According to the watchdog, weaknesses in FFA’s systems and controls meant the investment firm failed to properly assess a significant number of instances of suspicious trading that should have been reported. This is despite FFA Private Bank having outsourced responsibility for the monitoring and assessment of client trading, with the DFSA ruling that the firm failed to effectively supervise these activities.

This penalty poses a stark warning to financial institutions operating in the region: that poor risk management will not be tolerated when it comes to market abuse. As stated by DFSA chief executive Ian Johnston, ‘This case serves as a reminder that firms cannot rely blindly on those to whom they delegate responsibility for the performance of key compliance activities’.

The regulator’s message comes at a critical juncture for Dubai – a city seeking to cement its position as the leading trading hub in the Middle East and bolster its standing on the global stage. The UAE government recently unveiled a 10-year economic plan called D33, which aims to double the economy’s size and make Dubai one of the top four global financial centres within a decade. In addition, the UAE is on track to be delisted from the Financial Action Task Force’s ‘grey list’ of global financial crime, which had tarnished Dubai’s reputation as the top choice for global financial firms looking to establish a base in the Gulf.

Ensuring the enforcement of rigid financial markets regulation will be critical if Dubai is to achieve its lofty growth ambitions. Financial services firms based in the region can therefore expect the city’s markets watchdog to come down hard on those found to be lacking the appropriate processes surrounding trade surveillance over the coming months. With this in mind, it seems prudent that companies operating in the area ensure they possess robust capabilities with regards to the detection and reporting of market abuse.

The truth of the matter is that investment into many financial institutions’ approach to trade surveillance and communications monitoring has been put on the back burner over recent years, with companies instead opting to prioritize systems that support the sexier front-office function. As a result, firms often rely on a patchwork of multiple vendor solutions to fill surveillance gaps across the entire organisation. Trade information and communication data subsequently sits in two entirely separate buckets, and the manual process of sifting through these disparate data sets and connecting the dots between trades can become a real headache – particularly when a regulator comes knocking.

Dubai-based firms must depart from this cumbersome and costly approach to market abuse monitoring – and fast. Those that fail to do so cannot expect the DFSA to turn a blind eye. After all, Dubai’s reputation as a global trading hub is at stake, and this watchdog does not seem the type to throw a firm a bone.

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Get in touch with us today to find out more on how we harness the power of AI.

If you liked this, then you might also be interested in:  

• Looking back to look forward 2022: Regulators up the ante 
• Scaling your risk control systems: Reactive to proactive surveillance 
• What is Natural Language Processing and how does it work? 

Over the past month, the Commodity Futures Trading Commissions (CFTC) stance on transparency and accountability in swap markets has been stronger than Suella Braverman’s immigration rhetoric – and that is saying something!

The most recent actions, simultaneously filing and settling charges against Goldman Sachs, J.P. Morgan and Bank of America, should serve as a major wake-up call for the industry. These charges highlight a persistent issue: a significant number of financial institutions are failing to fulfill their responsibilities when it comes to swaps reporting. But why, despite the CFTC’s increasingly hard line stance, is this happening? And perhaps more importantly, what can be done to address the root causes?

Firstly, it’s essential to understand the complexity of the derivatives market and, in particular, the world of swaps. Swaps are intricate financial instruments with numerous variables, including interest rates, credit default events, and currency exchange rates. Handling these complex transactions and ensuring accurate reporting is no small feat. Financial institutions often grapple with the challenges of collecting and reconciling information from multiple sources, dealing with differing reporting requirements across jurisdictions, and ensuring that the data is consistent and error-free.

Moreover, the sheer volume of swaps traded daily is staggering. According to the Bank of international Settlements (BIS) 2022 report, turnover of OTC interest rate derivatives averaged $5.2 trillion per day (“net-net basis). Keeping track of every swap transaction in real-time and reporting it accurately to regulators can strain the resources of even the strongest banks. This is particularly true for those institutions engaged in a wide range of activities, from trading to asset allocation.

Another factor contributing to reporting failures is the lack of standardised reporting requirements worldwide. Different jurisdictions have their own rules and regulations, often leading to confusion and inefficiencies. US financial institutions now have to navigate a maze of reporting standards, making compliance a convoluted and costly process.

In response to these challenges, there is no doubt significant investments in technology and infrastructure have been made to improve reporting capabilities. However, implementing strong systems and processes takes time, and even with substantial resources allocated, errors can still occur. Furthermore, compliance efforts often compete with other strategic priorities, creating a balancing act for financial institutions. So, what can be done to address this ongoing issue?

