Trading firms consume so much data during the trading day that it is easy to forget how much data they generate as well. And inside this stream of data may be elements that could violate compliance policies, especially newly enacted regulations brought forth by the Dodd-Frank Act.
Under Dodd-Frank and new rules enacted by the Commodity Futures Trading Commission, financial firms must have the ability to quickly and accurately reconstruct trades. This includes all related pre- and post-trade communiqus and records that are time-stamped with the Universal Time (UTC time) to the nearest minute.
With this in mind, Citicom Solutions, a U.K. financial IT solution provider, has released Citicom Assure, a solution that aims to provide real-time analysis of data, including instant messages (IMs), emails, text messages and mobile- and fixed-voice recordings that originate from the trading floor.
Its a non-disruptive technology that collects and listens to all internal data and flags unusual activity, said Mark Whiteman, a co-founder of Citicom. He added that it will only work on smartphones and tablets that are connected to the investment firms enterprise, and not on personal equipment brought onto the trading floor by the trader.
In short, the solution identifies phrases and terms that arent considered normal in standard business. The firm experimented on data from Enron, the energy trading giant that imploded in the early 00s. If you put some Enron data into our system, what actually comes up is the phrase Martin Luther King. You can investigate that phrase by clicking on the word Martin Luther King. Its identified because its not usual terminology that is seen in the trading room environment, he said.
If a suspicious phrase does appear on the compliance officer or head traders dashboard, they can double-click the phrase and see how it was used in every instance in emails, IMs and voice recordings. It may be innocent-or it could signal a plan to do something illicit and dangerous to the reputation of the firm.
There are other instances we found later where pseudonyms were used for executing a trade. The phrase Chinese restaurant can appear, and when you click that term, youll actually find that its not people asking if they want to go out for Chinese tonight, Whiteman said. Its actually a pseudonym for a trade execution, because all it does is highlight the differences.
If compliance officers and heads of trading desks have any suspicions when looking back into the historical communication data, they can connect this to a specific trade. If you were concerned about trading around Vodafone, for example, you could word the load Vodafone, and every instance where that name was used it will be flagged and alerted, he said.
The solution is predominantly aimed at the trading floor and the research desk, where most breaches of compliance are expected to occur. Were starting to see a little bit of the back office being pulled in as well, Whiteman said.
Citicom claims the solution is being used by a pair of investment firms in Europe and is looking to establish a presence in the U.S. Citicom declined to name the firms using their solution, citing anonymity reasons.