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Will the $2B Fines Make a Difference for Personal Devices on Trading Floors?


The end of September saw a culmination of a landmark regulatory investigation by the US Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). 16 major global banks were fined for failing to keep records of business communications on personal mobiles and other devices on their trading floors. The result of this nearly 18-month investigation was $1.98 billion in regulatory fines.

By most standards, $1.98 billion is a lot of money and a significant step up from previous nominal fines reaching to tens of thousands of dollars. Indeed, the size of these individual fines sent shockwaves through the financial risk and compliance communities and are compared to the fines usually issued in serious fraud cases.

But is a collective $2B in fines still enough to shift a cultural change ending an era of grey area of non-compliance and for the banks to bring meaningful controls over personal devices on their trading floors?

Let’s consider some facts. The turnover of a global Forex market is $6.6 trillion each day. An average trading floor of an investment bank turns over at least few billions daily. Latest industry statistics confirm that 87% of the regulated firms have implemented no controls over any of their mobile communications. Regardless of the technology being there, none of the banks today have a visual oversight of the business communications happening on personal mobile devices.

The ruling arguments from the global firms are, that there is no technology to address this problem, that the banks work only with fully integrated platforms addressing 10 other problems, followed by let’s focus on a channel-specific problem, most recently Signal, and followed by creating ‘mobile friendly zones that are physically taped off from the rest of the trading floor. Yes, seriously.

Considering our experience in mobile comms and laser-sharp focus on this exact problem for the past 5 years, I think we are very far away from the real change driven by the global banks to monitor all mobile communications on their regulated trading floors. It increasingly seems that the firms are comfortable with having some grey areas as it legitimately allows them to continue making more money per day that cripples the very billions in enforcement fines just issued by the SEC.

The issue of unmonitored personal mobile devices resembles more and more the regulatory action against SAC Capital to bring down one of the most notoriously successful Wall Street trader Steve Cohen who allegedly made his money from insider trading. Whilst his company got issued also a $1.8 billion fine, Steve continues to be a billionaire and even do some trading. Alas yes, the banks got fined, but does it really change anything?

The US regulators should of course be applauded for all this action, which has significantly increased the industry awareness on and attention to the use of personal mobile devices in regulated spaces. There will surely be some measures and controls by the banks to demonstrate that they are addressing the issue. Unfortunately, and more likely than not, these actions will just be a smokescreen, which enables the firms to continue to retain the grey area of trading. The banks will continue having no visibility of any personal mobile or connected devices brought to their regulated spaces, and they will continue having no accurate records of the activities through their devices.

Smart devices are ubiquitous and are set to become even more and more integral part of our lives. Whilst today we can still separate ourselves from our devices, soon this will not be the case. I guess it is a trade-off between a profit on the balance sheet versus the scale of security and compliance breaches through unmonitored mobile devices. Only the time will tell how long the piece of string is.

For those who want to stay ahead of the curve, please contact me to find out how technology addresses this regulatory problem.


Published: 12 October 2022

Author: Raili Maripuu

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