Sell-side analysts spend +30h/week manually closing/investigating alerts, says study

Rick Steves

An independent report by Acuiti, and commissioned by Eventus, has found that the increasing complexity of trade surveillance requirements, driven by regulatory demands and exacerbated by volatility, is putting pressure on manual processes and driving investment in automation. 

Acuiti surveyed 71 senior trade surveillance, risk, compliance, technology and trading executives at banks, brokerages and proprietary trading firms.

Among the key findings is that 94% of respondents said that the complexity of trade surveillance has increased over the past three years, with 64% saying it has increased significantly.

64% banks now say machine learning is either very important or critical

The report, “Getting to the risk quicker: How trade surveillance leaders are dealing with an increasingly complex environment”, covers the challenges facing trade surveillance teams as regulations governing trading have grown in scope, detail and enforcement, and trading products have advanced in complexity and sophistication.

The research project aims to analyse the key challenges that face banks, brokers and proprietary trading firms when structuring effective trade surveillance operations.

The major drivers of heightened complexity in trade surveillance in the last three years have been increased regulatory requirements and market volatility.

Most analysts from the sell-side are spending more than 30 hours a week manually closing and investigating alerts, with the high manual input being exacerbated by a shortage of skilled compliance staff, the study found, adding that for efficiency, firms are now looking to rely on automated workflows – 64% of banks point to machine learning as either very important or critical.

More than 60% of respondents had either recently invested or were considering investing in trade surveillance within the next 12-18 months
Buy-and-build methodologies couple the advantages of both third-party and in-house solutions.

Immense pressure on sell-side for high quality trade surveillance systems

Eventus, the firm that commissioned the report by Acuiti, is a provider of multi-asset class trade surveillance, market risk and transaction monitoring solutions.

Joseph Schifano, Global Head of Regulatory Affairs for Eventus, said: “It’s important to help compliance teams respond quickly and with as much detail to potential issues that arise with their surveillance alerts. Automation techniques enable analysts to work with the front office more efficiently, getting to the root cause of any potential issues. Analysts need to customise their technology and mitigate risk based on particular businesses, regulatory jurisdictions and trading activity. Today’s surveillance system must enable its users to be nimble and responsive to a rapidly changing global environment, while being explainable to the front office and regulators alike.”

Ross Lancaster, Head of Research at Acuiti, said: “The pressure on the sell-side to maintain high quality trade surveillance systems is immense and unlikely to abate any time soon. Regulation and the volatility we have seen this year are creating sustained stresses on compliance desks, and this is increasing the case for strategic investment.”

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