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Higher Demand for Market Data in Compliance Investigations

An emerging trend of risk-and-compliance officers requesting specific blocks of market data suggests new opportunity for information providers.

Brennan Carley, Global Head of the Transactions and Platform businesses at Thomson Reuters, says people are increasingly using products created for alpha-generating purposes in risk and compliance investigations. What started as one-off requests for small and specific batches of data have picked up in frequency across clients.

For example, inquiries are coming in from compliance teams for weekly tick data. "They are looking for data around a few suspicious quotes and trades," he explained at the SIFMA conference last week. "They don't want five years of tick data, they'll just want that one week."

As Bill Nosal, head of strategic product management for the Smarts Group at Nasdaq OMX, recently explained at the Wall Street & Technology Analytics Edge event, risk-and-compliance teams have shifted from a culture of running away from data to one that is chasing after it. The role of risk and compliance officers has become more investigative and more proactive in detecting signs of illicit trading activity.

"A lot are one-off requests, case by case, but it's starting to look like a pattern." says Carley. "Now, how do we package this in a way that's useful? Right now it's sporadic. And we already have a compliance business, so how do we incorporate this into their products? How do we add our market data into compliance tools?"

Integrated compliance in underlying workflows
In a few short years, technologies have rapidly advanced trade surveillance from after-the-fact rule enforcement to real-time oversight; including dashboards to monitor the trading environment as it happens.

Soon, predicts Carley, firms will be integrating compliance into the trader workflow to a point that, if a trader goes to a execute a trade that seems suspicious, a red flag will come up and the trader will be asked to justify the intent. "It's certainly better than running an end-of-day report," he says, "It's all a matter of integrating compliance into systems and process to prevent problems."

Becca Lipman is Senior Editor for Wall Street & Technology. She writes in-depth news articles with a focus on big data and compliance in the capital markets. She regularly meets with information technology leaders and innovators and writes about cloud computing, datacenters, ... View Full Bio

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User Rank: Apprentice
6/28/2014 | 11:34:36 AM
Predictive compliance
The potential for compliance staff to question a trader's intent before he/she can make a trade is interesting. Through analytics and compliance rules firms can anticipate the potential for a trade violation and nip it in the bud. The shift from post-trade to pre-trade compliance is underway. As you point out, this is creating a business opportunity for vendors to create targeted market data.
Becca L
Becca L,
User Rank: Author
6/29/2014 | 4:08:40 PM
Re: Predictive compliance
Bill Nosal from NASDAQ Smarts said we are in an era of compliance automation, and that no department's role has really changed in the last few years as much as Compliance. Accounts like this really emphasize the point.

Gven all the potential to weave compliance into the trade process and the wealth of new products that came support such a change, It may be only a few years before compliance automation is as big of a buzz word as big data or cloud.
User Rank: Apprentice
7/3/2014 | 8:26:22 AM
Frictionless compliance
The move to pre-trade compliance is more about integrating compliance information into the decision making process rather than "building and better mouse-trap".  Allowing the investment team to do what they do best without hindering their workflow is what it's all about.  And by weaving the compliance information in with techincal info about an investment leads to a frictionless process instead of having compliance being the gatekeeper.  Of course this is not going to come about overnight and without significant increase in technology and data, but no one said it would be easy...
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