.

Andy Young, global head of solutions and sales at Colt Technology Services in London, says financial extranets remove the need for FX trading firms to navigate the “spaghetti junction of cross-connect connectivity” inside major data centers. Young points to the morass of trading platforms and liquidity pools located at major global data centers such as the LD6 Equinix International Business Exchange in Slough and Equinix’s NY4 IBX Data Center in Jersey City. “That {a single point of market access} has really driven next generation extranet,” he says.

Colt’s PrizmNet financial extranet, which contains an ecosystem of more than 10,000 firms operating in financial markets, offers buy and sell side firms solutions within and outside the data center environment. “If you have a client in a data center they just need to order one pair of cross connect and they can have multiple services to multiple ECNs and single bank platforms logically configured over those cross connects,” says Young. “They can also access other interrelated markets within the data centers. You have fixed income platforms as well as other exchange related futures and interest rate markets so it is not just necessarily FX but also other derivative markets and electronic trading platforms. They can utilize that single access into an extranet and have multiple FX liquidity as well as inter-related markets.”

The difficulty of obtaining access to a growing variety of liquidity pools and market data sources makes it increasingly a challenge for many FX trading firms to manage their own inhouse network. When trading firms utilize the services of a financial extranet provider it enables them to focus more resources upon their core business activities. This enables buy and sell side firms to better navigate an FX market that is facing challenges similar to those that equity markets faced a decade ago such as fragmenting liquidity, a fall in average trade size, and the rise of globalization, according to Hafeez of BT. “In addition there is a growth in FX of emerging market currencies,” he says.

“We created a new proposition called BT Radianz FX Express, providing dedicated low latency links within and between the world’s five biggest FX trading locations, helping FX firms lower costs and create opportunities for international growth,” says Hafeez. “By having that knowledge we’re able to enhance a customer’s trading experience or if they are a venue, ultimately bring them new business too. We are also able to help them win new customers in locations where they may not have a presence, such as China, Turkey or Singapore.”

Tim Carmody, vice president network product and engineering at IPC in New York, says FX trading firms that are considering using extranets should always look at the breadth of market participants and depth of liquidity sources available. IPC’s Connexus Extranet offers participants access to more than 6,000 global firms, including corporate treasurers, non-dealer institutions, regional banks, asset managers and institutional investors. The extranet is built for the financial markets and provides a suite of services, including market data, order routing, order management, trade execution, execution management, risk management, portfolio management and settling and clearing services. “The benefits of having a diverse range of participants can become most apparent during stressed conditions in which many participants withdraw liquidity from the market,” he says.

“This [a wide network of participants] makes the chances of finding a counterparty significantly greater,” says Carmody. “When many are selling there are openings for an opportunistic provider of liquidity such as an insurance company or a hedge fund. FX markets have been prone to volatility of late. We had the Swiss National Bank and then Brexit. Being part of a diverse community is very helpful.”

Hafeez says BT ensures every key FX venue that has liquidity or potentially has liquidity is connected to its extranet. “We’ve done that to ensure our customers can have access very, very quickly,” he says. “When deciding which connectivity partner to use, firms need to look at the community accessible on that network already. How many participants are already connected? How many traders are connected? How many FX venues are available – and in which locations? Which market data feeds are accessible?  That will help them decide the best infrastructure for them to boost their competitiveness and grow their business.

Hafeez says BT has successfully migrated customers that had previously been using the Internet to trade and obtain market data services. “This results in three key things happening,” says Hafeez. “One, order flow increases. Two, customer satisfaction improves.  And thirdly, those firms benefit from the increased security and resilience inherent in our Radianz suite of services, as well as reduced cost and operational risk. Our view is that while the Internet may be one option to connect to different venues, the serious players in the FX marketplace need the quality of a secure managed shared infrastructure type service.”

LOW-COST AND RELIABLE HIGH-SPEED TRADING

Jay Hibbin, regional sales director, financial services and insurance at CenturyLink in London, says demand for financial extranets among FX trading firms has been further bolstered by a significant drop in the cost of using these services, relative to co-location services or a dedicated lowlatency fiber network. This has enabled extranet providers such as CenturyLink to step into the fold. The IT services company – which offers managed services at more than 55 data centers worldwide along with a major US fiber network – has a consultative approach, enabling its clients to obtain the best execution venue for key applications.

