Best Practices for Managing the Latest Trends and Challenges Related to Market Abuse Surveillance

What are the latest trends and challenges related to market surveillance? What are the best practices for addressing these challenges? Where do firms start, and how can technology help?

ACA Group’s Eddie Cogan, Partner and Head of eComms Surveillance, recently joined A-Team Insight’s Sarah Underwood for a fireside chat where they discussed these topics and more. Eddie, founder of Catelas, which was recently acquired by ACA, shared his expertise from more than 20 years working in surveillance. You can watch this brief session below.

Trends and challenges related to surveillance

The popularity of Zoom, Teams, WhatsApp, WeChat, and other video and voice communication platforms shows no signs of abating. While great for convenience and productivity, these tools bring the following risk and compliance challenges to financial services firms:

1. The rise of voice – More and more business conversations are happening via voice calls or video meetings, and sometimes in multiple native languages. It’s becoming increasingly important not to view voice as just a form of communication, but also for surveillance technology systems to be able to transcribe voice to text and then integrate that into the surveillance process.
2. Regulators have taken notice – ACA is seeing an increase in regulators looking towards voice as a common process and they expect firms to raise their game in terms of monitoring their employees working from home.
3. Integration of trade data with eComms – Perhaps the most crucial element to effective market abuse risk monitoring, bringing trade data and eComms together makes it easier to eliminate false positives and isolate actual risky behavior.
4. Adoption of surveillance technology – ACA has seen more firms, particularly smaller firms that don’t have big silos related to data and processes, beginning to implement surveillance technology that can connect trade data and eComms.

Best practices for managing surveillance-related challenges

Given these challenges and the direction surveillance is moving, what can firms to do make sure their surveillance programs are effective?

1. Empower people with technology - Surveillance can no longer be done manually and by people alone: your firm’s domain experts need to be empowered by technology. The benefits of a surveillance system that can connect trade data with eComms are immense: reduction of false positives, isolation of risk, and moving towards a more predictive model that can identify leading indicators of risk (such as behavioral indicators). Fewer false positives mean less time spent reviewing messages and more time spent looking deeper.
2. Adopt a holistic approach – Surveillance technology that uses different algorithms can better isolate risk and look more broadly across the firm without overloading your surveillance team with content to review. For example, natural language processing (NLP) and machine learning algorithms are important for understanding context to isolate risk, while behavioral algorithms can look at how people gather and conduct business to establish another form of context.
3. Know what to do with the technology – Your surveillance team needs to understand what to do with the technology’s outputs – the messages that require review will be more interesting and potentially signal a real risk, meaning your team will need to know how to respond and mitigate the risk.
4. Be able to explain how the technology works – Regulators expect firms to understand the technology they’re using – how the algorithms work, what behaviors and patterns you’re looking for, etc.

How we help

ACA’s holistic surveillance solutions are designed to help your firm manage its firm-wide risk in a way that meets regulatory expectations and industry best practices. Our offerings combine consulting, managed services, and technology to provide a holistic solution for developing and executing a comprehensive and truly risk-based surveillance program.

For questions or to discuss how ACA can help your firm strengthen its surveillance program, increase efficiencies through technology, and ensure your regulatory obligations are met, reach out to your ACA consultant or contact us here.

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