Big Data : Asking the right questions to turn the challenges of compliance into a competitive advantage -
idea of ‘Big Data’ is much discussed within the financial markets, as
it is elsewhere; particularly concerning how it could and should be
used. Yet there remains much confusion and not a great deal of consensus
over what “Big Data” truly means, and more importantly what it means
for businesses. In the trading world – and specifically within the
trading communications space - such data can be incredibly valuable. But
as is the norm when interrogating large datasets, it is vital that the
right questions are asked in the first place.
When is “Big Data” being captured?
simple answer is ‘all the time’. There are huge amounts of data from
multiple channels of communication that can be captured, archived and
analysed. Within the trading environment, this includes actual trade
data, blotters & history – everything that takes place around a
trade, as well as wider trading floor communications. MiFID II will
require all communications that are intended to result in a trade to be
recorded and stored. So when we talk about ‘trading floor
communications’, this means fixed line and mobile calls, emails, and
instant messengers – from Bloomberg and Reuters to MSN or Skype.
the vast array of data passing through an organisation is a tough
technological challenge, but doing so is increasingly offering firms
competitive advantages. Focusing exclusively on the financial markets,
the ability to apply analytics to anything from trade executions and
overall trader performance, to finding inefficiencies in a trading
workflow, can offer firms the kind of governance and oversight which was
simply not possible in the past.
Where are you storing it?
for data storage are now significant, and maintaining such storage is a
job in itself. Storage needs to be resilient and secure, with
well-maintained back-ups and the possible use of WORM-compliant storage
solutions (WORM: ‘Write Once, Read Many’ - a protocol which guarantees
that the data is not modified in any way after it is first written to
the storage medium in question). In many cases, a lot of big data is
currently stored on storage media that, if not already obsolete, is
coming to the end of life – or as in the case of tapes, is a medium
which is physically degrading and for which no like for like replacement
parts are available.
are particular risks associated with tapes, and in parallel, increasing
pressure from regulators and recognition by banks that those need to be
taken care of and pushed to network attached storage. Once this
migration has been completed, one of the major benefits – as well as no
longer being dependent on old tape-based storage media – is that you can
apply new technologies to the historical data. This means that if a
regulator makes demands for specific data from five (or more) years ago,
the data can be searched for, accessed and swiftly presented in a way
which was simply impractical, if not impossible, beforehand.
a result of the demands upon financial institutions for secure and
resilient data storage, the risks and costs associated with storing data
on their premises are high. Increasingly therefore, hosted storage is
being considered as an alternative model. For years, some data – such as
emails – have been archived in the cloud. Nonetheless there has been
resistance to storing other data, such as voice calls, there too.
However, we are now at a time when many other things – ultimately all
services - could and should be stored in the cloud. There are clear
benefits of making the move: less risk, flexibility and scalability of
storage, as well as cutting the cost of investing in large amounts of
Are you using big data effectivity to your advantage?
compliance, being able to use the available data in the right way when
needed is crucial. Demands from regulators can be challenging: firms are
expected to be able to respond to any request to produce the right
extracts of the vast amount of data that forms massive storage archives.
At the moment this can be costly, time-consuming and inaccurate;
manually listening for sensitive phrases in phone calls for example,
means that the possibility of uncovering anything from breaches of
policy all the way through to market abuse is not achievable on a
there are now various technologies that offer the possibility of
filtering through the hundreds of thousands of recorded communications
using advanced phonetic searches and Compliance Officers can now
proactively set up alerts linked to particular scenarios. This means
that when certain terms or phrases are mentioned, a workflow is provided
that allows you to identify, flag and mark for review any targeted
communications. Firms should utilise such technology to test their data
capture against specific regulatory scenarios that relate to their own
compliance culture, to ensure they can meet regulators’ demands if
the Compliance department, utilising technology to mine the vast amount
of data being captured can be a significant benefit to your wider
business strategy. From analysing sales if products are being mis-sold
or spotting opportunities to cross and up-sell, to monitoring service
quality and examining whether staff are following procedure and
standards on client calls; the insights gained from Big Data can direct
and drive improvements across business functions and give you a
forward to 2016 and the implementation of MiFID II, firms will need to
become more proactive in the way they manage and monitor the many
channels of communication used every day. Big Data is a key tool in
doing that, once you think beyond simply capturing it, to how you can
use it and what it can bring to your organisation.
A blog by Rafael BLOOM
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