Effective Compliance Investigations | Communications and Market Data Analysis

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Effective Compliance Investigations
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SHIELD FINANCIAL COMPLIANCE
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Introduction
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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 todays
data-driven financial markets, compliance
officers must consider not only
transaction-related communications but also the
trade and market data contemporaneous with a
suspicious event.
SHIELD FINANCIAL COMPLIANCE
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Rigorous Review Requires a Full Picture
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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
requirements.
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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 todays 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.
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SHIELD FINANCIAL COMPLIANCE
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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.
Improvements in Compliance Data Boost Enforcement
Effectiveness
SHIELD FINANCIAL COMPLIANCE
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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.
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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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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 traders intention to commit
market manipulation, adding yet another of
security on an increasingly sophisticated
technology-driven compliance environment.
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