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MEETING THE TRADE RECONSTRUCTION AND RECORD KEEPING DEMANDS UNDER MIFID II & THE DODD FRANK ACT
Harald Collet, Bloomberg Vault
+1 212 617 7629
Adam Stannard, Bloomberg Vault
+44 20 3525 7856
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REGULATORY RISK, COST & PRESSURES 2
WHAT CONTENT DO I HAVE?
HOW DO I CONTROL IT?
HOW CAN I USE IT?
CUSTOMER CHALLENGE STATUS QUO
MORE REGULATION
MORE RISKS
RISING COSTS
BLO
OM
BE
RG
EM
AIL
IM
VO
ICE
TR
AD
ES
DO
CU
ME
NT
S
SO
CIA
L M
ED
IA
• CANNOT RECONSTRUCT TRADES
• POOR SURVEILLANCE
• DARK DATA
• SLOW INVESTIGATIONS
• HIGH OPERATING COSTS
• DIFFICULT TO DELETE DATA
• INCONSISTENT GOVERNANCE
• REQUIRES DOMAIN EXPERTISE
DATA SILOS
RECORD KEEPING, MARKET ABUSE DIRECTIVE
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MiFID II Requirements
• Record
Keeping
• Records shall be kept of all services, activities, and transactions
undertaken by investment firms to support enforcement actions under
MiFID, MiFIR, and MAD/MAR.
• Records includes all email, IM, recording of telephone conversations,
transactions, documents (even if it doesn’t lead to a transaction)
• Records will be kept for a minimum of 5 years (up to 7 years where a
regulator specifies) in a manner ‘so that they cannot be modified or
deleted’ (compliance storage)
• Event
Reconstruction
• Firms are required to provide transparency into trade life cycle. Firms
need to have trades and communications (incl. voice) 'readily available'
and provided upon client's and regulator’s request
• Surveillance • Firms must strengthen conduct of business rules.
• Firms are required to increase monitoring and surveillance on marketing
and distribution activities for prohibited or restricted financial instruments
• The technical guidelines from ESMA require firms to integrate
surveillance platforms for trades and communications to increase
market transparency
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Telephone/Electronic Communications (Art 16 MiFID II)
Must record comms
relating to, at least,
transactions concluded
when dealing on own
account and the provision
of client order services that
relate to RTO and
execution of client orders.
Must record comms
(including internal) intended
to result in transactions
concluded when dealing on
own account or in provision
of client order services
relating to the RTO and ex
of client orders, even if
those conversations /
comms do not result in
transactions (or in the
provision of client order
services).
Storage medium – must not be
capable of being amended or
deleted; readily accessible and
available to clients on request.
Orders placed by clients
through other channels
considered equivalent (in
particular, the content of
relevant face-to-face
conversations with a client
may be recorded using
written minutes or notes).
Records to be provided to
the client involved upon
request and kept for five
years and, where requested
by the regulator, for up to
seven years.
All reasonable steps to
record comms made with,
sent from or received by
equipment (i) provided by IF
to employee/contractor or
(ii) the use of which by an
employee/contractor has
been accepted or permitted
by the IF.
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REGULATORY LANDSCAPE
MiFID II on Record-keeping
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» An investment firm shall arrange for records to be kept of all
services, activities and transactions undertaken ….
» Records shall include the recording of telephone conversations
or electronic communications …..
» Such telephone conversations and electronic communications
shall also include those that are intended to result in
transactions…..
» The records kept … shall be provided to the client involved
upon request and shall be kept for a period of five years and,
where requested by the competent authority, for a period of up
to seven years.
» …To be stored in a medium so that they are not capable of
being amended or deleted, readily accessible and available to
clients on request
Extract from Articles 16(6) and 16(7)
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REGULATORY LANDSCAPE
Dodd-Frank Act on Record-keeping (CFTC):
» All records are required to be kept for the life of the trade +5
years on WORM storage.
» Mandated that voice recordings be captured and archived for 1
year.
» Associate all pre-trade communications with counter-party LEI
and trade details.
