Inside The SEC’s Tech Department
To more effectively analyze the data that comes in - and to better present its cases to prosecutors - Bayer has also started implementing data visualization technologies at the SEC. As such, the regulator now has the ability to in-take phone records and other data that would be normally handled by looking at phone records over a 10 or 12-month period by an individual, Bayer points out. Now, “within minutes we’re able to analyze phone record data to understand links between various parties, and also to display those links visually to a jury and a prosecutor which is very powerful. We can crunch a lot of data and produce an output that is visual in nature and allows a jury or prosecutor to understand if there’s a linkage between a particular phone number at a party’s location and who they have been calling and what the links are to insider trading and other matters under investigation.”
The SEC has also been leveraging the cloud. “We cache S1 and amended S1 [forms] in the cloud. It was 3 times faster when we moved to cloud, and it allowed us to serve literally unlimited requests from the public. That’s an example of how we were able to use additional funding to improve service,” Bayer says. The cloud proved to be a boon for the SEC – and investors - in the wake of the botched Facebook IPO.
“The first time Facebook filed, we needed additional capacity and we cached the EDGAR filing data in the cloud,” Bayer notes. “We cache S1 and amended S1 [forms] in the cloud. It was 3 times faster when we moved to cloud, and it allowed us to serve literally unlimited requests from the public. That’s an example of how we were able to use additional funding to improve service.”
Funding of course has long been a bitter point for the SEC. Last year, Bayer decried the Commission’s IT budget, noting that it left little room for ramping up analytics. Since then, things have improved. The SEC’s budget increased to $160.5 million in 2011 and $208.6 million in 2012. This year, $80.6 million will go into operations & maintenance, and $128 million in “development, modernization and enhancement.”
Bayer hopes that funding will continue to increase in 2013, but he is quick to note that the regulator’s current budget is still paltry compared to the budget of the financial players the SEC regulates. “We’re not even close to companies like Citibank or JP Morgan or others,” he says.
Still, the SEC has been actively hiring technology experts, trying to close the gap with the financial players it oversees – although this continues to be a tough challenge given its inability to offer the same levels of salary as Wall Street.
Currently, the SEC’s office of information technology has 128 full-time positions it has filled (either with two-part time employees or one full-time employee), up from 117 in 2011 and 125 in 2010. It is looking to hire an additional 70 technologists, Bayer notes.
Gregg Berman, Senior Advisor to the Director in the Division of Trading and Markets, adds: “We are bringing in many more technology people. Quants, financial engineers, people versed in data. Traditionally, the SEC was staffed with attorneys. We are starting up a new Office of Analytics and Research and recruiting from financial engineering schools. Also, we’re internally building up more technology, as well as across the agency.”
Staff turnover at the SEC, while low, can have a significant impact, Bayer notes. “We want to make sure our lawyers have case history and also knowledge management across the SEC so that we invent once or think of it once and then try to leverage it as many times as we possibly can,” he explains.
This is all part of the SEC’s multi-year “Working Smarter” plan, which is designed to ensure the agency’s business processes are streamlined, integrated, and implemented with technology to reduce costs and increase efficiencies and effectiveness. “Working smarter isn’t just outsourcing to cut costs and automating processes, but it’s using learning capabilities to improve the business process, raise digital awareness of the population so we’re not just doing the same function in an automated fashion but are doing it in the most efficient way. We’re also trying to leverage experts across the organization,” Bayer says.
Asked what keeps him up at night, Bayer says the SEC’s biggest challenge in today’s ultra-fast market is to “go faster and bring about the changes in an ever shorter timeline.”
He adds: “The faster we can build and deploy, the better off the investing public will be.”
[For more on the SEC, look out for ‘Do the SEC and other regulators really have the firepower to police the capital markets?, coming up in WS&T’s July digital issue.]
Melanie Rodier has worked as a print and broadcast journalist for over 10 years, covering business and finance, general news, and film trade news. Prior to joining Wall Street & Technology in April 2007, Melanie lived in Paris, where she worked for the International Herald ... View Full Bio
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