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Ambitious about recording stock trades?
Well, the EU commission is.
Tags: Frink  Business Factors  Tech Factors  CISCO  API  data base  
With new EU directive MiFID II coming into effect from 3 January 2017, the European Union has raised the bar for recordkeeping and monitoring requirements for trading firms. A change whose magnitude should not be underestimated by market participants.
What is MiFID II?
The European Securities and Markets Authority (ESMA) implemented the original Markets in Financial Instruments Directives (MiFID) in 2007, to introduce competition across the EU and make financial markets more efficient.

In the wake of the financial crisis, the legislation was revamped in 2011, in order to adapt it to changing market realities and implement G20 commitments to bring non-equity products under regulation and move the majority of OTC trading onto regulated platforms.

MiFID II, the 1,600 page final report to the EU Commission drafted in 2014, now includes increased transparency, record-keeping and trade reconstruction requirements for financial services in Members States.
What are the key changes?
Until now, voice record-keeping had typically only been deployed for only a small amount of employees. With MiFID II, trade reconstructions need to include structured records, such as counterparty and trade identifiers, as well as unstructured records relating to all transactions, even if the transactions or services are not concluded.

Furthermore, Article 16 (7) of the new directive stipulates that all communication, not just fixed line and mobile calls, but also instant and text message services, emails and calls made over a PC or phone using services like Skype, must be recorded, stored and available for retrieval. Records must be kept in a medium that is inalterable and must be available to clients on demand for a minimum of five years, or seven years if requested by the competent authority.

Also worth noting, recordkeeping requirements for investment firms will be extended to trading venues, and ESMA will be able to access investment firm records. Investment firms must keep data relating to all orders, as well as transactions. Records maintained by trading venues must include data that constitute the characteristics of an order, including data that link orders to executed transactions.

Naturally, clients must be informed that conversations and communications will be recorded beforehands.
The relevant provisions in MiFID II - Article 16(7)
“Records shall include the recording of telephone conversations or electronic communications relating to, at least, transactions concluded when dealing on own account and the provision of client order services that relate to the reception, transmission and execution of client orders. Such telephone conversations and electronic communications shall also include those that are intended to result in transactions concluded when dealing on own account or in the provision of client order services that relate to the reception, transmission and execution of client orders, even if those conversations or communications do not result in the conclusion of such transactions or in the provision of client order services.

For those purposes, an investment firm shall take all reasonable steps to record relevant telephone conversations and electronic communications, made with, sent from or received by equipment provided by the investment firm to an employee or contractor or the use of which by an employee or contractor has been accepted or permitted by the investment firm.
Recording and client relations
An investment firm shall notify new and existing clients that telephone communications or conversations between the investment firm and its clients that result or may result in transactions will be recorded. Such a notification may be made once, before the provision of investment services to new and existing clients.

An investment firm shall not provide, by telephone, investment services and activities to clients who have not been notified in advance about the recording of their telephone communications or conversations, where such investment services and activities relate to the reception, transmission and execution of client orders.

Orders may be placed by clients through other channels; however such communications must be made in a durable medium such as mails, faxes, emails or documentation of client orders made at meetings. In particular, the content of relevant face-to-face conversations with a client may be recorded by using written minutes or notes. Such orders shall be considered equivalent to orders received by telephone.
Recording solutions
An investment firm shall take all reasonable steps to prevent an employee or contractor from making, sending or receiving relevant telephone conversations and electronic communications on privately-owned equipment which the investment firm is unable to record or copy. The records kept in accordance with this paragraph shall be provided to the client involved upon request and shall be kept for a period of five years and, where requested by the competent authority, for a period of up to seven years.

One potential technical solution could be to use Cisco Media Sense for the recording and use the Media Sense rest APIs to link the finance records directly to the call data. This would also give you the possibility to directly integrate the transactional system used by the bank with the call recording data base. The advantage of such an approach is a high probability of linking the correct data while minimizing manual data entries and thus, human errors.

Another option would be that users have to manually enter data for each call (e.g. XML service on phone) to link the data. Naturally, this method is prone to human error and as a result, might end up in compliance issues at a later stage.
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Editorial team: Manon Pierre, Claudia Kaefer
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