The Dodd-Frank Wall Street Reform and Consumer Protection Act represent a significant step-change in the global financial services regulatory structure. Some of the provisions associated with Dodd-Frank present both technological and supervisory implications
for those firms engaged in swaps activities. As a consequence of this shift in the regulatory landscape, I believe that we will see a rise of the voice recording machines. The regulation mandates that all communications relevant to trading swaps will have
to be captured and that it must be possible to reconstruct trades. We are no longer simply talking about straightforward voice recordings and having the ability to search through a backlog of audio recordings. Times have changed.
There are many new recording challenges on the horizon. For example, traders are increasingly making use of their own mobile devices and carriers. In addition, complex communications dialogues between counterparties can result in a rich cocktail of instant
messages, email and voice. Making sense of this is no small feat and as a result, firms will increasingly require a robust system in place to record and correlate all of these conversations.
Gone are the days when voice recording applications flew below the radar and had relatively little visibility within a firm’s IT organisation. Although the technology was often necessary, voice recording was never considered to be all that exciting. Now
all this is changing and the regulatory pendulum is swinging and it is accelerating. Scandals such as LIBOR rate fixing, money laundering and latent, undiscovered fraudulent activities, will only perpetuate this.
It’ll be tough for firms to keep up with the pace of regulatory change and tackle the compliance challenges that the modern communication methods around swaps trading presents. Financial institutions will need to work with partners to develop and adopt even
more powerful technologies that can perform advanced pattern searching, filtering and correlation functions. This is no longer the stuff of science fiction.