XLoD Global returned to London with 3 great days of discussions, debates and networking. With both virtual and in-person elements to the event there was much to be taken from the experience for all in attendance.
Noteworthy across the event was much attention to the increase regulatory measures which the industry has seen in recent months – the most recent and widely discussed of these being the SEC’s $ 1.8 billion Wall Street fine for failures relating to the monitoring of encrypted messaging platforms such as WhatsApp.
With the consensus from experts across all three lines that regulation is set to get more extreme getting ahead of this is key for firms within the market. Here are just some of the key takeaways from across the 3 days.
Increased need for WhatsApp monitoring
As recent weeks have demonstrated, traders are using the de facto messaging platform WhatsApp for business purposes. Much discussion at the event, including VoxSmart CEO’s Oliver Blower’s case study presentation, highlighted the increased need for firms to surveil across the platform.
A quick show of hands at the presentation showed that although majority of people present were using WhatsApp very few were enabled through firm policy to communicate over the platform. In light of recent fines, regulators are expected to continue efforts to ensure compliance across the channel leaving firms opened to additional risk should they fall to adequately monitor the leading messaging service.
An added challenge for firms widely discussed at the event was the question of Bring Your Own Device versus Corporate issued devices. One such discussion highlighted corporate issued devices as the way forward to reduce risk of conversations not being recorded, with a simple, user-friendly solution for the end user in addition to buy-in from executive levels.
Manual is unsustainable
The need for increased automation was a key feature to discussion and debate at the event with many questioning the sustainability of manual functions. Should firms strive for increased levels of transparency and governance then automated technology will be essential in ensuring this.
Trade Reconstruction debate, which featured VoxSmart Group CEO, highlighted the benefits of adapting an automated solution to connecting communications with trade data. Both first and second lines of defence would reap benefits from such a solution. Firms have the opportunity to acquire additional insights into trades and profit and loss spike to inform better business in a timely manner while enabling employees to focus on primary responsibility and upscale talent.
The benefit of implementing a trade reconstruction solution is not limited to that of regulatory compliance but extends to the front office who arguably should be paying for such a system considering compliance and surveillance is a downstream beneficiary of data capture efforts. Exposing insights into front desk efficiency and such a solution offers the foundations for higher levels of automation, such as speech trade executions.
“42% of participants felt their firms was not well-positioned to meet the regulatory requirements relating to trade reconstruction”
Future of the surveillance function
Calls for more dynamic risk assessments were made, with scalable tech solutions seen as key in addressing the current gap which firms are facing when it comes to surveillance. It was apparent that throwing people at the problem was not sustainable nor effective. In order to cut down on the noise associated with trade communication surveillance dynamic approaches such as AI and ML were key in minimising this problem.
In reducing false positives agile technology was hailed as the holy grail when looking to reduce alert fatigue in addition to the Cloud as fundamental in the process of data with analytical capability reliant on it. Firms are increasingly seeking to get to the real risk faster to get ahead of regulatory requests whilst also seeking greater insights from trade communications.
“57% of participants spend on new surveillance technology will be prioritised towards trade surveillance”
Firms need to be realistic regarding ESG claims
With many firms having signed up to be Net Zero regulators are expected to increase efforts in assuring firms are meeting their claims and responsibilities in the fight against climate change. Firms were advised to design and understand reporting and disclosures rules when it comes to ESG regarding accuracy, messaging, positive claims unbalanced by risk scale and inconsistent rating measures – all of which regulators will look at when tackling the issue of greenwashing.
However, firms were also reminded that regulators are there to work with not against them when it comes to the ESG, describing it as a process and a journey which many firms are on to ensure positive measures in halting climate change.
Cross collaboration vital to the success of both lines
A recurring theme for a number of years is the conversation around the data gap which firms are facing. This will only be solved through cross line collaboration and buy-in from each individual function. With data fuelling how firms are operating and much benefit to be achieve from utilising this data for better business decision, it has never been more pressing to dive into the data lake.
What this means for firms is and brings to an organisation is the need for a culture shift. People understand surveillance as an important function yet the 2lod needs to be a partner to all lines, with cross line collaboration fundamental. Management of taking risks needs to be as strong as systems dealing with risk.
These were just some of the talking points across the 3-day event – however what is clear is regulatory boards expectations and resolve will only increase in the future. By getting ahead of regulation firms a better placed to not only deal with requests but also gain enhanced insights to bolster trade opportunities for the future.
Get in contact with us today to find out how our solutions can help your firm enhance its control systems for the future!
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