Easing the Pain of Brexit: How Re-Evaluating Technology Can Help European Financial Firms

The UK and European Union are deeply interconnected when it comes to capital markets, with 80% of EU capital markets activity managed and conducted out of the UK. With Brexit proceedings commencing at the end of March, financial firms in the UK are starting to prepare for the considerable impact on their operations, including market volatility, relocation of headquarters and staff, trade disruption, and changes to regulatory mandates.

Particularly with the issues of relocation and compliance, now is the time for European firms to re-evaluate their trading technology.

Headquarters and Staff Relocation

One of the primary risks of the Brexit is the loss of passporting rights, which allow institutions established and regulated in any country within the EU to do business in another member country without having to secure authorization. The UK is the most active country currently using these rights, with UK-based firms accounting for over 75% of all passporting activity in the EU. UK firms would need to maintain a local presence in the EU to continue enjoying passporting rights.

The loss of passporting rights as well as the loss of the ability to clear the Euro in London has many financial firms evaluating if they want to retain their European headquarters in the UK. While many predict a small movement at first, a chain reaction will likely occur as banks follow their clients, and vice versa. In addition, many UK-based firms will likely face regulatory pressure to develop a more significant presence in continental Europe to effectively conduct business. For now, a UK firm may only need 5 people staffed in the EU, but in a few years, that number may increase to 50 or 100 employees.

In addition to disrupting business operations and the lives of employees, the cost of a move for a financial firm is substantial. Rerouting trader voice communication lines alone can cost firms tens of thousands and can take weeks to properly implement.

For firms considering a move, this period of transition provides best time to re-evaluate current technology for solutions that will cut costs and reduce the disruption caused by relocation.

Regulatory Compliance

The UK’s transition away from the EU will take at least two years, with some experts projecting it could last up to a decade, and will involve negotiating everything from customs to energy policy. During this time, the UK will be an acting member of the EU, meaning that all current legislation will be implemented in full – including the upcoming MiFID II regulations, set to take effect in January 2018.

While it is likely that the UK will need to maintain equivalency with EU regulations in order to continue doing business, the UK will have to establish their own set of regulatory mandates for financial industry. With frequently changing sets of regulations in their future, financial firms have the burden of keeping their systems and technology updated, often a costly task.

Now is the time for firms to make the necessary equipment upgrades and replacements for systems that are more adaptable to changing compliance regulations.

Moving your trading floor? Cloud9 can help. Contact sales@c9tec.com to schedule a demo.

To learn more about the benefits of Cloud9, watch this quick tutorial.

 

Cloud9 Partners with Behavox to Provide Holistic Trade Surveillance and Compliance Capabilities

Cloud9 Partners with Behavox to Provide Holistic Trade Surveillance and Compliance Capabilities

We’re excited to announce our joint partnership with Behavox, a compliance software company focused on the financial services sector.  This collaboration combines the end-to-end compliance, call recordings, and advanced metadata from Cloud9 with Behavox’s relationship mapping, risk scoring, and behavioral monitoring capabilities for voice trades.

Behavox is valued in the market for its expertise in machine learning, developing robust algorithms based on 16 years of enforcement cases against traders and banks worldwide. Behavox utilizes these algorithms with sound processing, to enable keyword detection, highlight variants in emotion/sentiment, and tie voice records to data points that signal market abuse, insider threat, collusion, or reckless behavior. With this technology, the platform meets the requirements of regulators like FINRA, CFTC, and the FCA, and delivers compliance with Dodd Frank, MAE, SMR, and MIFID II.

Cloud9 is currently the only cloud-based communications solution for the capital markets with a comprehensive strategy around analytics and voice capture. Our platform delivers value by collecting voice recordings as well as enhanced call metadata– adding additional insight not available with legacy services. Cloud9’s partnership with Behavox supports our ongoing strategy to provide customers with a full suite of monitoring, compliance and analytics solutions through integration with leading third-party trading technology providers capable of leveraging Cloud9’s generated voice and metadata.

“At Cloud9, we have created a partner ecosystem that enables us to provide enhanced compliance, analytics and trader workflow capabilities around voice and translate it into actionable data – a feature that was previously unavailable to firms,” said Cloud9 Technologies CEO, Jerry Starr. “Partnering with an innovator like Behavox greatly benefits our customers and enables them to use their recordings and advanced metadata to manage both operational and reputational risk.”

Compliance remains a critical consideration for financial firms as they try to keep up with regulatory changes such as MiFID II being effective from 2018, increased reporting and data capture requirements, as well as the ongoing avoidance of corporate and individual liability.

