The necessity for traders to accurately reconstruct the communications surrounding trades is clear, with regulatory boards taking a strong stance since the banking crisis of 2007. As seen in our previous blog, legislations such as the Dodd-Frank Act of 2010 and the EU’s MiFiD II lays bare what is expected of financial institutions, and failure to comply with the requirements risks hefty penalties.  

Manual or On-Demand Trade Reconstruction 

With the shift in the way traders are communicating within financial circles, accelerated by the global pandemic, firms are finding it increasingly challenging to accurately index and analyse this data in a manual capacity. Reports have found that it can take up to 48 hours to manually reconstruct 20 trades involving 2 traders. Should regulatory request be made of a firm, this leaves swap dealers little time to comply with the request.  

Furthermore, when undertaking this in a manual capacity often firms are finding the need to pull traders from their primary functions in order to meet regulatory deadlines. This negatively impacts the overall revenue of a firm, and the chance for human error is higher. In this way do we see a manual trade reconstruction process as ineffective and outdated.  

In comparison, adopting a powerful technology streamlines this process, enhanced with AI and Machine Learning and custom-built to your firm. Financial trades and orders are automatically linked to their corresponding communications for efficient auditing and regulatory reporting, enabling a firm to submit with confidence an accurate reconstruction to the regulator.  

How does Automated Trade Reconstruction work? 

VoxSmart’s Automated Trade Reconstruction technology undertakes four simple steps in what is referred to as the matching process to accurately construct trades. These four steps are as follows: 

  1. Data Ingestion. Within this phase up to 3500 communications are gathered on average from various sources including instant messenger platforms, email and voice transcriptions. The data is acquired and validated before moving on to the second phase.  
  2. Communication Filtering. Of the ingested communications, typically about two thirds reach the filtration phase. Communications are filtered by class, period, employee, parties and completion status using AI and Machine Learning. 
  3. Communication Matching. Following the filtering process about 5-10% of ingested communications are sent for advanced matching. This is done by analysing specific criteria including key identifiers such as product names, dates, counter-parties and amounts. In this way do we see communications to be refined to the relevant information.
  4. Reconstruction Tuning. Typically, 6 to 10 communication per trade make up the reconstruction tuning process. These trades communications are analysed, weighed for commonalities in communications and displayed – aligned to the specific needs of the organisation. 

The 4 simple automated procedures, allow firms to focus less on error-prone, manual tasks and more on proactive analysis and investigation. Reviews are quick to perform with reduced false positives meaning the whole process is complete in a matter of minutes once the trade has been made. In addition to saving time, money and employee resources, it gives firms increased transparency over how traders and sales professionals are booking business. 

With  VoxSmart’s award-winning Trade Reconstruction Solution firms can be assured they are receiving the best on the market, equipped with the confidence and assurance of meeting regulatory requests with ease. 

Get in touch with a member of our team today to discuss how our award-winning Trade Reconstruction Solution can help your firm here!  

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