The Next Generation of

eComms Surveillance

Solutions

Regulations Demand for Trade Compliance

FX Code of Conduct

Global Guidance

• Protect Confidential Information

• Complete, Accurate Data

• Measure and Monitor

Updated 2016

APACDodd-FrankU.S. Legislation

for Swaps

MAREuropean Directive

MiFID IIEuropean Directive

2018

Refers to

• Surveillance in Placeto Detect Market Abuse

• Record Keeping (Recording)

• Trade Reconstruction

2013 2016

• Record Keeping (Recording)

• Trade Reconstruction

• Detecting Market Abuse

• Detect and Prove Intent Even if Unsuccessful

• China to create it’s version of MiFID II

• Hong Kong expects Authorized Institutions to adopt a holistic framework

2018

Every major regulator in the world has developed a

FinTech incubator or sandbox to better understand:

• Electronic Communications

• Analytics

• Reporting Tools

The new normal is the expectation that firms will know what technology

can offer to promote an effective compliance program – because the

regulators certainly will

FinTech Incubators

What do regulators expect from a eComms Surveillance program?

• Empower end users with tools needed

• 1st line owns risk, mitigated by controls put in place by compliance

• Engage in a process of re-education stimulated by enforcement actions

• Manual tasks create operations risk

• Is this a formal process or simply owned by one person

• What happens if that person leaves?

• Whistleblowers – must go to the SEC before the firm.**

Key Insights

• Trade data reveals ‘the what’ Communications focus on ‘the why’

• Employees are using unified communications in real time with each other,

their clients, partners, vendors and the general investing public

• Instant messages, collaboration tools and social media to communicate

• Regulators around the world have made it clear that “content is

determinative” and are neutral about the channel

eComms are Key

Chats Emails Text messages Mobile phonesOffice phonesSocial Media

• $2M fine for failing to maintain reasonably designed supervisory systems

and procedures for reviewing e-mail communications

• The combinations of words and phrases, known as the “lexicon,” allowed

millions of e-mails to evade meaningful review including:

• Representatives borrowing from or lending to customers

• Solicitating penny stock transactions

• Sales of unregistered notes

CASE STUDY

• Representative fraudulently sold 1 million in unregistered securities

• At least 16 separate email chains contained evidence that, if properly

reviewed, would have indicated the fraudulent sales were occurring

• Two years after the last customer already invested, two relevant strings were

flagged by the system, but the firm failed to detect the misconduct.

• Susan Schroeder, FINRA Executive Vice President, Department of

Enforcement

• “Firms have a clear obligation to reasonably supervise electronic communications,

which includes periodically re-evaluating the effectiveness of existing procedures."

• “They should also assess whether their e-mail review and supervisory systems are

reasonably designed in light of each firm’s business model.”

CASE STUDY

• Global Regulators now Require Financial Firms to record the evidence -

lightening the burden on enforcement bureaus.

• Each of 3 major European Regulations have one particular recital in

common – almost verbatim

“Existing recordings of phone conversations and data traffic records

constitute crucial, and sometimes the only, evidence to detect and prove the

existence of":

• MAR – insider dealing and market manipulation.

• MiFID II – market abuse as well as verify compliance by firms with investor

protection.

• BMR – the compliance with governance and control requirements.

• Proactive eComms Surveillance pays – better to self report violations in

current “Whistleblower” environment

Impact: Regulators Learn from their Experiences

Today’s Challenges with eComms Surveillance

• Supervision of ALL relevant

conversations across any

line of communication

• Unreliable lexicon-based

searches generate too many

false positives

• Random sampling increases

a firm’s regulatory and

business risk

• Getting the complete picture

and reconstructing events

across all channels takes too

much time and requires

multiple solutions

More Communication Channels Unreliable Analytics and Processes Inefficient Investigations

Chats Emails Text messages

Mobile phonesOffice phonesSocial Media

Automatically reconstruct events and create investigation & escalation workflows

Centralized access to all your communications data

Index and Analyze all communications data using NLP analytics and ML models

The NICE Actimize Approach

Analyze

Act

Aggregate

Universal IndexAnalytics Relevancy ScoringLinguistics SearchCorrelation Enrichment