It should not all rest on the shoulders of the CFTC. Regulators around the world should work collaboratively to establish standardised reporting requirements and harmonise regulations. This would simplify compliance efforts for financial institutions operating across borders. Similarly, it is not just about the investment bank. Bank, brokers, dealers and fund managers should collaborate and share best practices to collectively improve reporting standards and ensure compliance. Above all, firms need to continue to invest in advanced technology, including data analytics and automation, to improve data accuracy and reporting efficiency.

The most recent actions by the CFTC serve as a stark reminder that reporting failures in the swaps market remain a significant concern. The complexity of these financial instruments, coupled with the challenges of managing large volumes of data and navigating varying global regulations, create a perfect storm for compliance lapses. However, it is in the best interest of financial institutions, regulators, and the market as a whole to work together to overcome these challenges, ensuring that transparency and accountability are upheld in the world of swaps trading. Only through continued collaboration and innovation can we hope to address this critical issue and prevent future reporting failures.

Get in touch with us today to find out more on how we harness the power of AI.

If you liked this, then you might also be interested in:  

• Looking back to look forward 2022: Regulators up the ante 
• Scaling your risk control systems: Reactive to proactive surveillance 
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Every man, woman and their dogs are talking about AI right now – but it seems they are only doing so in the abstract. Worryingly, even global institutional investors appear to be gripped by the constant hype and hyperbole. Nvidia ($NVDA) is a prime case in point. In February, the semiconductor vendor added a staggering $220bn to its market cap in just one hour after reporting earnings. Basically, this meant Nvidia overnight added more market cap than the entire value of Intel and Micron Technology combined. Then, in late May, the firm became the first computer chip producer to reach a $1tn valuation. Indeed, even the Bank of England The Bank of England and FCA recently published a discussion paper Artificial Intelligence and Machine Learning, to further their understanding and to deepen dialogue on how Artificial Intelligence (AI) may affect their respective objectives for the prudential and conduct supervision of financial firms.

There is not a planet big enough, nor an investor pocket deep enough, for all of the blue-sky thinking around AI. The reality is, right now, very few people understand what AI actually means, let alone how it can be implemented to help drive greater efficiency in their business. It’s high time we identified some practical use cases to cut through all this noise. As a first step, we want to help answer a fairly simple question: if you are a senior executive within an investment bank being bombarded with all this AI literature, where on earth should you start?

Well, whenever there has been a technological innovation in capital markets – the starting point has traditionally been cash equities trading. Exchange traded and, by definition, highly liquid and transparent technology has historically driven equities to lead and others to follow. One of the most prominent followers has been fixed income. Over the years, the bond market structure reform dog has been well and truly wagged by the cash equities tail. From algo trading to transaction cost analysis, fixed income trading desks have historically adopted equities tech innovation. However, with AI, we could very well be on the cusp of a paradigm shift.

Unlike equities, the vast majority of the fixed income market is traded over the counter (OTC). As a consequence, the market is highly opaque with different pockets of illiquidity scattered across all parts – particularly in corporate bonds. This is why there is such a wide range of different views when it comes to prices for multiple instruments. Bond markets have also become more complex and highly nuanced over the past decade, while valuation processes are still relatively simplistic. Days or sometimes weeks can go by without a block of specific high-yield bonds hitting the market, meaning a greater number of instruments are left without market-based prices. By gathering all the disparate data relevant to the FI desks, and then deploying AI on top, this is a realistic way to solve some of the long-standing pricing and illiquidity issues in this market.

Looking beyond the fixed income space, investment banks – along with a wide variety of financial institutions – can also utilise AI to enhance key business operations. What’s more, they can do so without allocating the significant time and capital required to develop their own AI-powered software. A growing number of tech providers like VoxSmart are empowering financial institutions across the world with AI-driven tech that can quickly and seamlessly integrate with their fundamental day-to-day business processes. At VoxSmart, we draw on AI to enable financial firms to reliably adhere to fast-changing regulations, easily monitor staff communications and unearth winning data-driven insights.

Learn more about how we harness the power of AI across our solutions here.

Get in touch with us today to find out more on how we harness the power of AI.

If you liked this, then you might also be interested in:  

• Looking back to look forward 2022: Regulators up the ante 
• Scaling your risk control systems: Reactive to proactive surveillance 
• What is Natural Language Processing and how does it work? 

