Effective Compliance Investigations | Communications and Market Data Analysis

SHIELD FINANCIAL COMPLIANCE

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Effective Compliance Investigations

Introducti on

In order to ensure these investigations are carried out properly, compliance officers must have a complete record of all relevant facts to consider. This requires a review of both the event in question and all of the pertinent information surrounding it. In today’s data-driven financial markets, compliance officers must consider not only transaction-related communications but also the trade and market data contemporaneous with a SHIELD FINANCIAL COMPLIANCE suspicious event.

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0 3 Traders are sophisticated, and they can find creative ways of working the system. Over the decades, unscrupulous financial professionals have colluded to buy and sell securities and commodities according to strategies carefully crafted to manipulate market prices. New technologies have made market manipulation more accessible – and less detectable – than ever before. As a result, compliance officers are facing increasingly data-driven investigation

Rigorous Review Requires a Full Picture

Effective compliance investigations require a complete view of all relevant facts, and there is any number of ways unsavory traders can manipulate financial markets using modern technology. As a result, in today’s markets, effective compliance enforcement systems collect and analyze not only electronic communications but also relevant transaction and market data on a historical or intraday basis.

SHIELD FINANCIAL COMPLIANCE

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Improvement s in Compliance Data Boost Enforcement Effectiveness SHIELD FINANCIAL COMPLIANCE

Most regulated financial firms run sophisticated compliance monitoring systems that flag events that could amount to violations of applicable regulations. In most circumstances, when a compliance officer receives a red flag from the monitoring software, his or her first response is to review all of the communications the traders had regarding the suspicious transaction. From there, most systems require compliance officers to then shift to another platform to see all of the orders performed contemporaneously with the trade.

Most regulated financial firms run sophisticated compliance monitoring systems that flag events that could amount to violations of applicable regulations. In most circumstances, when a compliance officer receives a red flag from the monitoring software, his or her first response is to review all of the communications the traders had regarding the suspicious transaction. From there, most systems require compliance officers to then shift to another platform to see all of the orders performed contemporaneously with the trade.

SHIELD FINANCIAL COMPLIANCE

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Trade Data Proves Crucial in Effective Investigations Market manipulation can be hard to detect, particularly because in some circumstances it is only evidenced by careful scrutiny of trade-related data. For example, when most traders are considering a purchase or sale of stock, they will look at the prevailing prices, which are the “bid and ask” or “bid and offers” prices. The difference between these two figures is called the bid/ask spread. In a very efficient market, this spread will be minimal – the difference between the buy and sell price will be very close. Detecting variations in the bid/ask spread may indicate market manipulation that would otherwise be undetectable through other means.

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0 8 Compliance technology has grown incredibly sophisticated.

Once machine learning software collects sufficient data, artificial intelligence solutions can detect market manipulations to an incredible degree of sensitivity. This saves compliance officers from the mundane work of analyzing thousands of possible data points and select what is relevant for a compliance investigation and what is not. Advanced AI solutions with neuro-linguistic programming can even predict a trader’s intention to commit market manipulation, adding yet another of security on an increasingly sophisticated technology-driven compliance environment.

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