Reconstruct Investigate DashboardReview ReportsWorkflows

Aggregates and Monitors All Communications

• A single platform that aggregates and reviews 100% of the

data related to employee conversations including emails,

texts, chats and even voice

Solution

• Eliminate the risk posed by random sampling by automatically

analyzing 100% of all conversations

• Execute complete investigations by analyzing voice and e-

communications data together

Impact

Text

More Accurate Analytics Greatly Reduces False Positives

• Natural Language Processing driven analytics and models

tuned for financial markets correctly understand the context of

conversations

Solution

• Accurately identify suspicious communication and reduction

in false positives by 50% alerts

Impact

Speech-to-Text

Analyze & Review

Alert OK

NLU

AI ML

Intelligent Content Analytics to Gain Insights

Financial Services Domain Focus

Extract References to

Known Companies,

Products and People

Identify Bid, Ask, B/S Quantity,

Volume and Price Details

Machine-Learning:

Entity Based Sentiment and

Asset Classification

Statistical Entity

Extraction

Language Model-Based Key phrase

Analysis

Policy Driven DiscoverContextual Content Driven

Visual Model Tuning – Ensures Relevant Review Selection

Contextual Search or Existing Model

Results

Users provide feedback on the results within the tuning application

Machine Learning runs selection logic based on the user

feedback

New classified model is created from the

ML output

Deploy new model into production

Contextual

Searching

Label with desired

Classification

Comprehensive Case Management Expedites Investigations

• NICE Actimize ActOne Investigation and Case Manager

automates workflows, information gathering and story

creation. Robotic Process Automation (RPA) assists with

repetitive manual tasks.

Solution

• Comprehensive case management automates every step of

the process, improves collaboration and increases

productivity.

Impact

ActOne Investigation

Management

Market

Surveillance

Alerts

Market

Data & News

eComms

Alert

Actions Reports Checklists Analysis

Reduce Cost and Protect Against Reputational Damage

Ensure Regulatory Compliance and Increase Audit Responsiveness

Increase Compliance Analyst Productivity

Reduce the Cost of False Positives and False Negatives

Use Flexible Deployment Models

Trade Compliance Is Complex

“Can I get a

quote for..”“Done deal..”

“Have a large

deal coming for...”

“Will make the

changes..”

“Confirmed..”

“The deal has

cleared..”

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

“Can you

recommend..”

“What are you

hearing about..”

CO

MM

UN

ICA

TIO

NS

LIFECYLE OF A TRADE

PRE-TRADE TRADING TRADE OPERATIONS CLEARING

Market Views Bid / Ask Market SoundingNews Negotiations Confirmations SettlementsTransfersQuotes Amends Cancels ReconciliationTR

AD

E D

AT

A

Compliance Must Evolve

• Analysts spend time

pouring through data

• Must connect

relationships manually

• Struggle with detection

inaccuracy

• Cannot keep up with

industry change

• Ever increasing

regulatory complexity

• More features = only

minor benefits

• Need more disruptive

change

• Demand for quick ROI

on new investments

• Sophistication of

threats constantly

changing

• Firms must stay one

step ahead

Operational

Inefficiencies

Risk and

Compliance Cost

New

TechnologyEvolving

Threats

Firms cannot keep up with segmented manual processes and offline tools

Compliance Transformation is Impending

One Compliance

Process

Manage Exposure to

Conduct Risk

Understand Intent and

Prove it

An Autonomous Alternative: Seeing into the Future

Need for

smarter

detection

Rising

tech costs

Improved

user

experience

Resource

demand

What if all the data

came together?

Could we improve productivity,

lower costs and focus on

high value work?

One Compliance Platform

BOUNDLESS

DATA

Transformative Technology

LIMITLESS

ANALYTICS

INTELLIGENT

AUTOMATION

Reshaping the Landscape