ChatGPT has in recent months taken the world by storm with it’s AI powered language comprehension capabilities. The technology developed by OpenAI uses machine learning algorithms to analyse and understand natural language to generate human-like responses to a wide range of prompts and questions. 

The technology based on GPT (Generative Pre-trained Transformer) architecture, pre-trained on large amounts of text data to learn patterns and relationships in language. Sounds like Natural Language Processing (NLP) no?  

Here at VoxSmart we decided to put it to the test to see how it would fair with jargon heavy trading language used across platforms globally! We sat down with ex-broker and current Senior Business Development and Sales Representative Andrew Stone to coach us through trade talk! Let’s see how it did…  

First in the fire… 

Not the most promising start from the technology – So what does it mean Andrew?   

From my understanding it refers to an exchange traded asset and the action of selling right at the end of the trading session to move the price down. This is a common occurrence on any trading floor and a phrase like this or similar can be heard daily as traders seek to strike the best deal.

Okay let’s try this, as suggested by the Essex native and cockney rhyming slang extraordinaire. 

Is that how you used it?  

No not quite – in my trading days in London a “bag” referred to a grand or 1000! There was a lot of folk from London on the desk, so using slang like this was part of our day-to-day lexicon. Those not familiar with rhyming slang had to quickly learn the jargon to keep up!  

Okay, so let’s see if ChatGPT understands the term in relation to rhyming slang… 

Eh Andrew?… 

Nope, not even close! Or well I certainly have never of heard of it used in that way – a cup of Rosie Lee or simply a cup of Rosy perhaps, but cup of bag? Never!  

Okay so it needs some training on certain cockney rhymes that could be used in trading, how does is deal with jargon used for information requests?… 

So, what might this mean?  

Typically, if someone were to ask you any cares on something it means they are looking for information on the supply and demand of a certain stock. For example, if someone were to ask “any cares in the Aug 25 Bund?” it means they are looking for a decent clip, actually – check if it understands what a clip is!  

A clip?  

How did it do? 

Yes, all relevant answers, which goes to show that although it may not be 100% attuned to jargon used on trading floor it still uses powerful technology to filter and find relevant information. However, current technology such as NLP which we use across our products is pretrained to understand trading specific jargon used across asset classes and capital markets.  

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There you have it! When it comes to trading specific jargon and slang ChatGPT has a little way to go to catch-up. Technology such as NLP as used across our product suite has been trained to understand the everyday lexicon of traders to ensure that business can cut through the noise of communications and make better business decisions! 

Get in touch with us today to find out more on how we harness the power of AI today.  

If you liked this, then you might also be interested in:  

• Looking back to look forward 2022: Regulators up the ante 
• Scaling your risk control systems: Reactive to proactive surveillance 
• What is Natural Language Processing and how does it work? 

Time and time again we hear of the importance of communication surveillance technology however for many firms it has become increasingly challenging to secure funds to for such changes. Implementing changes to surveillance technology is often put on the back burner in favour of multiple vendor solutions to fill surveillance gaps. Although adequate, this approach can be both cumbersome and costly, and doesn’t cover the communications channels which pose the greatest risk if left unmonitored.  

Having a proactive approach to surveillance technology for 2023 will not only better place firms when it comes to dealing with regulatory requests, but also harvest many additional benefits.  

Let’s delve into just some of these benefits and reasons why CFOs should budget for communication surveillance technology in 2023.  

1. Regulators up the ante 

With the SEC’s FY22-26 Strategic Plan indicating increased measures against firms that failing to comply, those who proactively monitor channels and conduct regular reviews of control systems, are better placed to respond to compliance requests at ease. This not only increases the efficiency of compliance teams and reduces the associated stress of audits, but it also enables traders to focus on their primary responsibility – trades!  

2. Better business decisions 

Beyond the obvious, communications surveillance technology enables firms to collect and store trade data in one place. With the right technology this data can be used to enhance business decisions across numerous departments and inform management and stakeholders of the benefits of a given plan of action.  

Furthermore, with enhanced visibility over trade communications firms can analyse profit and loss spikes and assess missed opportunities through targeted reports gleaned from communication surveillance systems. Identifying key market makers and evaluating the quality of client-trader relationships further aids in informed business decision making.  