As a result, firms have tried to solve the problem by investing millions of dollars in compliance, particularly on back office investigators, lawyers, and intelligence officers to sort through and monitor trader communications.  Market demand is placing a premium on the quality, processing, ingestion, retrieval and archiving of voice data for front office and compliance purposes.  The Tabb Group estimates the global compliance market is at $2.5 billion and still growing.

Learn more about Cloud9’s analytic, compliance, and interoperability services.

Cloud9 Achieves ISO 27001 Certification

Cloud9 Achieves ISO 27001 Certification

We’re proud to announce that Cloud9 Technologies has received the ISO 27001 Certification, the international standard that describes best practices for an information security management system (ISMS). Compliance with this certification validates that Cloud9 has implemented comprehensive information security practices that protect our users, their information, and their call record data in accordance with internationally-recognized standards.

ISO 27001 family of standards ensures the secure management of financial information, intellectual property, employee details, and third party information by assisting firms in establishing methodologies and meeting key objectives for implementing information security.

Cloud9 underwent in-depth testing and assessment by a third-party auditor to validate compliance with this standard. Maintenance of the certification requires an annual review and a three-year re-certification, giving Cloud9 users confidence that their data is continuously protected under these standards.

Since our founding, security has been top priority for Cloud9. Our robust security framework includes end-to-end, triple encryption security, that safeguards calls, recordings, and call data in transit and at rest. Achieving this certification provides independent validation regarding the company’s ability to safeguard calls, voice recordings, call data, and business information that they entrust to Cloud9.

“We’re proud to be internationally recognized as a leader in information security protocols and best practices. It is a testament to the dedication of our team in ensuring that we have every safeguard in place when dealing with user information,” said Cloud9 Technologies CTO, Leo Papadopoulos. “Data security is critical when dealing with the financial industry, and Cloud9’s ISO certification provides our users with the highest level of protection for their most sensitive communications.”

To continue this excellence in security and compliance, Cloud9 has employed a security management team dedicated to the prevention and monitoring of security threats as well as managing strict policies around escalation and rapid response.

Learn more about the importance of security in fintech.

UK FCA Approves Use of Cloud Technology at Financial Services Firms

For firms looking for guidance about how regulatory agencies apply outsourcing rules to cloud services, recent guidelines issued by the UK Financial Conduct Authority (FCA) offer support for the use of public cloud technology at financial services firms.

In a set of new guidelines released in July, the FCA recognized the need to provide more detail on their approach to financial services firms using a cloud services provider. The guidelines go on to provide a positive endorsement of cloud technology, stating: “We see no fundamental reason why cloud services (including public cloud services) cannot be implemented, with appropriate consideration, in a manner that complies with our rules.”

The new guidelines support the FCA’s effort to foster innovation in order to promote competition in the financial services sector. They state in the report, “Using the cloud can provide more flexibility to the services firms receive, enabling innovation, and bringing benefits to firms, consumers, and the wider market.”

These cloud-friendly guidelines demonstrate a changing attitude towards the cloud in the financial services industry, as discussed recently at our panel, Fintech and the Cloud.  Third party cloud providers offer financial firms a number of benefits such as cost savings, increased security, and often, built-in compliance. 

Regarding security, the FCA went on to advise firms considering a third party cloud service to agree on a data residency policy with their provider upon beginning their relationship. Building this trusting relationship between firm and provider is key to implementing a secure and effective cloud solution.

Interested in implementing a cloud solution at your firm? To learn more about the benefits of Cloud9, watch this quick tutorial.

New Technology is the Key to MiFID II Compliance

With the MiFID II deadline looming in Europe and Brexit shaking up the market structure worldwide, financial firms consistently face the pressure of compliance. New mandates mean new processes to implement, and often, disruption to business, which ends up costing firms significant amounts of money. The 2016 European Fixed Income Benchmarking Report notes that 52% of companies have experienced increased costs due to implementation of European regulations that have negatively affected their fixed income trading operations.

Companies dedicate entire teams to understanding and implementing new compliance measures, with MiFID II particularly top-of-mind among European financial firms. The same benchmarking report notes that 48% list “Understanding the Regulations of MiFID II” and 38% list “Implementing MiFID II Guidelines” as a top 3 organization priority, even falling above typical business processes like “Identifying New Emerging Market Opportunities” or “Finding Alternative Methods to Source Liquidity.” The concern is shared in the United States markets as well, where “Understanding and Implementing US Regulatory Guidelines” topped the list of concerns at 68%.

With regulation taking up so much attention, how can companies stay compliant without breaking the bank or disrupting their business?

The key, many firms are discovering, is replacing one-dimensional, legacy equipment for the adaptability and efficiency afforded by new technology. The majority of buy-side traders surveyed in the European Benchmarking Report plan on investing at least 16-30% of their total budgets on new technology in the next 12 months.