In the past, the cost of low-latency connectivity could be ten times the price of a conventional connection with subscribers obtaining a speed advantage in milliseconds, according to Hibbin. “The laws of physics come into play,” he adds. “There comes a point where you can’t decrease latency much further. Then there is very little more that you can do, shaving off microseconds and nanoseconds. Extranets are increasingly picking up low-latency routes and integrating them into their network. The delta is now smaller. Hundreds maybe ten’s of microseconds. For a lot of the buy side this is not significant and for some of the sell side also.”

Colt provides FX trading firms with the ability to monitor the performance of the network along with the tools to manage any changes that take place on the network. “This enables our clients to manage the performance of the network in real time and see if they can understand what is happening and make changes if there is an issue,” says Young of Colt. He says the capacity of financial extranets to provide a consistent level of latency performance is cementing the place of the networks in the FX trading landscape.  “We are not talking ultra, ultra low latency,” he says. “But clients expect a consistent and reliable latency performance; in other words, deterministic latency. Making sure the behavior and performance of the network has reliability from one day to the next so it enables clients to manage their applications better and to create a more predictable performance. Trading applications tend to be quite sensitive to any change or spike in latency.”

‘A SAFE WALLED GARDEN’

Carmody highlights the security of financial extranet’s trading environment as a key benefit of the networks. Participants can interact with each other in a “safe walled garden,” he says. “We have an acceptable use policy. We have the right to remove participants. You won’t have people hacking or trolling the network. Everyone on the network is curated where as on a public Internet there are people scamming.”

Walker of TNS says financial extranets’ place as fully regulated and secure trading networks makes them preferable to trading services delivered over the Internet or via cloud computing that may also not have the same depth of bandwidth. He says: “We have established connections with multiple global FX destinations giving superior FX market coverage via one simple supplier relationship. By offering this kind of level of market access, supported by industry-leading security and resilience, we can deliver exceptional service levels which would be difficult, costly and complex for clients to achieve using the Internet and cloud services.” 

“We over provision bandwidth and two things happen,” says Hafeez of BT. “One, order flow increases. Two, customer satisfaction improves as well. While the Internet has that overall mix of methodologies to connect to different venues the serious players in the FX market place need the quality of an extranet type service. Venues benefit from that and see an increase in order flow and improved customer satisfaction.”

Walker of TNS says that the high levels of security and performance that financial extranets embody are particularly important for FX algorithmic trading firms. “Algorithmic trading requires complete control of systems,” he says. “The public cloud won’t provide this. Given the proprietary nature of the software that FX trading firms deploy, and the sensitive trade data between parties, the infrastructure needs to be dedicated to support both performance and security.”

IPC enables FX market participants to meet their regulatory reporting obligations under the Markets in Financial Instruments Directive (MiFID) II RTS-25, the Securities Exchange Commission (SEC) Rule 613 and Financial Industry Regulatory Authority (FINRA) Rule 4590. IPC’s turnkey clock synchronization and time stamping service, Connexus Chrono, provides a traceable time feed of trades that take place on its network. IPC delivers this solution globally at different levels of accuracy, ranging from 1 microsecond to 250 microseconds. “This is a very granular guaranteed clock service,” says Carmody. “A guarantee of exactly when a trade happened. This enables regulators to reconstruct a trade and identify exactly when a trade happened.”

Walker of TNS says regulatory and reporting requirements are creating more demand for financial extranet services. “This is not least the case for trade reporting,” says Walker. “The requirements for that are growing and spurring more connections to repositories, venues and clients. As the requirements for risk management also grow, that is creating more connectivity needs as well. At TNS we have a wealth of experience establishing and maintaining multiple connections and have designed our solutions to be scalable and flexible so we can respond quickly as business needs evolve. New on-net connections are typically set up within three days.”

ONE SLA FOR ALL YOUR TRADING REQUIREMENTS

Hafeez says BT Radianz’s role as an extranet provider is primarily that of a facilitator, providing the necessary infrastructure, hosting and connectivity in order for FX trading firms to pursue strategies across global FX markets. “We try to say to our customers, whatever you want to do, we will try to make that as simple and cost effective as possible,” he says. “We will help give you the low lead times to make new additional services available as quickly as possible. We will provide you with a single Service Level Agreement for all your services. We will simplify and implement what you need.”

