Since the introduction of the Dodd-Frank Act of 2010 and the EU’s MiFID II, Trade Reconstruction has been the primarily the focus of the second line of defence with compliance teams leading the charge in dealing with regulatory requests.
However, this task, when undertaken in a manual capacity, often pulls staff from their primary function, with reports suggesting that it can take up to 800 hours for 10 employees to manually reconstruct approximately 20 trades. On a given trading floor, with the amount of communication data mounting, this is no longer feasible for many firms.
In order to effectively combat these challenges, an automated solution not only streamlines the trade reconstruction process but also provides firms with a complete record of the trading processing for further analysis and review. This opportunity to leverage trade insights shifts the spotlight of an automated solution from the 2nd line of defence into the 1st line.
Front Office benefits of Trade Reconstruction
In addition to the regulatory safeguards which the technology provides to the 2nd line of defence, an automated trade reconstruction enables firms to easily identify and correct trade errors or disputes and reduce their negative impact to a business. In this way do we see the solution to save both time and revenue, as the investigation of human error or misunderstanding is made possible in a timely manner.
Not only can trade reconstruction mitigate loss avoidance in terms of botched trades but also safeguards financial institutions from hefty fines brought about through regulatory penalties. In recent months banks and financial institutions have seen astronomical fines, including a million-dollar sanction handed out to a leading global firm for failing to comply with swap dealer reporting measures.
Additionally, with enhanced visibility over trade communications firms have the ability to analyse trading patterns and trends gleaned from delving deeper into entire trading lifecycles. Furthermore, the opportunity to resolve disputes trades and customer complaints in a prompt fashion improves customer relations, which increases competitivity and overall profitability.
With these enhanced business opportunities, the profit potential which is achieved from an active approach to indexing and utilising data, compiled from trade reconstruction, firms can decipher between traders who are giving market colour or attempting to manipulate the market.
We are now entering a new phase whereby the benefits to be achieved from trade reconstructs goes beyond that of the compliance department and meeting regulatory requirements. Firms, when taking an active approach to utilizing collected data, achieve competitive advantage over those who fail to adopt an automated system.
Being regulator ready has never fostered such additional benefits to the front line of defence.
Get in touch with a team member today to learn how VoxSmart’s award-winning solution can help enable your firm to enhance revenue potential today!
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