Revista Systems

ASSUMPTION IS THE MOTHER OF ALL…..
(you know the rest)

Box office superstar Steven Seagal played Casey Ryback in Under Siege II: Dark Territory.

We recall when Ryback’s nemesis Trevor Dane workshopped the merits of assumptions.

To illustrate the problems of assumptions in compliance and regulation we have paraphrased this quote here today.


"Assume you may be under seige, too"

There are better tactics than making assumptions….

We don’t need to assume is that the MiFID II directive is demanding, we know it is! Market participants must capture all communications associated with any transaction, across multiple communication and collaboration channels. The regulations specify that the records must be stored in an accessible and searchable way and available promptly.

You might think you have the technology in place to handle this, but do you? Are you 100% sure that when the regulator comes knocking, you can quickly reconstruct trades with all of the associated communications? In some cases this will be straight forward, however there are likely to be thousands of transactions across a multitude of devices and as a result much more difficult to manage.

Consider the following scenarios…

No trade execution but a price enquiry made

Finding the starting point of the communications timeline is one of the biggest challenges to assumption. In the case of a price enquiry with no trade being executed, where does one start to look for the communication initiating the first communication of this no-trade enquiry? Was it phone call or email or chat? From Who?

Probability is maths Probability based trade reconstruction is assumption based.

An option is to search for a call to - or from - the client in the same week, or maybe two weeks, or even within a month (just to be on the safe side). The result of the ‘estimation’ of the time frame is the introduction of a layer of uncertainty. Assuming the first communication happened within a month of the price enquiry being completed – and assuming the call was placed by the client – and assuming it was a call.

Trade booked, we have a starting point

Let's say the trade was booked. There will be a date to assume backwards from. In the absence of properly structured communications metadata it is logical to use probability or assumption which will help to find the most relevant communications, based upon the ‘starting point’.

Start Now Now we can assume a starting point...

If a trade was booked with client x, any communications from client x on the same day \ week \ month will be assumed to be relevant. Assuming your assumptions are correct (this is getting scary isn’t it?) and you assume you have found all the associated interactions in the first place, you will still need to manually trawl through an undefined number of interactions to ensure no other relevant communications have been overlooked.

All relevant communications captured, or are they?

Any investigation that arises is likely to be as a result of something untoward being identified. Most market participants capture most communications.

If a trader has used an unauthorised device to communicate then we are now faced with even more doubt as we look through the hundreds of calls they may have made in any one day – we are searching for something which isn’t there. Not to mention the immense disruption to BAU.

How can we avoid the above scenarios?

Policy is one way - Don’t use mobile phones.(?) Completely unrealistic, we all know they will still be used, we just won’t be tracking them - resulting in clear conduct risk.

-- OR –

The Better Way…

We could link all of the relevant communications at the time they occur, store them in a structured and secure manner and in turn remove all ‘assumptions’ – thereby mitigating risk and freeing up time to focus on increasing profitability – not retrospectively trying to piece everything together.

If you're under siege, the right tools will help'. Old siege tools: If you're under siege, the right tools will help!
Assumptions don't cut it...

The regulations around communications aren’t going away and burying your head in the sand is not an option. Assuming that you can find all relevant communications in a short time frame when the regulators request is a daunting thought. Market participants are best off taking steps to ensure they can deliver before the FCA starts handing out substantial fines.

Get your house in order now before you’re under siege too.

(Assuming it’s not!)


The Revista CCM is the only platform that links communication metadata to enquiries and transactions, and enables this to happen in real time at any stage in the transaction lifecycle.

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