The increasing complexity of trade surveillance requirements, driven by regulatory demands and exacerbated by volatility, is putting pressure on manual processes and driving investment in automation, according to a new study by Acuiti on behalf of Eventus.
The report – Getting to the risk quicker: How trade surveillance leaders are dealing with an increasingly complex environment – explores the challenges facing trade surveillance teams as regulations governing trading have grown in scope, detail and enforcement, while trading product and techniques have become more sophisticated and complex.
The report polled 71 senior trade surveillance, risk, compliance, technology and trading executives at banks, brokerages and proprietary trading firms.
It found that 94% believe the complexity of trade surveillance has risen over the past three years, with 64% saying the increase was significant.
It also noted increased regulatory requirements and market volatility are the major drivers of heightened complexity in trade surveillance in the last three years
In addition, a majority of sell side respondents said that their analysts are spending more than 30 hours a week manually closing and investigating alerts while high manual input is being exacerbated by a shortage of skilled compliance staff
Firms are increasingly looking to technology for efficiency, with a clear desire for more automated workflows.
Around 64% of banks refer to machine learning as either very important or critical.
Joseph Schifano, global head of regulatory affairs for Eventus, said, “Analysts need to customise their technology and mitigate risk based on particular businesses, regulatory jurisdictions and trading activity.
Today’s surveillance system must enable its users to be nimble and responsive to a rapidly changing global environment, while being explainable to the front office and regulators alike.”
“The pressure on the sell-side to maintain high quality trade surveillance systems is immense and unlikely to abate any time soon,” said Ross Lancaster, head of research at Acuiti. “Regulation and the volatility we have seen this year are creating sustained stresses on compliance desks, and this is increasing the case for strategic investment.”
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