The Push for Day-to-Day Trade Monitoring to Keep Up with Regulatory Demands

When it comes to compliance in the securities industry, surveillance can make or break a brokerage firm. From renewed focus on risk management and data analytics in the SEC’s 2015 Examination Priorities Letter, to FINRA’s proposed Comprehensive Automated Risk Data System (CARDS) initiative, broker dealers and proprietary trading firms are tasked with a more thorough understanding of their compliance standings than ever.

While deceptive behavior in trading can lead to dire consequences for individuals and trading firms, trade violations can create severe consequences on the market as a whole. Numerous tactics—order spoofing, painting the tape, wash sales, “portfolio pumping”—can all have a ripple effect, artificially driving stocks up and down.

Dodd Frank regulations mean more requirements and rising costs, but broker dealers and proprietary trading firms can manage their compliance by addressing challenges step-by-step.

Consistently monitor all trading activity

Firms and broker dealers execute millions of trades daily on a variety of platforms and exchanges, so it’s not enough to rely on the trading software itself to track patterns, and spreadsheets can’t keep up with high frequency algorithms. Post-trade software monitors trades across platforms and exchanges, flagging any questionable activities in one consolidated place to save time and ensure firms have clear and complete records of their surveillance efforts.

Get a grasp on analytics for audit readiness

Electronic trading has left its stamp on the capital markets industry beyond day-to-day activities. Gaining access into trade information is a necessary first step for remaining compliant, but increasing attention on reporting means broker dealers need to be prepared to share information from across the company at the drop of a hat.
For instance, FINRA’s CARDS proposal focuses not only on surveillance, but also collection of key account activity on an automated basis. Firms need to efficiently gather then interpret “big data” on trading on a regular basis, which will require collaboration from a number of operations and compliance personnel. Sophisticated back-office software can streamline this process with daily, online exception based reports.

The compliance space can be daunting, but firms who ignore the rising tide of regulations and fail to develop strategies for surveillance, recording and reporting of trading activity put themselves at serious risk. When back-office software systems are deployed with capital markets, industry regulations and technological advances in mind, they can do more than track, eliminating the headache of attempting to manually handle the monsters of surveillance and reporting in an age of electronic trading.