When choosing a financial extranet, FX trading firms need to ensure that the SLA guarantees 100 percent up time with no “single point of failure”, according to Carmody. “At IPC we’ve built a network from the ground up for the financial services industry. We have a diverse network. We understand financial customers. What they demand of their trading requirements. We know how to service those customers because we understand what they are doing. We know what this market needs and what it takes to support this network.”

Walker of TNS says FX trading firms should consider the size and scale of the connected financial community as well as the SLA’s provided as key indicators of the capabilities of any extranet. “That way you’ll be able to sort out the wheat from the chaff,” he says. “Look at who is using the extranet. Look at who you can get access to. Look at the performance guarantees.” The “ubiquity of access” within a financial extranet is of critical importance, according to Hibbin of CenturyLink. He says FX trading firms should scrutinize SLAs for the levels of availability and up time that the platform offers, along with failover capacity and latency. “Speed to market is key,” he says. “You need the shortest amount of time to get up and trading so you can start seeing returns.”

QUICK DEPLOYMENT OF NEW SERVICES

The fast moving nature of global FX markets makes it essential for FX firms pursuing sophisticated trading strategies to be able to obtain access to new market data and connect to new pools of liquidity. BT can add new services in a few days over its existing infrastructure, according to Hafeez. “There are a number of trends that we’re seeing in the FX space. The first is the development of very niche FX data feeds which trading participants are keen to access. The second is an increasing number of fintech participants in the FX market place. These are providing some interesting and exciting solutions that the FX market would like to access. Finally, the third trend is the rise of firms turning to extranet providers to access applications that help firms address their MiFID II obligations.”

“If we had a connected Asiabased FX trading firm and they wanted to connect to Currenex or Hotspot FX, for example, then we can have that connection established within a couple of days,” says Walker of TNS. “For new members of our community, we can build the initial connection to our extranet and ensure full connectivity within just two to five weeks. This quick connection time frame is a big advantage for firms looking to trade in new markets.”

THE FUTURE OF FX TRADING

Hibbin of CenturyLink says software-defined networking (SDN) will in the future become an important part of the fabric of extranet services offering buy and sell side firms seamless access to new sources of liquidity. “SDN’s could reduce FX venue connectivity from a matter of months to hours or even minutes,” says Hibbin. “The integration of SDN and cloud computing will result in services being available on demand and be much more agile. You could bring in a new source of liquidity. Connect or disconnect with venues. Change the mix of capacity or be able to quickly put new trading strategies to the test.” Colt plans to leverage its position as a telecommunications company that owns a fiber-optic network to roll out SDN across its core financial extranet. “What we’re essentially going to do is bring the PrizmNet platform on to that SDN enabled network,” says Young. “Then you can start talking about almost real-time provisioning utilizing SDN.”

Financial extranets act as a facilitator for new technologies that fulfill a pent up demand among FX trading firms for services that can navigate an increasingly interconnected and complex market place. These ecosystems provide a more secure ‘walled garden’ for FX trading and offer participants a depth and variety of liquidity sources that can be particularly beneficial in stressed market conditions. As the capacity of financial extranets to offer a wide breadth of FX trading tools and low-latency services increases, their place in the FX trading landscape will arguably become only more significant.

By Ganesh Iyer, Director, Global Marketing, IPC for Traders – first published September 27, 2017

Changes in market structure, regulation and business models have affected asset classes worldwide. The key to understanding these changes is realizing the fundamental difference between commodities like agriculture, products and livestock, and financial assets like stocks and bonds.  Commodities offer inflation protection while financial assets claim cash flows against an economic unit.

A vital structural change happening within commodity markets is marked by an increasing number of buy-side firms, especially pension funds, making noteworthy investments in commodities. With lower risk premiums, reduced cost of hedging and a drop in the volatility of commodity futures prices, it is easy to understand the increased growth of buy-side participation, and a new connectivity model that supports it. 

Top Challenges of Commodity Market Participants

The addition of derivative contracts to gain access to commodities as well as the growth and change in mix of buy-side participation have created two significant challenges for market participants:  

1. Secure, reliable connectivity throughout the trade lifecycle.
2. Having and maintaining instant access to a robust ecosystem of counterparties, liquidity venues, brokers/dealers, institutional investors, trade lifecycle services and market data.

