Make Love not War: Why compliance & trading should be closer aligned

Make love not war - why compliance and trading should be closer aligned-1

Today, compliance teams collect and store a rich and diverse set of data for regulatory record keeping, reporting and oversight. In the front office world, the ability quickly to access and analyse data has been highlighted as the key driver for decision making. Yet the data stored for compliance purposes rarely escapes the department and is almost never used by trading teams. But as data becomes more and more important to establish a competitive edge, will the compliance function be the knight in shining armour that comes to the rescue? 

Historically, compliance has often been described by traders (unfairly in my opinion) as the business prevention unit – a manifestation of the different metrics and objectives of these departments. Traders drive revenue for clients and the business and want to do so in the most profitable way. Compliance on the other hand carry the responsibility of ensuring that everyone is playing by the rules and that the reputation and integrity of the company is protected. Consequently, it feels like compliance teams and trading desks are often out of step with one another.

This has started to change over the recent years with the introduction of regulations like SMCR which have made senior managers accountable for business misconduct and market integrity. As a result, there is now a clearer incentive for Heads of Trading to support and align with compliance – to protect themselves from liability. However, there are many more benefits beyond mere compliance that can be gained through closer collaboration between these teams.

It was highlighted during TradeTech 2020 that the ability to quickly process, analyse and extract insight from data is key for trading teams to drive enhanced performance. However, bringing together the required data, validating it, and then using it is not a simple task. In fact, because of the sheer quantity and breadth of data produced today (both internally and externally to an organisation), many have been unsuccessful in developing a form of “data lake”, largely due to limited budget and resources.

Interestingly, regulatory requirements for record keeping, reporting and oversight present a similar challenge and necessitate the consolidation of a wide array of real-time and near-real time data (including trades, orders, communications, market data, global news, HR data and more). However, for compliance, this is not a “nice to have” but an operational must, and as a result, they do collect and store this information. The degree to which this is all on one platform or fragmented between multiple compliance solutions varies, but the data is there.


5 steps to great compliance data governance


That means that trading teams could access and use this rich set of readily available data for enhanced analytics, giving traders the near real-time view of performance needed to quickly adapt and adjust to changing market conditions. And since the data is already being stored in one part of the business, teams would not need to build or buy any more platforms. Dashboard visuals could then provide instant answers and alerts – similar to those used for market surveillance – and could be customised when specific behaviours or activities occur.

Of course, any shared platform between the two teams would need appropriate controls to ensure information barriers. All compliance solutions should already enable advanced permission controls and as Helen Bevis outlines in her recent article, there are several actions that firms can follow to manage information barriers in today’s trading environment.

 

Since all regulated firms are already collecting a wealth of data for compliance record keeping, reporting and oversight, this data should also be made available to profit centres within the business, such as trading. Is not easy to consolidate and analyse large volumes of data, but since this is already a requirement within compliance, firms would do well to organise and store compliance related data in a centralised platform with easy access for all parts of the business. This would allow each department to leverage the wealth of insightful data for their specific needs.

If firms are successful on this mission, compliance officers and traders can use the same underlying data platform to simplify processes and focus on more substantial long-term gains. This means not only greater performance but also reduced costs since several departments can use the same platform and data.  


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At SteelEye, our data-centric compliance platform can provide valuable insight into what your traders are doing and how they are doing it. We ingest trading, communications, news, market data and more, and offer intelligent analytics tools that tell you everything you need to know about your trading performance.

  • Measure the relative performance of your traders, the executions achieved and deviation from the best price/time

  • Highlight working patterns of your traders

  • Set automated alerts and reports to capture signals, data and trends that are important to you

These are some of the insights we can provide in a near-real time basis, powered by a complete set of Refinitiv on-exchange market data and extensive multi-asset coverage for non-listed products. Plus, we also offer post-trade TCA in addition to our regulatory compliance solutions for reporting, oversight, record keeping and more. To explore these themes in more detail, please book a demo.

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