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New Technology Helps Firms Stay One Step Ahead of Regulators

On the heels of an SIA estimate citing the financial industry's compliance spending at more than $25 billion, it's no surprise that SunGard is looking to get a piece of that pie.

On the heels of an SIA estimate citing the financial industry's compliance spending at more than $25 billion, it's no surprise that SunGard is looking to get a piece of that pie. The Wayne, Pa.-based software and processing-solutions provider has launched Brass EnGard to give firms an opportunity to wrap their hands around regulatory data - before regulators do.

According to Deborah Mittelman, chief compliance officer for SunGard's BRASS business unit, firms now average one regulatory inquiry a day. In addition, she says, "Regulators are getting much more sophisticated with the technology they are using, which improves their ability to find problems. So firms need to get more sophisticated with how they comply and surveil their activity."

While many vendors have addressed the compliance nuances of retail traders, such as anti-money laundering, SunGard's Brass EnGard aims to help the institutional equities trader with requirements such as market-making and best-execution rules, notes Mittelman. Two large drivers of the launch of SunGard's newest tool are the looming deadline for Reg NMS, as well as OATS Phase III, which establishes enhanced reporting requirements. "There's such a higher level of scrutiny that firms are facing from regulators these days. Those two initiatives are hammering the industry," says Mittelman.

While the OATS requirements are less strenuous, Jeromee Johnson, a senior analyst at Westborough, Mass.-based TABB Group, agrees that Reg NMS is leaving many firms confused with how the new market structure will shake out. "A much smaller percentage of firms are ready for the effects of NMS and everything that is coming with it," he says.

As of now, SunGard's Mittelman explains, many firms must use a variety of consolidating and reporting methods - each order management system may necessitate a separate method of regulatory data management. Brass EnGard, which is trading-system independent, offers surveillance across all of those systems, Mittelman says, as well as a data warehouse hosted by SunGard.

A firm need only provide the vendor with the appropriate data, Mittelman continues. Brass EnGard then validates that data with a set of business rules that are specific to the regulatory conditions faced by institutional equities traders. For firms with specific requirements, business rules can be customized beyond the standard set, she adds.

Discrepancies are flagged and drilled down upon if necessary - users can search for any related data to a particular item. And to authenticate the process, the system documents any action and resolution. "It's a full compliance lifestyle tool," notes Mittelman, "with the four main steps of surveillance, investigation, documentation and regulatory reporting."

While many large firms already have begun addressing these regulatory challenges, Mittelman asserts, "There are a lot of duplication efforts right now." SunGard's new tool, she says, "helps centralize the data management process, which is something firms have trouble with. This provides an answer."

The product initially will target the top-tier firms, according to Mittelman, but it also can be implemented by a smaller firm since it will be sold as components with various levels of customization abilities. Pricing is based on the components utilized as well as volumes of data, she notes. <<<

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