FlexTrade says it has partnered with ACA Technology Solutions to help mutual clients manage their trade surveillance and compliance needs using ACA’s Decryptex surveillance technology and FlexNow. “FlexNow and Decryptex are stand-out products supported by highly-responsive and knowledgeable teams, says Shoshana Wainer, head of compliance at Albar Capital. “Integrating Decryptex with FlexNow allows us to […]
Digital Reasoning has launched a new, AI-enabled voice analytics solution for voice communications monitoring in banks. Developed with input from its industry partners and customers, the firm claims it delivers market-leading transcription accuracy of financial domain audio data and seamless workflows that enable efficient scaling of audio monitoring coverage. Allied with the firm’s conduct surveillance […]
So we brace ourselves, as an industry, for more bad headlines about conduct in the FX markets, however in contrast to previous instances, the industry should be ready on this occasion. The culmination of the European Union’s clearly exhaustive and complicated investigation into events that first came to light six years ago is upon us […]
Digital Reasoning has announced the availability of a managed hosted version of its conduct surveillance solution on Google Cloud Platform and Amazon Web Services. Developed with Digital Reasoning’s banking partners, the firm says the solution brings its text and audio communications analytics to the world’s leading secure cloud infrastructures. It adds that compliance and front-office […]
The New York Department of Financial Services (DFS) has fined Standard Chartered Bank $40 million for attempting to rig transactions in FX markets between 2007 and 2013. An investigation by the DFS, as well as an internal review by the bank, found that bank traders used a range of illegal tactics to maximise profits or minimise losses at the expense of the bank’s customers or customers at other banks. Specifically, it was found that between 2007 and 2013, traders based in New York and elsewhere joined traders at other locations in a chat room called “Old Gits”. According to the DFS, the chat room was formed so that traders could coordinate trading, share confidential information and otherwise affect FX prices, with one trader apparently describing the chat room to a new member as “a den of thieves”.
The FICC Markets Standards Board (FMSB) has published the final version of its Statement of Good Practice (SGP) on Suspicious Transaction and Order Reporting.The FMSB is an independent body set up by market practitioners to try and improve standards of conduct in wholesale FICC markets. It aims to bring transparency to grey areas in the wholesale FICC markets by identifying emerging vulnerabilities, clarifying and documenting practice and agreeing standards to improve conduct and market behaviour. Setting up the FMSB was one of the main recommendations to emerge from the Fair and Effective Markets Review (FEMR), which was conducted by HM Treasury, the Bank of England and the Financial Conduct Authority (FCA).
Regular readers will know I have what I believe to be a healthy level of scepticism over the use of AI and machine learning in trading.
What will give me more confidence is the better embracing of adversarial AI, for only by imbuing an algo with a certain amount of cynicism will we empower it to trade effectively in markets because, and this is a point I have made before in these pages, it is quite easy to spoof an algo.
There are so many lawsuits aimed at financial markets participants that it is hard to keep up these days, and while most are aimed at historic actions, there is definitely a culture building in which the first instinct of someone who feels they have been wronged is to head to the courts. This has to stop somewhere, for if it doesn’t there will be repercussions for the market structure. If you have a problem with a market, tell the operator and then tell the regulators – only after then do you hit the lawyers.
Spoofing is the low hanging fruit for prosecutors thanks to it being easy – especially on regulated venues – to spot. But this visibility should not just be about bringing charges, it should be used for preventative means. What interests me is how these alleged spoofers thought they could get away with it and in reality the only way they did is because the surveillance procedures in place at venue and institutional level were either too slow, inadequate, or non-existent.
Trangressions come in many forms; some are undoubtedly deliberate, others may be unintentional, but they have one thing in common – if viewed in black and white some months later they can often look incriminating. The FX industry has faced a series of conduct-related scandals – mostly involving the use of electronic communications which many believe have not been monitored adequately.
One firm, however, believes it has the answer to the challenges facing banks in particular when it comes to monitoring activity over e-channels.