Now that regulators have increased the price that banks pay for failing to monitor their employees' communications, companies that specialize in trade and communication surveillance are capitalizing.
Nice Actimize
The product, Compliancentral, builds on Nice Actimize's NTR-X and Surveil-X suites of products, which focus respectively on monitoring employee communications and analyzing their trading behaviors. Compliancentral brings the two data sources under one product to help firms "know more and risk less," according to the company.
By combining the data sources, Nice Actimize can correlate employees' trades and other behaviors with their communication patterns to catch bad behaviors investment banks would not catch otherwise and provide greater confidence in their surveillance practices.
To be sure, Nice Actimize's suite of products is not the best or only solution for banks, especially smaller ones that do not partake in trading. Community banks, credit unions, and other small institutions primarily concerned with cost savings and simple archiving of bankers' communications can use simpler approaches such as spot-checking or random sampling of employee communications.
Banks can also monitor communications while letting employees
Smarter tech solutions can help banks worried about fines from regulators keep their employees on authorized apps and devices.
Nice Actimize's product launch comes after a summer in which the Securities and Exchange Commission levied fines on investment banks totaling more than $2 billion. The fines came after regulators felt hampered in investigations by the banks' failures to monitor and archive employee communications on newer messaging platforms,
The sudden transition to hybrid work in 2020 is the primary cause of the underlying issues, according to Chris Wooten, executive vice president for Nice. A change in expectations about what devices and applications investment bankers could use for work meant the banks suddenly started to miss a wide variety of communications.
It also meant people who wanted to do insider trading or otherwise circumvent their company's surveillance had a much easier time doing so.
"If somebody wants to cheat the system badly enough, they can cheat the system," Wooten said. "The question is: Are the banks and financial institutions really doing what they need to do?"
Banks cannot simply rely on technical solutions to monitor all possible channels an employee might use to communicate, according to Wooten. Companies should also scrutinize trading behaviors, hence Nice Actimize's Surveil-X product.
Surveil-X allows investment banks to reconstruct trade timelines and monitor traders' actions for risky patterns. Especially when combined with communication surveillance, surveilling employee conduct can provide managers and a financial institution's compliance department warnings when behaviors cross the line into insider trading or other illegal behavior.
More than 500 customers use Surveil-X, according to Nice Actimize, which has earned a solid reputation in the space. Aite Group, an independent research and advisory firm, rated Surveil-X best-in-class in a 2021 review of intelligent trade surveillance companies.
"Clients have expressed very high satisfaction with the quality of management, its reputation, and client servicing, product features, and functionality," Aite Group said in the report. "As with most of the existing vendors, clients have expressed high satisfaction with the solution and are not looking to replace the product with another vendor solution."
In the review, Aite Group also ranked Bloomberg LP and Nasdaq as best-in class vendors. Other top competitors included OneMarketData, Eventus Systems, SteelEye and b-next.
According to Wooten, Nice Actimize's primary differentiator is the quality of the data its compliance products return.
"What we're really good at is building the models that surface these types of behaviors," Wooten said. "Until you get into this, you don't realize how complex it is and how many pieces of data you need to understand if there's something going on."
Opimas, a management consultancy focused on capital markets, also reviewed Nice Actimize and other surveillance products in a 2018 report, which indicated that Nasdaq and Nice Actimize shared over half the spend on trade and order surveillance software.
Opimas's review showed Nice Actimize offered the widest range of features, notably alerts for voice communications. The review also indicated most of Nice Actimize's customers are in the largest tier of financial institutions. According to Nice Actimize, "more than 90% of the world's largest banks" use its NTR-X product.
"Nice Actimize has long held a leading position in trade and communications surveillance market share on the sell side — without falling into the legacy technology trap where many of its early classmates now reside," the Opimas review said. "Its continued dominance can be attributed to significant and ongoing investments in research and development, as well as key acquisitions."
A Nice Actimize spokeswoman did not share the names of any specific banks that use its NTR-X or Surveil-X products but did provide three case studies from three large financial institutions, including two top-50 investment banks.
In one case, the bank looked to roll out Microsoft Teams to all regulated users and used NTR-X to do so while ensuring the channel was monitored. In the top-20 investment bank's testing, Nice Actimize's approach was benchmarked among the highest among the competition. In part because of the migration of the operation to the cloud, using Nice Actimize shrank the bank's compliance recording budget by 84%, a $10 million savings.
While smaller banks can avoid costly surveillance and analysis solutions if they do not participate in trading, investment banks are well advised to cast a wide net when recording their employees' communications. According to Wooten, that's a practical answer to the problem that regulators also expect banks to use.
"This is where I think some of the banks that we've read about over the summer time ran afoul," Wooten said. "People are using WhatsApp, and the regulators felt that you should probably be covering that, because that's a pretty popular channel to communicate over."