Adopting the right technology at a firm can make implementing compliance mandates easier on teams and on their wallets. Generally, firms are on the hunt for new technology that meets the following requirements:

  • Compliance structures are already built into the system.
  • Features state of the art technology that is reliable.
  • Able to cope with new regulations and keep the firm legal. The technology should be capable of adapting not only as your company grows, but also as regulations change, and can automatically be updated to account for changing mandates.
  • Doesn’t disrupt business operations and interacts seamlessly with existing devices and procedures.
  • Is cost effective. The solution shouldn’t require extensive maintenance or costly replacements when regulations change.

With these qualifications in mind, Wall Street CIOs are increasingly investing in new, modern platforms to keep their firms secure and compliant. Not only are they more affordable than ever, updated technologies give financial firms the flexibility to adapt to changing regulations, better reconstruct trades, and overall, conduct business more efficiently.

Get a quick introduction to the Cloud9 Application here.

Fintech and Security: How Much is Too Much?

Financial services firms are reluctant to take their operations to the cloud – will their fears and the reality about security in the cloud ever align?

It’s no secret that security is always top of mind for financial firms, and a growing number of major data breaches in the past few years are not making CIOS and IT Directors sleep better at night. Financial firms deal with some of the most highly sensitive data in the world, and a breach could instantly ruin the operation and reputation of their business.

Needless to say, banks and financial services firms aren’t exactly rushing to hand over some of their most important and confidential information to a third party technology vendor. The fact that many fintech solutions also operate with a foundation in the cloud only adds to the hesitation.

This reluctance by financial firms has many asking: How much is too much when it comes to security?

Trick question – you can never be too secure. According to a recent article from securityintelligence.com, the financial sector is one of the most targeted industries in the world, and breaches lead to considerable liabilities, dropped stock prices, and customers exposed to identity theft; no financial institution should be complacent when it comes to security. Firms should approach adoption of fintech with the understanding that most fintech providers are often even more prepared to deal with security threats than the financial institutions themselves.

Many fintech providers utilize a cloud service, like Amazon Web Services (AWS), to host and scale their technology using public servers. Despite the initial fear around a word like “public,” a reliable provider like AWS is designed to face numerous issues specific to the financial marketplace including security threats, technology disruption, and disaster recovery. Security, in particular, is an inherent component of AWS and many other cloud services.

“The financial services industry attracts some of the worst cyber criminals,” says Rob Alexander, CIO of Capital One, in a quote form AWS’ own web site. “We work closely with AWS to develop a security model, which we believe enables us to operate more securely in the public cloud than we can in our own data centers.”

Although the cloud has built-in security capabilities, fintech firms ensure protection of financial institutions by creating infrastructures that secure data at every point, from origin to destination, as well as architecture for compliance. They put effort into developing integrated and adaptive solutions as well as developing a relationship with IT professionals through exceptional service and support.

Financial institutions have the most to gain by finding a trusted partner to support their key business operations in the cloud, versus hosting the product or service on-premises.

It would take far too much time for a bank to build the kind of high-level security that fintech firms are building on their own, supported by the knowledge gained from working with hundreds of organizations. The right partner can not only provide economies of scale in terms of building a robust set of security capabilities, but they have the resources and knowledge to nearly eliminate security threats in relation to a specific service or application.

Companies like Cloud9 Technologies, a trader voice cloud-based communications provider designed to replace telephone-based trading hardware (turrets), are a great example of this advantage in action. Built on the Amazon Web Services cloud, we’ve enabled our service with two factor authentication and advanced voice encryption that secures calls in transit and also restricts unauthorized users from accessing recorded calls. These specific security measures take the unique needs of voice traders into account and provide financial institutions with a solution that is safer and more effective than legacy hardware or an on-premise system.

However, financial institutions should be cautious when considering technology solutions designed for the general enterprise. Taken from our own space in collaboration, for example, thousands of Slack access tokens were recently posted on Github, making it simple for hackers or automated scripts to access account details, some of which belong to Fortune 500 companies.

Using these tokens it would be possible to eavesdrop on a company, easily access internal chat conversations, and protected files. Bugs recently discovered in the Microsoft 365 system by two security researchers could have given hackers unrestricted access to any account under the system– including Skype for Business.

It’s a dangerous world out there for financial institutions, but the right partner can provide the best defense against security breaches. Fintech providers that fully understand and support the niche requirements of the industry will ultimately prove to be the best asset to financial institutions as they transition to the cloud. There is no such thing as too much security, and when it comes to safeguarding information in the financial services space, finding the right technology partner can make all the difference.

Get a quick introduction to the Cloud9 Application here.