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BLURRED LINES: OTC REFORMS FOR VOICE TRADING (Continued from Page 22)New Silos?Oddly enough, as compliance, risk, IT and operations roles start to overlap, the need to manage voice and electronic communication may inadvertently create new silos for many firms,Carletti says.The problem is that voice trading is more complex than past iterations, when transactions occurred strictly within the realm of secure trading turrets. “As you know, a trade can be initiated by a chat,” Carletti says. “Pre-trade models can be furtherCloud and Hosting ServicesAs trading firms adjust to the regulatory requirements, they’re likely to consider cloud computing and hosting, say Carletti and Powell.“The resistance we saw to cloud-based recording is decreasing,” Carletti says. “It shows that there is more of an understanding of how to be compliant and cost-efficient.”Powell says that a new demand for hosting solutions is underway as firms are looking for alternatives to the conventional deployment of new hardware, disk storage andThere is always going to be the customer that’s going to pick up the phone and ask, ‘Why is the gold price falling today?’ That level of wholesale consultative trading willalways be there.developed via email and executed via a mobile phone conversation. So that’s really the challenge.”While many firms have taken the first step to implement voice recorders, they risk falling into the trap of setting up separate databases for fixed-line calls, IP-based voice recordings, and instant-messaging and email communication, Carletti says. “But when you are asked by the regulators to come back in 72 hours ... to reconstruct the deal, you can imagine that if you have three silos, it becomes a very delicate exercise,” Carletti says.24 Given the complexity of voice- and-digital trade-related communication, trading firms will be busy as they strive to achieve a centralized system that features the “six R’s” for compliance: reporting, recording, recovering, replaying, reconstructing and receiving voice-based and electronic communications, Carletti says. This process can take three to five years tointegrate with incumbent systems.To help with integration, Carletti says BT works with the compliance-recording offerings of Verint and its Impact 360 for Financial Trading and the voice-recording offerings of NICE Actimize.Bartolozzi adds that the wide scope of voice-trading compliance requires firms to have “hooks into their systems” that will feed into a shared database that can facilitate regulatory reporting.– Robert Powell, global head of compliance, Etrali Trading Solutionsdata center expansion to stay on top of recorded calls.“What we’ve seen in the last year is a significant number of our customers asking for us to host that equipment on our site, our data center,” Powell says. “That gives them some benefits in terms of maintenance.” Remote hosting also makes it easier for firms to downsize IT resources if there is a reduction in staff after a market event or a downturn in the economy, he adds.Voice-trading providers are aware that their market is shrinking as firms continue to reassess their mix of voice- and non-voice- trading activities. “Compliance pushes the market to be less voice- and more data-oriented,” Carletti says.Yet the inclusion of voice-based trading in OTC reform is an acknowledgment that some forms of trading may not transition to a fully electronic implementation, say industry observers. Lessliquid and less frequently traded OTC products and bespoke instruments are often handled better via voice systems.Powell agrees that the voice market for sophisticated dealerboards is shrinking. “That said, there is always going to be the customer that’s going to pick up the phone and ask, ‘Why is the gold price falling today?’” Powell says. “That level of wholesale consultative trading will always be there.”Meanwhile, Powell says he will keep his eye on voice-based transactions via mobile phone. “We do see people flocking to mobile recording.”FALL 2014 | FTF NEWS MAGAZINE