Last month, VoxSmart CEO, Oliver Blower, spoke as part of the FIA’s Power Trading Forum focusing on the issues around Market Surveillance in the energy market. As a growing number of firms are installing this technology to monitor for market abuse under MiFID II, the panel members all agreed with one clear piece if advice. Read on to hear Oliver’s thoughts.
’Marginal Gains before Quantum Leaps’ was the advice of KPMG’s MD of Trade Surveillance, Robert Weston. The advice, which echoed what all panel members were advocating, was essentially; we need to go back to basics and remember to solve problems in an incremental structured way before fast-forwarding to the end state and questioning why we had then failed.
The panel, which was the second industry event I took part in this week, made me think…
Imagine for one moment that Google Maps only used your data to calculate your route. The outcome would lead you straight into the nearest traffic jam, for the value of an application like Google Maps is the data contributed by others analysed for YOUR benefit.
Now imagine you were a global bank attempting to implement Trade Surveillance software using only your data compiled by a vendor you had only just integrated. You get the point.
For a long time, financial markets have themselves been subject to allegations of vicious miss-selling. But in this regulatory melting pot of market reform there are a plethora of vendors overselling and overexciting an already confused market. Not only does this lead to confusion but also a pre-occupation with capabilities which do not exist today (at worst) or far exceed their current product set (at best).
In my mind ‘Surveillance’ is one such example of nascent, immature technology attempting to disrupt in a fragmented, competitive, over-hyped, and largely misunderstood, regulated market. Those ingredients mixed with an overzealous market appetite are creating a recipe for disaster.
I am not for one minute absolving or immunising VoxSmart as we too are part of the problem and the solution. We exist in this rich compliance ecosystem now supporting a requirement for real-time trade surveillance and user behaviour analytics, but we need to start at the beginning not the end.
Real-Time Surveillance starts with data. Data is the foundation upon which the whole value chain is built but more often than not we see a presupposition that the data simply ‘exists’ without a moment’s thought as to how it is collected, in what frequency, in what format, in what condition etc.
As any Data Scientist will tell you (after they have told you how amazing they are!) the analytical output is only as good as the quality of the input.
In the world of mobile compliance, the complexity of data capture almost goes to the Nth degree by virtue that the device under surveillance is ‘mobile’ – it moves! making it infinitely more complicated to achieve any of the aforementioned objectives.
Notwithstanding the technical complexity, the regulatory expectations are clear. It is anyone, anywhere, talking about anything (expressed in simple laymen terms). Some vendors will claim otherwise but that is due to their product limitations not their (mis)understanding, or otherwise, of the rules.
Only once we have cast the net wide enough, can we hope to catch any fish or in this instance regulatory breaches, trading errors, errant behaviours etc.
My advice to anyone doing a market scan of trade surveillance right now? We’re in capture mode, powered by a piece of regulation that according to recent research only one third of the market feel ‘ready’ for. Focus on implementing technology that puts compliance at the centre of the use case and don't get mis-sold by