Simply put, connectivity is key for investing, from order creation to market data delivery.

Risk management and compliance for commodity portfolios are also dependent on connectivity through the entire trade lifecycle as well as access to an established ecosystem of market participants. The combination of communication, connectivity and collaboration solutions are essential to:

• Calculate net asset values and assess risk more accurately, by evaluating a range of independent market data sources
• Reduce market impact costs of liquidating large, concentrated positions by reaching a global community of liquidity venues
• Join forces with various groups within a trading firm to record, confirm and reconcile trades
• Enforce position and risk limits by connecting to a range of trade lifecycle services, including risk management, portfolio management, execution management and order management systems

Secure, Cost-Effective and Successful: Cloud-based Solutions

Savvy market participants are making the most of financial extranets, business continuity planning, voice communications, latency-sensitive connectivity solutions and collaboration tools to address challenges and tackle risk management issues.

But how can market participants do this cost effectively?

Enter the cloud. To execute commodity trading strategies and manage associated risks without the investment in, or ongoing management and maintenance of their own infrastructure, market participants are deploying cloud-based solutions. The cloud allows for adaptive, on-demand connectivity throughout the trade lifecycle and across multiple asset classes so participants can address the market’s communication, collaboration and connectivity needs – especially for small and medium-sized firms.

Cloud-based solutions facilitate:

• Reliable and secure access to counterparties, liquidity and trade lifecycle services at any time, from anywhere and with any device
• The ability to meet regulatory requirements, such as capture, archiving analytics and retrieval of all voice, mobile, email and IM data associated with communications
• Complex cross-asset class trading strategies
• Mitigation of business, operational, investment process and market risk
• Reduced infrastructure and operations expenses

Commodities markets will continue to face challenges, so the use of cost-effective communications via cloud-based solutions is important to make it easier to maintain trustworthy, secure connectivity and access to an ecosystem necessary to execute trading strategies. This just means that now more than ever having your head — or at least your critical communications — in the cloud is crucial.

First published by Robert Van Egghe in Ignites Europe – first published August 31, 2017.

… But Robert Powell, director of compliance at service provider IPC Systems, says his conversations with regulators have left him in no doubt that they expect firms to store any message that may be related to a transaction in any format.

Mr Powell says this could range from clear instructions to a seemingly generic comment like “have you noticed the FTSE is up?”

“It’s a big change in the way asset managers operate. When the extent of what is expected dawns on firms they will choke on the requirements,” he says.

Read the full article here.

A conversation with Maria Latorre, Global Head Channel Management and Vanessa Higuera, International Channel Support Manager at IPC Systems for Revista Gerencia – first published July 2017.

Recognized for its technology on the financial sector, IPC Systems has important expectations in the Latin American region and specifically the Chilean markets. A key strategic partner for this is Wittel, through whom IPC hopes to bring new solutions with added value.

How important is Wittel’s role for the brand?

M. Latorre: We have about 33 offices worldwide, in some of those regions and whenever we do not have an office we work with chosen Channel Partners to market our solutions. Globally, Wittel is one of the most strategic partners: it accounts for 56% of total turnover in Latin America and Central America, and 13% of total turnover worldwide.

How does Wittel contribute to the IPC technology?

M. Latorre: Wittel knows perfectly the market and the evolution of customer needs, both in Chile and Brazil. This is very important because it shows that they understand the issues and they position themselves as a trusted advisor. They also have a specialized team dedicated to the IPC solutions, which enables the customer to have the best customer experience at the service level. These are the main characteristics we look into when defining a strategic partner.

How are they projected in the Chilean and regional market?

M. Latorre: We have great challenges. Today – IPC is the global leader of the Trading Communications market. We want to get out of our “comfort zone”, and launch new solutions in indirect markets. We encourage partners like Wittel to become experts and bring the latest technology to the market because that is what our customers are waiting for.

With Wittel we have a large footprint in the region with approx.. 2700 positions. We want to take advantage of its experience, knowledge of the service and its strengths locally, to deliver more added value.

What are these other solutions?

