Post on 02-Dec-2014
description
Dodd Frank Act – Recordkeeping Requirements
Stephanie Baruk sbaruk@chappuishalder.com
June 2013
Context and ObjectivesComply to recordkeeping obligations
1. The Commission modified the proposed rule such that each transaction record does not need to be maintained as separate electronic files.2. Under § 23.202(a)(3)(iii), SDs and MSPs are also required to retain records of portfolio reconciliation results, searchable by transaction and counterparty, in order to comply with § 23.502 Portfolio Reconciliation.
In order to enhance risk management, the CFTC has mandated that Swaps Dealers (SD) and Major Swaps Participants (MSP) maintain daily trading records for swaps as well as all related records, including cash and forward transactions. This
encompasses all written and oral communications, such as e‐mail, instant messages, and telephone calls.
Requirements Description
Identifiable and Searchable by Transaction and Counterparty
Trading records for swaps need to be identifiable and searchable by transaction and counterparty.
Voice Recordings Pre‐trade, trade and post‐trade voice communications relating to a swap need to be captured, tagged, retained, and searchable.
“Readily Accessible” and Open to Inspection Swap records must be readily accessible for the first two years of the five year retention period, and is subject to inspection by the CFTC and US Department of Justice.
Time‐stamped in Universal Coordinated Time (UTC)
SDs and MSPs must use UTC to record the date and timing (to the nearest minute) of: • all quotations exchanged prior to execution;• swap and related transaction executions; and• swap confirmation.
Audit Trail A complete and comprehensive audit trail is required to enable accurate trade reconstructions.
Data Storage Records must be retained for a period of five years past the term of the swap (termination or maturity). Oral recording retention however, is only one year.
Records of quotes, solicitations, bids, offers, instructions, trading, and prices
Reliable timing data to complete trade reconstructions
Date and UTC timestamps for all quotes exchanged
Pre‐Trade
Counterparty name and unique counterparty identifier (UCI)
Swap terms Trade ticket Unique swap identifier (USI) Date and UTC timestamp of swap execution Date and title of agreement to which the swap is
subject Product name and unique product identifier (UPI) Execution price Fees or commissions, and other expenses Any other relevant information
Execution
Records of post‐execution trade processing and events
Post‐trade
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Key Challenges, Issues and Success Factors
Key challenges Main issues to be expected
Key success factors
• Relevant content must be readily accessible and immediately available to the regulator
• Multiple channels of communication must be included, such as email, IM, voice, database, and documentation, including pre‐trade communications
• A wide variety of data and file formats is within the scope of the request
• Large numbers of existing content repositories and databases must be mined
• Relevant information must be associated with a unique swap identifier only made available after booking trade with information related to the trade
• Most communications and documents are not organized by swap identifier
• Information must be preserved on WORM (write once, read many) disks for five years beyond the life of the deal
• Information in any channel may be in any language
• Need consensus from all entities on the solution as it should be globally deployed
• Systems are disconnected and often managed across different parts of the organization
• Existing repositories of information utilize very different technologies and contain a wide variety of file formats and database schemas
• Systems reside across multiple geographic regions
• Existing data is held in a wide variety of data formats
• Navigating internal infrastructure can be a challenge
• Locating relevant content, particularly in audio, IM, and email, is technologically difficult with traditional, structured data systems
• Comply to the regulatory obligation while optimizing costs related to the development of new solutions
• Leverage existing solutions in other locations such as: Symantec Enterprise Vault for email storage NICE for voice recording
• Review difficulties encountered and main challenges when implementing the recordkeeping solutions in the US
• Ensure consistency of the tool selection with other regulatory requirements related to recordkeeping obligations (Emir, Market Abuse, MIFID..) in order to anticipate future developments
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Global ApproachAp
proa
chDeliverab
les Benchmark and comparative analysis
IT solutions assessment (pros & cons)
Best practices of the competitors
Target solution summary
