How to approach communications surveillance in energy trading? The 5 levels of monitoring.
Energy trading firms often use voice and eCommunications to trade a wide and complex set of products however, this activity hasn’t fallen under the direct supervision of regulators, until recently. With the implementation of MAR and Remit over the last few years, energy firms have invested in trade surveillance technology. With increased spotlight on energy markets, firms are now looking towards a wider set of monitoring tools including Communication Surveillance.
Prior industry research suggests that, although there is still a lot of voice trading in this sector, reviewing calls is typically performed manually. Spot checks are usually carried out or deeper dive investigations happening when perhaps a trade surveillance alert occurs. Otherwise, calls are typically recorded and stored, available for compliance teams to review as and when.
With different levels of communication monitoring and benefits to be achieved, firms must gradually increase monitoring capabilities to enhance and improve surveillance systems. VoxSmart can guide you through this process and provide an award-winning product suite, powered by state-of-the-art AI and ML technology.
What are the 5 levels of communications monitoring?
Communications monitoring can be broken down into 4 levels, each increasing in complexity for a more complete and comprehensive surveillance program.
1. Call recording
The first step to any surveillance program is to start recording, of course. However, that is where a lot of firms stop. Recording calls is a requirement under MiFID II, article 16.7. However, we don’t see any value in just recording and storing these audio files away on a server collecting dust. They hold vital information which can be utilised not just to achieve better compliance but also to improve business processes using the insights gained from customer interaction.
2. Listening to calls on an ad hoc basis
The next stage is making these recordings available for compliance to review when necessary. This is otherwise known as sampling or manual sampling and has a very limited reach. While some smaller companies can make do with this method due to low call volumes, it is not an appropriate measure for larger firms or as a long-term supervisory control.
3. Lexicon-based searches
There is a wide variety of communications channels used by traders as part of their daily business. These include channels such as ICE chat and Bloomberg chat as well as emails and texts. Typically, these channels are authorised for use by compliance and some lexicon-based monitoring occurs across these channels.
In some cases, lexicon searches have been able to highlight trader discussions worthy of further investigation. However, using only lexicon-based searching can result in a higher number of false positives. This is because the context is not being considered at the same time. A lot of software which centres around lexicon-only analytics do their searching across communication metadata without analysing the communication’s content. However, when both the content and metadata is analysed together, this allows for more powerful analysis and more refined alert results.
4. Using AI to identify suspicious activity
The adoption of AI based tools to interrogate large data sets and uncover suspicious patterns is an efficient approach. In fact, technology has evolved a lot in recent years and when applied at the right stage of the analysis process, it can produce increased levels of accuracy and detect signs of intent. This is most advanced level of communications monitoring.
However, AI and ML technology for the trading floor should be deployed with the right approach and in the right measures. “BlackBox” AI is preventing accurate audits as outcomes generated often cannot be explained or justified which, for many firms, is increasing concerns around unknown bias and error rates.
With regulatory pressure mounting discover how VoxSmart can help your firm face these obstacles with our award-winning Communication Surveillance solution. Voice and eComms on the one platform – it just makes sense to get in touch with our team today!
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