M. Latorre: Our goal is to address the market needs related to compliance. There are a number of regulations that have been implemented in the United States and Europe, which will sooner or later have an impact in the Latin American market, where banks are obliged to keep records of their communications, voicemail, chat, e-mail, mobile, Skype, etc. All this data has to be stored for at least five years and have the necessary mechanisms to be able to analyze it easily. Through Assurance Services, trading floors are monitored at any moment to avoid any irregularities. All that interaction or process is what we call compliance, which is an area that Wittel can cover with our solutions. We also have count a Financial Markets Network, a network dedicated to trading that allows our customers to connect with their counterparts and resources to enable high or low touch trading.  Today, IPC has 200 thousand users in the community and more than 70 liquidity resources such as trading platforms, world markets, rsvs, ECNs, etc.

What are the challenges?

V. Higuera: Wittel is one of our oldest partners (since 1994), they are well recognized in the region, and have an important customer base for IPC. Our philosophy is to have Channel Partners because local service is key; we will continue working together with Wittel to achieve greater penetration and continue to be No. 1.

M. Latorre: Wittel is No. 1 in Brazil, we want to replicate this experience in Chile. The adoption of trading floor solutions has a great penetration, especially in banking, but given the economic context the renewals of the platforms has been delayed, so there is a great opportunity both in renewals as in adding value to the customer, through solutions mentioned earlier and how they can be incorporated into the collaborative work environment that have, for example, traders. In addition, Wittel is one of the few IPC partners who operate in more than one country, allowing us to attend our strategic accounts that operate internationally.

By Robert Powell, Global Head of Compliance at IPC for Global Banking and Finance Review – first published July 25, 2017

With MiFID II implementation high on financial firms’ agendas, there is going to be a major change in the way that trading communications are recorded and stored. Both mobile and electronic trading communications have increased significantly over the last few years, which is reflected in the new rules that extend the scope of communication recording and surveillance to include all types of interactions, including text, IM, email, mobile, and social media.

Once these regulations have been enforced, financial firms will need to capture data from all their regulated users, whether they are involved in pre-, during and post-trade activities; and this includes communications from far beyond the trader’s turret. Now – with just months until MiFID II comes into force – any organisation which is implementing MiFID II or still needs to begin the process, should consider creating a checklist to achieve compliance with the new rules.

Here are seven steps firms should be considering in preparation for MiFID II:

1. Understand record retention regulations

First, it’s worth combining a few technical standards published by the European Securities and Markets Authority (ESMA)into the first checklist:

• Have a designated compliance officer/director/manager

The Financial Conduct Authority (FCA) has listed the following controlled function (CF) registration types that might be a suitable person: CF1 Director, CF2 Non-Executive Director, CF3 Chief Executive, CF4 Partner & CF29 Significant Management. This person should be heavily involved with creating written policy and the policy procedures along with testing the policies and procedures for effectiveness. They should also be the person who conducts the annual record keeping review.

• Know your estate

This should be relatively easy to achieve, but businesses need to focus on two fundamentals – who and what.

First, who needs to be recorded? As a start, this should include all traders and sales people, and anyone who has the potential to commit the firm or discusses any kind of transaction with clients or counterparties. This list needs to be validated by the business and compliance team, and should include how long they need to be recorded for.

Second, what communications methods should be permitted to be used and how should they be recorded? Starting with the easy and obvious: email, Bloomberg, Thomson Reuters and instant message will be the norm for most firms. By recording fixed line phone calls, mobile calls and text messages, approximately 95 percent of firms will be covered. Specialist tools like ICE Chat and Slack should also be addressed. For each system, organisations need to understand how they are recorded and retained. Businesses can consolidate recordings to a single archive reducing surveillance, recovery challenges and costs. For MiFID II purposes, record retention is critical. If a company is outsourcing, they should subject third-party suppliers to additional scrutiny that they may not have encountered before.

• Communications “intended to lead to a transaction”

Organisations may need to increase the “recorded population” if, for example, policy is used to prevent employees from taking client orders or making transactions on their personal devices. In this case, organisations will need to extend mobile recording to cover their calls and texts. Also, looking at internal calls will also be vital. This will likely be covered, but it’s worth raising it as a discussion item among business, compliance and IT departments to ensure full compliance with the new rules. 

2. Extend the retention period

The unification of the records retention period is the cornerstone of one of the new rules under MiFID II. Firms will be required to retain communications data for five years unless the local regulator requests retention for seven years. Most organisations already retain emails for at least five years, however it’s worth checking that all types of communications used are captured for the right period. Voice calls, fixed line and mobile, will be a different matter.

