With mobile and electronic communication fast exceeding the fixed line phone, the way we connect with each other is changing. Regulators have recognised this to be true within financial markets as well as everyday life and responded with updated rules requiring
regulated firms to record all forms of communication and trading information. Under the Dodd-Frank Act, market participants need to have instant access to all forms of communication data around a specific trade, and to be able to supply this to the regulator
March 2012 was the first of several significant dates for those concerned with recording. Investment Advisors with more than 15 US citizens as customers were required to register with the Securities and Exchange Commission (SEC). By March 2013, companies
had to comply with the call recording legislation for both fixed line and mobile for swaps transactions.
Firms are now responsible for knowing all communication methods across transactions and retrieving them in a way that allows the ‘reconstruction’ of that communication, both pre- and post-trade. They must be able to provide specific data relating to a transaction
rather then specific message types or a named custodian. If a trade involved connection with counterparties via Twitter for example, these records will need to be stored and retrieved as required.
Banks are now starting to deploy systems to allow them to meet the challenges of increased retention and retrieval challenges. A correctly deployed and targeted system is able to increase productivity and reduce false positives for the monitoring and retrieval
of messages. It must be sufficiently flexible to meet the as yet unknown challenges of other regulations as they filter down including the Markets in Financial Instruments Directive (MiFID II) and Market Abuse Directive II (MAD II).
Today’s new environment shows a definite shift of responsibility from the regulator to the regulated. Until now the onus for understanding communications media used in the negotiation of each transaction was firmly with the authorities. The Dodd-Frank Act,
and the interpretation of the ‘intention’ of the rules by the CFTC, has changed all this and institutions must now take responsibility for reporting all communications if required. Requests from the regulators to view all communications around specific trades
in the future are extremely likely. Making sure systems are flexible enough to handle these demands is a step towards safeguarding the stability of today’s financial markets.