Overcoming Trade Reconstruction ChallengesIdentify, Visualize and Reconstruct All

Trade-Related Communications and

Data to Ensure Financial Compliance

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IntroductionGlobal Impact of New Regulations on Trade Reconstruction

The ChallengesTrade Information is Siloed Over Many Departments and PeopleTrade Data and Information is Captured and Stored EverywhereThe Trade Reconstruction Process is ChallengingWhat Happens in Reality?Example: A Trade Reconstruction Challenge of a Global Bank

The SolutionNICE Actimize Trade ReconstructionBringing it All Together with NICE Actimize Trade ReconstructionUse Powerful Applications to Organize All Trade InformationVisualize the Trade Events and CommunicationsTake a Phased Approach to Implementing Trade Reconstruction

SummaryNICE Actimize Trade ReconstructionNICE Actimize Financial Markets ComplianceNICE Actimize

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• swap dealer and major swap participant shall ensure that its records include all information necessary to conduct a comprehensive and accurate trade reconstruction for each - CFTC §23.202

• Provide a full SWAP timeline of events including all trades and/or communication within 72 - 731 Dodd-Frank Act

• Records shall include the recording of telephone conversations or electronic communications relating to

• even if those conversations or communications do not result in the conclusion of such

•

in all recordings. This evidence must be readily available for regulatory investigation. - Article 16(7) and Recital 57 of the MIFID II Directive

• - Han Chen, Chief Executive of Ceinex

• ili

- Guo Shuqing, Chairman of the China Banking Regulatory Commission (CRBC)

• sound

- Hong Kong Monetary Authority, 2 March 2017

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Global Impact of New Regulations on Trade Reconstruction

US

Europe

APAC

DODD-FRANK MIFID II MARCFTC ESMA

BIS HKMA

MASFX CODE OF CONDUCT

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Trade Information Resides in Silos Across the Organization

PRE-TRADE TRADING TRADE OPERATIONS POST-TRADE

Trade Support with Back OfficeTrade Support with Sales TraderTrading Desk with Sales Trader

Market Views Bid / Ask Market Sounding News Negotiations Confirmations Settlements TransfersQuotes Amends Cancels Reconciliation

Trade reconstruction is essential to regulatory investigations. But the actual process of reconstructing a trade is complex. A single trade could consist of a

variety of communication channels and orders, executions and other trade data with tasks completed by multiple people. Navigating the large amount of data

that a firm keeps in order to find elements of a single trade can be a challenging task.

To fully reconstruct a trade, you need to identify and present all of the voice and electronic communications that contributed to the process of the trade

execution throughout the organization. Voice calls, due to their unstructured nature, can be especially hard to find if you don't have the right tools.

deal coming

Sales Trader with Client

hearing

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Trade Data and Information is Captured and Stored Everywhere

Desk Phone

Trading Turret

Mobile Phone

Instant Messages

Corporate Emails

• Siloed archives of relevant trade data

• Multiple data types and formats

• Inconsistent Metadata and Identity Properties

• Variety of tools to identify and access the data

What do you have?

Trades

Where do you start?

• How do you identify all the relevant and related data?

• How do I correlate information across multiple data sources?

• How do I create and share a timeline of events

Chat Rooms

Executions

Orders

Compiling the data and communications associated with a trade is a challenge. Data is typically siloed in multiple databases requiring multiple searches or

opping all they are doing to complete

a trade reconstruction process. For the compliance analyst tasked with trade reconstruction, the questions are often "Where do I start?" and "How do I

reconstruct a trade with a timeline of activity and communication that could go back as far as several months?

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The Trade Reconstruction Process is Challenging

Manual search of multiple

events and records with no

auditability

Insufficient understanding of the

issues which require review

Need to collect multiple records from

various sources and understand events as

they occurred with manual timeline creation

External sharing of events

and unknown missing facts

result in delivering

incomplete information

Manual, error-prone documenting in spreadsheets

Data can be confusing and

disconnected, leading to a

time-intensive exercise and inefficient

sharing of information

Investigations require immediate access to all relevant information from multiple data sources in order to have proper understanding and effective results.

that is needed for making

critical decisions and could result in sharing incomplete information internally and externally.

Many firms rely on a manual process to reconstruct a trade, but with complexity and strict regulatory deadlines, firms leave little time for review and thus

expose themselves as to whether they have successfully provided an accurate and informative trade reconstruction. Regulators have stated that the manual

process many firms employ is not sufficient.

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What Happens in Reality?

Perform a trade reconstruction to link the trade activity with other related communications to gain a complete picture of the event

CommunicationContains LanguageSuggesting Collusion

Need to perform contextual reviews of trading activity with no alerts by performing a trade reconstruction which includes all communications and related trade data

Trade Review Process

Need to reconstruct the related events and communications around a trade to provide context

Trading Activity Triggersan Alert

There are multiple reasons why trade reconstruction is needed. Most common is an outside triggering event. But what if trade reconstruction could be an

part of their proactive risk

management strategy instead of reacting to a request.

Conversations Market Data Market NewsTrades

+ ++

• The bank needed to reduce investigation times and improve the process of identifying and reconstructing communications, order and trade data related to trading activity.

• Their existing process was manual, inefficient and error prone which resulted in the inability to satisfy the expectations of internal compliance teams as well as those of the regulator.

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Example: A Trade Reconstruction Challenge of a Global Bank

• The vast amount of communications data and related trade information was stored in silos which made identifying, correlating and packaging the information difficult.

• Their finding was that the manual process was not meeting their needs.

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The Solution: NICE Actimize Trade Reconstruction

• The financial institution consolidated all order and trade data, trading alerts, voice, email and chat communications data into a single global Hadoop data lake.