» Provide reconstructed trade including all pre-trade
communication to CFTC/NFA within 72 hours
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BLOOMBERG VAULT
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BLOOMBERG VAULT SOLUTIONS 8
Enterprise Archiving » WORM Storage
» Letters of Attestation
» 100% Guaranteed Reconciliation
File
Analytics Trade
Reconstruction Data
Analytics
Surveillance:
» Real-time Policy Management
» Dramatically reduce false positives
eDiscovery: » Advanced search, analytics, and review
» Improves Performance & Efficiency
BLOOMBERG VAULT CORE OFFERINGS
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HOW BLOOMBERG VAULT WORKS? 9
Ingestion
Process
Data Sources
Bloomberg
Private
Network
Surveillance Secure
Transfer
Bloomberg
Private
Network
Analytics
Bloomberg Hosted Governance & Analytics Solution
A
B
Data Center
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ARCHIVE & SECURITY 10
BLOOMBERG DATA CENTER AND GLOBAL NETWORK
BLOOMBERG
VAULT
BLOOMBERG DATA CENTER AND GLOBAL NETWORK
BLOOMBERG
VAULT
Geographically Dispersed
Data Centers
Data Centers Infrastructure
» Fully owned and managed by Bloomberg
» Running on the world’s largest private network
» Active/Active & Scalable Architecture
» SSAE16-SOC 2 Compliant
» Security Enforced Network – SVPN, Biometric
Vault Infrastructure
» WORM (Write Once, Read Many)
storage
» Compliance with SEC 17a-4 rule
» Blind Encryption & Trusted Archive
» Bloomberg Vault Attests to the data for
FINRA, SEC, CFTC
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DATA SECURITY & INTEGRITY 11
Trusted Archive
A patented Bloomberg technology that guarantees 100% reconciliation
Blind Encryption
Control all archived data and encryption keys at all times
Vault HSM Web Client
HSM
Keys
Compare
Retransmit
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SUPPORTED DATA SOURCES 12
Bloomberg Data
» Message (MSG)
» Instant Bloomberg
(IB)
» Bloomberg
» Trade Data
Instant Messaging
» AOL IM
» Microsoft Lync
» Blackberry
» Reuters
» Yahoo Messenger
» Jabber
» Future release: WeChat &
Social Media
» Salesforce
Chatter
» Yammer
» YouTube
search
» Google chat
Corporate Email
» Microsoft®
Exchange
» Microsoft Office 365
» Lotus Domino
» Any SMTP
» Salesforce Email
» Yahoo Mail
Voice Data
» BFON
» Voice Recording, Including Nice, Redbox, Verint
» Call Detail Records
» Mobile Recording
Trade Data
» Bloomberg Trading Systems
» FPML exports from:
» Aladdin, Murex,
Calypso, etc.
File Analytics
» Unix & Windows file shares
» SharePoint 2010 & 2013
» BOX
» Coming soon: AWS S3,
Salesforce FILES,
SharePoint Online, Hitachi
TRADE RECONSTRUCTION
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BACKGROUND
Facing comprehensive Trade
Reconstruction requirements under
CFTC, MiFID, HKMA, MAS
Regulated Enterprises
» Transaction & counterparty search
» UTC timestamp across all data
» Unstructured pre-trade document
management
» Structured trade and post-trade data
management
» Respond to requests within 72 hours
CHALLENGES
Vault Offers
Purpose built workflow to
facilitate identification of
specific communications
related to trades
Structured trade data and
unstructured
communication search
Counterparty directory
management and search
by LEI (Legal Entity
Identifier)
Link communications to
trades for export, audit
trail or investigation
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ADAPT TO CHANGING REQUIREMENTS
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Electronic Communication
MSG/IB, SM/IM
Files & Documents
Voice Execution Clearing & Reporting
Pre-Trade Trade Post-Trade
Bloomberg Vault Trade Investigation
• Trade Archive • Communication Archive • Counterparty Directory
Bloomberg SWAP
Execution
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16 TRADE RECONSTRUCTION BUSINESS USE CASES
Respond to Regulatory Requests
DFA
MiFID 2
HKMA, MAS, etc
Improve Trade Audit Processes
Reconstruct communications associated
with trades as part of regular trade audit
workflows
Compliment Trade Surveillance
Investigate alerts and events generated
from the trade surveillance platform
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TRADE ARCHIVE
Securely store trade data on compliant WORM storage
Search for relevant trades and use as the trade archive as a
starting point for reconstruction of the communications
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TRADE RECONSTRUCTION
COUNTERPARTY DIRECTORY
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TRADE RECONSTRUCTION
COUNTERPARTY SEARCH
Streamline and improve labor intensive processes to manually
identify counterparty contacts
Counterparty name or LEI from trade and automatically resolve to
the relevant contacts
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TRADE RECONSTRUCTION – DEMO
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NEXT STEPS
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Trade Data
Counterparty Directory
Trade Documentation
Voice Recording
Secondary Channels
TRADE RECONSTRUCTION
PHASED DEPLOYMENT
Primary Channels
• Ingest trade data for compliant
storage and integration with
reconstruction workflow
• Sync counterparties and
counterparty contacts to expedite
search
• Leverage File Analytics for capture
of trade documentation on file
shares or SharePoint
• Include voice recordings from
existing recording platform
• Add secondary sources to the
archive (i.e. AOL, Yahoo, Lync)
• Consolidate primary sources in
communication archive (i.e.
Bloomberg MSG/IB, IM, Email)
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CONTACT US
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Harald Collet, Bloomberg Vault
+1 212 617 7629
Adam Stannard, Bloomberg Vault
+44 20 3525 7856
