Contributor: Steve Sabin
Compliance is complex and expensive—but not as expensive as non-compliance. Fragmentation, continued regulatory changes, and globalization of regulation are among the top concerns for most securities firms today.
Over the years, firms implemented separate systems to satisfy specific compliance requirements as they emerged, such as trade and order review, trade blotter capabilities, personal trading review, email and social media surveillance, and additional regulatory reporting. Today, firms are looking to integrate and consolidate compliance functionality to increase cost effectiveness and efficiency of common compliance functionality, such as case management, ad hoc reporting, and alerting and dashboard capabilities.
Continued Dodd-Frank, Finra and SEC regulatory changes are driving new compliance requirements and create unexpected business needs for firms. Therefore, compliance systems need to be very flexible to give firms the benefits of a baseline solution providing common functionality, with the capability to address new regulatory changes as they emerge.
On a global scale, the frequency and fines related to market abuse are increasing due to Dodd-Frank and MiFID II. However, many firms lack effective processes to pinpoint abuse behavior in trading activity such as price manipulation and insider trading. Because of the nature of trading behaviors and large volumes, detecting and comparing trading activities with market realities can be challenging. Applying price and market analysis rules to trade surveillance can streamline this process. In Europe and in Asia, the ability to perform market replay based on trading, and then drill down into trade details, is especially crucial.
While compliance traditionally has not been a direct competitive advantage, many firms are beginning to see it this way. As regulation becomes global, compliance platforms will need to become more intuitive, multilingual and device agnostic. Technology is helping to meet the regulatory challenges ahead while turning compliance workflow into an asset.