• Using the NICE Actimize Trade Reconstruction platform, the financial institution was able to index big data including voice integration to make ALL trade-related data instantly searchable from a single portal.

• The NICE Actimize big data analytics solution sorted and organized all trade and communications data, providing a smarter way of searching for required content through better understanding of the data.

• The NICE Actimize correlation search analytics provided a simplified process for finding related information. The financial institution was able to start with a single trade or communication and systematically find all other orders, trades, chats, emails and calls that could be related in seconds.

• Using the NICE Actimize Trade Reconstruction platform, the financial institution is now able to perform trade reconstructions using all available data from multiple channels across the organization and prove all steps of the identification, reconstruction and review process.

• Using the NICE Actimize Trade Reconstruction platform improved a time-consuming, error-prone manual process that previously took hours and reduced it down to just minutes, resulting in significant efficiency improvements and cost savings for the financial institution.

Aggregate

Analyze

Act

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Bringing it All Together with NICE Actimize Trade Reconstruction

Turrets MobileVoice Email NewsChat Trades Orders

Text Analytics RelevancyNatural Language IndexingCorrelationBehaviours

InvestigateTimeline

ReconstructionDocument

• Enables Analysts and Investigators to identify potential anomalies in visual result sets

• Ability to create full trade event reconstruction with timeline review

• Policy-driven workflows with automated actions to collaborate, attach relevant information and

Packaging

Speech Analytics

Central Access to Relevant Trade Data

Provides Contextual Results

With Efficient and Effective Applications

• Aggregate all data, structured and unstructured in a single solution

• Index, clean and enrich the data

• All data is fully searchable in a central system

• Convert Voice Conversations to Text

• Analytics to sort and categorize the data automatically

• Machine driven correlation to instantly find related conversations and content across 100% of the data within the system

Aggregate

Analyze

Act

Identify

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Use Powerful Applications to Organize All Trade Information

• Seamlessly search for a specific item of interest across all forms of analyzed and indexed data using a single portal.

• Unlock all trade communications to understand what is being discussed and correlate orders and executions with trade conversations.

• Reconstruct trading events as they occurred across multiple data sources, including voice and electronic communication.

• Data visualization enables deeper understanding of the search results to help identify patterns and relationships.

• Share and escalate information throughout the organization instantly via NICE Actimize's award-winning Risk Case Management (RCM) workflow application.

• Automated Trade Reconstruction helps manage risk and uncover unknown risk to your firm.

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Visualize All Trade-Related Events and Communications to Identify Potential Risks

Enables Analysts and Investigators to identify potential anomalies and find related issues across any form of communication

Ad-hoc Customizable Charts to Visualize search results in unique ways to identify and

act on emerging trends faster

Dynamically updates with filter selections and queries entered

into the search to display related

business activity

Multiple chart types to select from: Pie, Line, Bar Charts and Word Clouds for viewing data in

multiple viewpoints

NICE key phrase detection technology helps alert compliance analysts to phrases or wording that may be of potential risk. Through automated

trade reconstruction an analyst can immediately uncover any trades or activities associated with these phrases, minimizing exposure to potential long

term risk.

to Identify Potential Risks

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Take a Phased Approach to Implementing Trade Reconstruction

Electronic Communications

Email NewsChat

Voice Conversations

Turrets MobileVoice+

Order and Trade Data

ExecutionsOrders

+3

Electronic Communications

Email NewsChat

Voice Conversations

Turrets MobileVoice

+2

Voice Conversations

Turrets MobileVoice

1 1. Start with the indexing and analysis of

all Voice Communications, the most

difficult part as speech conversion is

required to provide structure to Voice

Communications.

2. Then add semi-structured Electronic

Communications data such as e-mail

and instant messaging to the platform.

3. Complete the index by adding Trade

Data to meet all of the regulatory

requirements for trade reconstruction.

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Summary: NICE Actimize Trade Reconstruction

Simplify Allow automation and analytics to

solve the complicated challenges of trade reconstruction and managing investigations.

Efficiency Significantly reduce time in

searching for data and related communications.

Assurance Demonstrate proactive

compliance through advanced analytics and auditable process.

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Solutions from NICE Actimize Financial Markets Compliance

Compliance IssuesSolved

MultipleData

Sources

Information Captured and

Analyzed

Conversations Market Data Market News Trades

DetectIntent

ReconstructTrades

Identify Conduct RelatedThreats

Communication Compliance

HolisticSurveillance

Sales Practices& Suitability

NICE Actimize Financial Markets Compliance protects financial institutions by enabling regulatory trade compliance through automation and intelligence

Solutions

• Compliance Assurance

• Compliance Recording

• Trade Reconstruction

• Holistic Behavioral Analytics

• Trade Surveillance

• Communication Surveillance

• Holistic Surveillance

• Sales Practices & Suitability

Contents of this document are Copyright © 2018 NICE Actimize, Ltd. Information is believe to be true at the time of publishing. All trademarks and logos are the property of their respective owners.

fmc@nice.com

NICE Actimize Financial Markets Compliance

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NICE ActimizeNICE Actimize is the largest and broadest provider of financial crime, risk and compliance solutions for regional and global financial institutions, as well as government regulators. Consistently ranked as number one in the space, NICE Actimize experts apply innovative technology to protect institutions and safeguard consumers and investors assets by identifying financial crime, preventing fraud and providing regulatory compliance. The company provides real-time, cross-channel fraud prevention, anti-money laundering detection, and trading surveillance solutions that address such concerns as payment fraud, cybercrime, sanctions monitoring, market abuse, customer due diligence and insider trading.

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