The volume of trading activity has grown exponentially over the past few decades, as a result of elaborate securities offerings and the availability of instantaneous communication. Throughout the evolution of the markets, trade reconstruction remains the key to documenting proper execution, settling disputes, and demonstrating compliance with the law.
In today’s modern market, the sheer volume of information required to construct a complete trade reconstruction can be overwhelming, and under new regulations, it’s growing every day. Transactions are not limited to individualized one-to-one agreements, they typically include a trader, counterparty, and a customer. Depending upon the size of the organization, firms can employ three support people for every trader (on both sides of the transaction), not including any interactions with risk or compliance.
Each exchange between parties can occur on multiple communication channels – voice, turret, email, chat, or mobile. Legacy systems often store this data in separate repositories, each with a different owner and support team. To complicate matters further, identifying all the relevant data is often a manual process. Retrieving and reviewing large blocks of information from segregated systems requires hundreds of man hours. In the U.S., all of this must be completed within three days. Regulations require C-Suite executives to sign an attestation certifying the completeness of the process, something that can weigh heavily on the signatory.
The constant fear of “did we get it all” looms over every reconstruction presented to regulators. It is clearly a monumental undertaking – one that consumes enormous amounts of time, and leaves little room for error. New standards worldwide require a searchable, time-sequenced recreation of all communications, both structured and unstructured data.
Thankfully, firms can now be equipped with advanced, automated trade reconstruction solutions. By applying data management and correlation algorithms, these solutions provide higher levels of confidence, and shave days off of trade reconstruction time. As our markets continue to evolve, so too is our ability to safeguard them.