Recordkeeping requirements as part of Dodd Frank Act and benchmark of solutions

1. Dodd Frank Act – Recordkeeping Requirements
Stephanie Baruk sbaruk@chappuishalder.com
June 2013

2. Context and Objectives
Comply 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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3. 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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4. Global Approach
ApproachDeliverables
 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
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5. I ‐ As‐is Analysis and Diagnosis
Approach Illustration: Regulation Analysis
Deliverables
 Regulatory analysis and impact assessment
 Cartography of impacted processes, tools and
products
 Mapping of existing recordkeeping solutions
 Gap Analysis and identification of needs
Non‐compliance cartography and 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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6. 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
Deliverables
 Benchmark and comparative analysis
 IT solutions assessment (pros & cons)
 Best practices of the competitors
 Target solution summary
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Compliance
Search
Storage capacity
Speech to text
Costs
References
Solutions assessmentComparative analysis
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7. 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 Solution
Overview on the panel
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8. 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
Deliverables
 Roadmap
 Communication plan
 RACI
 Reporting and monitoring tools
 Escalation process
Monitoring toolsImplementation Plan
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