Perform comparative analysis of existing market solutions (references, speech‐to‐text functionalities, storage capacity, search functionalities, compliance level, integration and exploitation costs…)
Study feasibility, costs and benefits of proposed solutions
Evaluate pros & cons
Identify competitors’ best practices, encountered issues, and chosen solution’s advantages
Synthesize advantages and drawbacks of each provider within the panel
Validate target solution
II – Benchmark & Target Solution
Analyze the DFA regulation and how it can be integrated within your organization
Define pilot approach and prioritization if necessary, eligibility criteria and perimeter
Perform a detailed cartography of products / volumes / systems / platforms / communication tools along with specificities by entity
Identify existing recordkeeping solutions within other entities and their compliance level
Assess operational impacts of new processes
Perform gap analysis (requirements vs. current state) and identify actions to undertake
Draft expression of needs based on gap analysis and address organizational or operational points, if necessary
I – As is Analysis & Diagnosis
Regulatory analysis and impact assessment Cartography of impacted processes, tools and
products Mapping of existing recordkeeping solutions Gap analysis and identification of needs
Elaborate implementation roadmap
Coordinate draft of functional specifications
Define role and responsibilities of new processes
Communicate to F/O the expected changes
Ensure follow‐up of the development planning and UATs
Monitor budget
Define and implement escalation procedures, if necessary
Communicate to Steering Committee progress of implementation
III – Preparation of the Implementation
Roadmap Communication plan RACI Reporting and monitoring tools Escalation process
16/09 14/10 28/10 31/12
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I ‐ As‐is Analysis and Diagnosis
Approach Illustration: Regulation Analysis
Deliverab
les Regulatory analysis and impact assessment
Cartography of impacted processes, tools and products
Mapping of existing recordkeeping solutions
Gap Analysis and identification of needs
Non
‐com
pliance cartograph
y an
d regulatory risk profile
Analyze the DFA regulation and how it can be specifically adapted to your environment (itemization) and validate eligibility criteria and scope
Define pilot approach and prioritization (structured vs. unstructured data, business lines, entity, communication tools– IM, mobile and landline phones, Mail, Fax, docs, etc…)
Perform a detailed cartography of products / volumes / systems / platforms / communication tools (IM, voice, email, fax, documents etc.) along with specificities by entity
Identify of existing recordkeeping solutions for structured and unstructured data within the different entities and their compliance level with the DFA requirements
Assess operational impacts of new processes
Perform a gap analysis of requirements vs. current state and identify actions to be set up in terms of (if any):
• Technical developments and new solutions•New information to be added to current flows•New responsibilities to be defined• Empowerment of F/O on process changes…
Draft an expression of needs based on gap analysis and address organizational or operational points, if necessary
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II – Benchmark and Target Solution
Approach
Perform a comparative analysis of market solutions in terms of:• References• Speech‐to‐text functionalities (quality, #of languages etc.)• Storage capacity• Search functionalities• Compliance level with the DFA requirements• Integration and exploitation costs…
Study the feasibility, costs and benefits of proposed solutions including tactical solutions by improving the existing US solutions:
• Add‐on of the NICE speech‐to‐text functionality with indexation capability
•Utilization of the GlobaNet Connector for integration of voice records to Enterprise Vault
• Deployment of the solution in other entities
Evaluate the different alternatives (pros & cons)
Identify best practices of competitors, their main issues, and their chosen solution’s advantages
Validate the target solution
Illustration: Benchmark
Deliverab
les Benchmark and comparative analysis
IT solutions assessment (pros & cons)
Best practices of the competitors
Target solution summary
0
1
2
3
4Compliance
Search
Storage capacity
Speech to text
Costs
References
Solutio
ns assessm
ent
Compa
rativ
e an
alysis
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Description Core Capabilities Competitive Advantage
“The NICE Trading Floor Compliance solutions can provide the ability to reconstruct trade communications as they happen, tie them to swap transactions and enable a search through every type of related interaction including voice, instant messaging and email.”