There are five key things to check:

• Find out how to extend a fixed-line recording retention period. It’s important to look at how the data is stored and if it is tamperproof or on WORM (write once, read many) storage.
• For mobile, are all users recorded? Additionally, where are these calls stored? If the calls and other data comes to an organisation’s on-premise infrastructure, they will need to check the retention period and make sure calls by new users are set to be retained for five years.
• Is the firm under litigation or regulator hold for deleting records? What is covered and can these holds be reviewed prior to MiFID II coming into effect?
• Are there different archives for different media types, and is now the time to look at a holistic archive that contains all communications records? And, will it allow management and retention periods, users, litigation holds, and search and recovery with centralised, accessible storage?
• US organisationsin business with European-based firms, may need to look to extend the voice recording retention periods per CFTC to include others that do these trades, even if they are not based in Europe. 

3. Have a plan in place to manage system failure

Next, systems fail. It is a fact that is widely recognised. When systems fail, organisations can find out more about their systems, procedures, technologists and partners than they would when business runs smoothly. MiFID II requires investigation of system failure. It’s not explicit, but an investigation of any failure should offer solutions and track the implementation of that solution.

In addition, organisations should try to formulate a list stating what was missed while the system was down. This way, when regulators call, organisations have proof that they prevented a recurrence of the problem; along with a good idea of the calls or messages that were not captured while the problem existed. Firms should keep their written investigation for five years, the same as capturing the original records.

4. Clarify what complete, quality and accurate means

It is very important to understand key terms at the beginning of an organisation’s journey to MiFID II compliance. When it comes to record retention,some argue that the requirement of “complete, quality and accurate” records is vague. Defining them can give a clear understanding of what the regulator expects.

Complete – this means organisations should know all types of communications used and by who, as well as having fit-for-purpose capture and retention mechanisms and processes in place.

Quality – this means the ability to reproduce records in as near original quality as possible. It applies to the ‘original form’ for electronic communications and for the actual voice quality for voice or video calls.

Accurate – this means organisations should be confident in not only the records’ content, but also the all-important meta data that shows when messages were sent or calls made.

5. Implement training programmes

There is a new emphasis on continuing compliance training for employees at financial firms. This is common with all new financial markets regulations where the regulator is keen to prevent employees claiming they were not aware of the changes and thought they were acting reasonably. At the very least, the training should protect the firm and show that it has complied with its obligations to inform its employees – and provide examples of – good and bad communications behaviour.

Recently, UK regulators have taken action for inappropriate use of WhatsApp. Training should be very clear about which communications devices are company approved to conduct business and that anything outside of these communications devices is strictly prohibited from using to transact. The allowed list is much shorter, while the unpermitted list grows every day, which means emphasis should be placed on informing users which communication channels are allowed or not.Indeed, employees should be aware of the risks of having a zero-evidence messaging system on their devices. Law enforcement may assume fire when they see this smoke.

6. Regulate non-recordable devices

It is very hard for firms to prevent the use of non-recordable devices. The training mentioned above, combined with a culture of compliance, will go a long way towards achieving peace of mind. The IT team should ensure the main, non-recorded communications capabilities are blocked from use on the network and mobile devices.

One item – often left until last – is the ability to link together all the hard work in creating and implementing policies for communications use, retention and surveillance. MiFID II requires management oversight, written policies and the ability to regularly review and show that implemented policies are effective and adhered to not just when organisations perform a recovery, conduct surveillance or add another communications technology.

7. Conduct surveillance

Surveillance is another difficult area in which to provide satisfactory documentation to regulators. It’s not possible to look at every message or listen to every phone call so technology selected to achieve this purpose should be adaptable and well understood by anyone using it. In addition to monitoring key words and phrases to reveal concerning behaviours, organisations should be thinking of surveillance that will uncover evidence of non-recorded use and confidentiality breaches. If found, these can be quickly remediated and used to demonstrate the programme’s effectiveness.

MiFID II compliance is going to turn a lot of organisational practices upside down, but by starting with management oversight, knowing and understanding your estate and communication methods, and addressing the extension of records retention, firms can be on the right track to meeting these regulations before they are implemented in January 2018.