Page 22 - FTF_092614

BLURRED LINES:The reforms for voice-based over-the-counter derivatives transactions are blurring the lines among compliance, operations, IT and risk staffs as they struggle to meet regulatory requirements.The shift is similar to when firms began applying compliance and archiving rules to email and other electronic communication forms that had an impact upon transaction processing, says Robert Powell, global head of compliance for Etrali Trading Solutions.The change for voice trading in the U.S. came about “because the compliance guy had his head on the block for producing data and [trading firms] realized quite quickly that you couldn’t put your reliance on an IT guy to do that,” Powell says. As a result, firms are creating “compliance-IT roles” that will work with IT and operations staff overseeing voice-based recording and reporting requirements.These overlapping roles are likely to straddle the traditional front-, middle- and back-office barriers.“It does straddle the entire organization but what you typically find is that because trader voice has a higher level of risk associated with it — in terms of compliance failures — some organizations have a trader voice team that is knowledgeable in how ... every call should be recorded, retained and backed up,” Powell says.Putting together a multifaceted voice-trading compliance strategy should also include input from a firm’s legal department, says Bart Bartolozzi, senior product marketing manager for IPC Systems, a maker of trading turrets and dealerboards that also offers its Voice Recording Management Service. “You want to comply [with regulators] but you don’t want to over-comply,” Bartolozzi says. “You want to be able to manage it to the requirement and not beyond.”In addition to new rules, regulators are requiring firms to appoint a point person for voice-trading compliance, Powell says. “If you’re an OTC organization governed by the CFTC, you have to appoint what is known as a technical consultant,” he says. “If you’re storing this stuff electronically, you have to appoint someone who can get access to this data if your organization becomes unavailable. ... I think it’s one of those things that will start hitting people when the CFTC examiners roll around to their next level of inspection.”OTC REFORMS FOR VOICE TRADINGby Eugene GrygoWhen it comes to voice-based over-the-counter derivatives transactions, the roles of compliance, operations, IT and risk staffs at trading firms are changing. In requiring instruments negotiated via phone and digital systems to be transacted via swap execution facilities, regulators have created new layers of compliance that are challenging firms large and small.The CFTC is requiring OTC market participants engaged in voice-based transactions via trading turrets and dealerboards to not only maintain the books related to their transactions, but also the monitoring, recording and archiving of fixed- line, mobile, IP-based and electronic communication.The regulator also requires firms to keep a complete audit trail for each transaction placed for execution. These requirements cover officers, employees and agents of firms working in the OTC markets.Before OTC reform, financial services firms “would have the operations people solely focused on maintaining the availability of the voice-trading solutions for the traders,” says Marc Carletti, executive vice president,22 global banking and financial markets, at BT Global Services, which offers phones and networking services for the trading floor. But the regulations are compelling operations staff to work more closely with a firm’s risk and compliance officers, especially those who are accountableat the board level, Carletti says.Some firms have also created new roles to deal with the overlap among compliance, operations and risk staffs such as the chief infrastructure risk officer and chief information security officer, Carletti says. “Those new roles are to fill the gap.”The gap was caused in part because responsibilities for oversight of voice-trading and voice-recording systems are shifting. Operations staffs used to make certain at the beginning of the day that the voice lines were checked for quality “one by one before the trading starts,” Carletti says. That operational issue has now become a compliance matter, he says.Marc Carletti, EVP, global banking and financial markets, BT Global ServicesContinued on Page 24FALL 2014 | FTF NEWS MAGAZINE