While trading in the pits and trading floors on Wall Street have long been associated with a wall of noise the message to traders may well be to tone down and be discreet. At large financial institutions across Europe and The U.S. traders day to day activities and phone records are being scrutinized and placed under the microscope. Regulators and financial institutions are fixing on traders phone records detailing competition, clients and colleagues.
The cell phone has long been seen as a safe haven and a retreat from the documented black and white paper trail of texts, emails and chat rooms. While traders were circumspect around email content the cell phone was widely seen as a tool to negotiate trades and build rapport but with regulators access to phone records this also may be curtailed. Regulatory requirements and technology are introducing a third party as surveillance and recording conversations continually while transcribing phone records for later examination as and when required.
Many traders and executives state that they have now toned down anecdotes and banter and conversations have been clipped and anything superfluous is no more. Other traders have chosen venues with electronic trading without a demand to converse. The one instance where regulators are unable to eavesdrop is personal meetings and this now carries more importance.
The flurry of activity over phone records comes about from the financial overhaul law (Dodd-Frank) which was passed in 2010. The law mandates financial institutions to commence using phone records (incl texts) in order to recount and define trades within derivatives markets. Rules have been implemented recently and firms are required to retain phone records for a period of one year. Prior to implementation phone records were voluntary or via patchy regulations defined by asset class. Surveillance is now more systematic and the analysis of phone records has almost doubled.
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