Traders are well aware that every phone call, e-mail, and IM on the trading floor is being recorded — but what about your personal mobile phone? Under new regulations ranging from Dodd-Frank to the Commodity Futures Trading Commission (CFTC) now requiring the recording and recordkeeping of all oral communications that lead to the execution of a commodity interest transaction, traders may soon see their personal smartphones under surveillance.
Traders spoke with Paul Liesching, senior vice president of Truphone Mobile Recording, a global mobile recording provider. We wanted his thoughts on how traders may have to open up their beloved iPhone and Samsung Galaxy to their firms IT and compliance teams.
Traders: Is recording audio on a trading floor a challenge because of the proliferation of personal smartphones?
Paul Liesching: Absolutely. This is what the industry calls BYOD or Bring Your Own Device and it presents some unique challenges around how we we overlay compliant recording over these devices. The U.S. has been at the forefront of BYOD. The U.K. and AsiaPac are catching up but the US is embracing it because the banks employees are embracing new technologies. They want to use the technology they want to use.
Right now, nobody has come up with a good answer to BYOD and recording. Our U.S. consumers are recording calls and data on bank-provided devices. The industry has said that this is the only viable way for doing mobile recording for Dodd-Frank.
Traders: How does the director of a trading floor deal with this challenge?
Liesching: We are talking with handset vendors about how to split the personality of the device, which is to say to provide two phone numbers on that device. Say, one number being recorded by corporate and paid by corporate — and the other being non-recorded and paid for by the trader.
We have the capability and some handset partners have the ability to split the data relationship on the device to have a secure corporate side of the device to record the corporate data and then a personal side of the device. They are embracing the idea of splitting the billing for corporate and personal as well. We may have an offering from six months to a year but BYOD is not going away.
Traders: If I am a trader who is about to go rogue, I am most likely going to use my own smartphone or a burner phone.
Liesching: Yes, thats always been the case. Even if we look at the trading environment today, everything they see before them is recorded: IM, e-mail, fixed phone lines and squawk boxes, the whole thing. They have the facility today to walk outside the building and have a one-on-one chat with someone else about something irregular or possibly outside the banks policy. That hasn’t changed and will never changed.
What the regulator seeks to do is to ensure that there is some continuity around the audit trail, some kind of record keeping within the CFTC regulation. The regulator is not going to knock on your door and ask Are you recording your mobiles? What they will ask is, Can we see these records for these transactions?
Traders: What are the regulators looking for exactly?
Liesching: What regulators want to see is a story, a natural transactional story that involves fixed phone lines, IMs, and e-mails. We know that trades can take one second and they can take one year. There is a communication stream that happens there and the regulator is looking for gaps. Gaps in the audit trail — and if those gaps exist, that is what the banks will be ordered to find.
Do traders grumble about having their mobile phones recorded?
Liesching: Yes, they do grumble. The mobile phone may be provided by the IT department but it feels like its yours. Everything that sits on your desk feels like it belongs to the investment firm but when you take the mobile home with you and on holiday, and its always with you it feels like its part of you. When someone comes along and says we are going to record that, it feels like a personal infringement.
Historically, when a bank provided-phone is recorded, you actually see the traffic on that phone reduce. It normally takes about three months for that traffic to come back up to the same level. Once people get over the emotional barrier, they are a bit skeptical and wary of the recorded device and then actually it becomes empowering. It then means that people can do business whenever and wherever they are. Ultimately people get through that.
Traders: Are hedge funds buying this service or do they want this from their sellside and broker counterparties?
Liesching: Both. In the U.K. the brokers are buying this and putting it in place and hedge funds are also buying this, too. When you do have a dispute both parties like to have their own records, so there is a logic about both parties being able to record.