‐ Ability to reconstruct all trade communications via the different channels as they happened over time
‐ Correlate transaction and communications to make them searchable “by trade”
‐ Automatically raise alerts for non‐compliant communications‐ Discover current communications topics and trends‐ Provides compliance departments with insights and real‐time
impact tools that will increase compliance protection against new regulations
‐ Offers a voice capture platform that can process Turrets, PBX phones, Mobile devices via various connection method to suit customer needs
‐ Metadata that can be captured and tagged may be counterparty, SWAP Document ID, SWAP Transaction ID, SWAP deal names, stocks / currency / commodities names assisted with the SWAP, etc.
“The Clearwell eDiscovery Platform, now from Symantec, is the leading electronic discovery software solution that enables enterprises, governments and law firms to manage legal, regulatory and investigative matters using a single application”
‐ Includes semantic analysis, native file format review for over 500 file types, and predictive coding
‐ Platform that is easy to use and administer‐ Streamline the entire eDiscovery life‐cycle by using a single
application that spans legal hold and collections through analysis, review, and production
‐ Modular approach enables customizable eDiscovery solution.
‐ Clearwell can be directly integrated with Enterprise Vault, which is the market leader in enterprise information archiving solutions.
‐ Ease of use, simple deployment and time‐to‐value
“Bloomberg Vault offers an end‐to‐end solution for real‐time policy management, enterprise archiving and eDiscovery to help address the needs of legal and compliance professionals.”
‐ Fully hosted platform offers end‐to‐end record‐keeping to satisfy Dodd‐Frank requirements, including voice compliance.
‐ Tags records by counter‐party and archives regulated trades.‐ Offers scalable archiving solutions.
‐ Provides native integration to the proprietary Bloomberg tools.
‐ Local Vault allows data to be managed globally according to a set of corporate policies, but stored locally in various countries.
“Global Relay is the market leader in compliance messaging, archiving and message management.”
‐ Captures incoming, internal and outgoing electronic messages in real time.
‐ Web‐based archiving tool integrates with email and messaging systems to deliver superior search, retrieval and monitoring capabilities.
‐ Unlimited cloud storage. ‐ Search and retrieve capabilities available on PC and
mobile devices.‐ Exceptional service ‐ zero messages lost, 99.999%
uptime, and 24‐hour response to e‐discovery and audit requests.
“Leader company in interaction analytics, renowned for its ability to transform unstructured data to structured information through language analysis”
‐ Extracts key data from voice and text interactions.‐ Reconstructs trades locating all interactions associated to it.‐ Identifies risk patterns and compliance rules endorsement.
‐ Multi‐lingual solution for voice and text.‐ No technical infrastructure changes required.
“Autonomy, an HP Company, is a global leader in software that processes human information, or unstructured data, including social media, email, video, audio, text and web pages, etc. “
‐ Provides a single platform approach for managing all information, enterprise‐wide, in accordance with organizational & regulatory policy and business goals
‐ Automatic content classification feature recognizes trade types, transactions, buyers and sellers.
‐ Multi‐lingual solution for voice and text.‐ Leader in cloud archiving.‐ Autonomy IDOL technology supports complex
unstructured content analysis using probabilistic modeling and Bayesian inference.
II – Benchmark and Target SolutionOverview on the panel
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III – Preparation of the Implementation
Approach
Elaborate implementation roadmap
Coordinate draft of functional specifications
Define roles and responsibilities in the new process, if any
Communicate to Front Office the expected changes
Ensure follow‐up of the development planning and UATs
Monitor budget
Implement escalation procedures and escalate alerts, if needed
Communicate to the Steering Committee the progress of the implementation
Illustration: Roadmap
Deliverab
les Roadmap
Communication plan RACI Reporting and monitoring tools Escalation process
Mon
itorin
g tools
Implem
entatio
n Plan
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