3. Revenue Protection 

We have seen time and time again of regulatory boards continue to increase in frequency and size.  Failure to adequately comply with regulations have material impact on the bottom line. As the gatekeepers of company revenue, CFOs are well informed of the importance of safeguarding against the cost of non-compliance which has risen over 45% in the last 10 years. 

With the appropriate communication surveillance, technology firms are not only regulator ready when it comes to regulatory requests but can also improve the reputation of the firm through proactive means of compliance. What’s more, firms have the opportunity to resolve disputed trades and customer complaints in a prompt fashion to improve customer relations, increase competitiveness and overall profitability.  

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Although implementation of communication surveillance technology comes at a price, the return on investment is substantial when looking at the bigger picture.  

At VoxSmart we understand the budgetary pressures facing many institutions and strive to provide a leading communication surveillance solution to meet regulatory requests and aid in better business decisions to increase overall profitability.  

Get in touch with us today to find out more about our Communication Surveillance technology!  

If you liked this, then you might also be interested in:  

• Scaling your risk control systems: Reactive to proactive surveillance 
• How to leverage an automated trade reconstruction solution to increase competitivity. 
• Looking back to look forward 2022: Regulators up the ante 

As technology has advanced, so too have trading desks. What was once a heavily manual system of booking trades is now a seamless process of automated means. However, despite greater access to automated technology some firms still rely on manual controls to reconstruct trades.  

Hear what ex-broker turned VoxSmart markets expert, Andrew Stone, has to say on the advancements of modern technology and the benefits of automated solutions.
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From Analog to Algorithm (aka from Dinosaur to Modern Man!)  

Trading has come a long way since the analog days of my broking career. Back then trades were conducted over the phone, tickets handwritten and collected by the ticket boys to be delivered to the settlements department to process via vacuum tube. Each broker would have a notepad to record the trades (an old-fashioned spiral bound notepad, not the electronic version used today!) and a call would be made at the end of the day to the various bank’s traders to “check out” and confirm the days trades.   

It was during one of these checks that a client DK’d (don’t know’d) 2 trades that I’d done in what was the current German 10yr Bond (I’m saddened to report that it expired some 20 years ago, a little like my broking career!). Unfortunately, the check-out was done by a colleague as I had left early for the Bank Holiday weekend, so I was informed by a message left at a hotel reception! Did I mention this was before most of us had mobile phones? 

This meant that I had to cut short my holiday and return to London and make a trip to the dreaded Tape Room! It was a space resembling a 1960’s version of a supercomputer, rows and rows of double spool tape machines that produced the kind of heat that could melt steel. It wasn’t a place that you wanted to spend any longer than you had to, and certainly not somewhere to spend your Bank Holiday weekend!   

After many fruitless, sweaty hours of listening to tapes that should have contained my desk recordings but that actually covered every desk but mine, I finally found one of the trades. With this information I managed to convince the client to book both trades – saving myself a potential career shortening loss!  

Today’s trading floors are very different. Banks and brokers still use voice trading to transact business in certain markets but in others the choice of communication channels has increased drastically. Messaging and chat platforms have become the norm, and together with emails now creates the modern trading desk.  

Yet despite these advances to the front office, from improved communications to automated booking and pricing and trading systems, one thing remains largely a manual process. Trade Reconstruction.  

More and more regulators are requiring financial institutions to “show their work” by disclosing all communications that relate to a trade or series of trades. Banks and broking firms currently use hundreds of man-hours on a process that can be reduced to mere minutes with the right system.  

What’s more, an automated trade reconstruction solution fosters additional benefit beyond that of meeting regulatory requests. Internal teams can use it to investigate profit and loss swings, or to look at unusual trading patterns whether they be trades with new counterparties or transactions taking place outside of normal hours. The right trade reconstruction solution can protect firms from fines and reputational risks and save them money whilst doing so.  

If it had existed in the late 80’s it may have even saved my weekend!  

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In order to comply with regulation as laid out in the Dodd-Frank Act of 2010 and the more recent CFTC swap data rewrite, firms have a mere 72-hour window to submit trade reconstruction requests. This put firms under immense pressure and removes traders from their principal responsibilities.  

Get in touch with us today to find out more about our Automated Trade Reconstruction that could’ve spared Andrew a weekend in the tape room cellar!  

If you liked this, then you may also be interested in:  

• Looking back to look forward 2022: Regulators up the ante 
• How to leverage an automated trade reconstruction solution to increase competitivity. 
• Automated Vs. Manual Trade Reconstruction [complete guide]