Financial regulators in New York are concerned that a new messaging platform could encourage traders to commit misdeeds.
The large Wall Street banks have been working on a messaging platform developed by Symphony Communications. Now Anthony J. Albanese, acting superintendent at the New York State Department of Financial Services, has raised his concerns about the platform, writes Nathaniel Popper for The New York Times.
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Financial regulator concerned by capabilities of new platform
Albanese, who just took over from Benjamin M. Lawsky, sent a letter to California-based start-up Symphony. The biggest Wall Street banks are part owners of the company, which is developing a new messaging platform to allow employees to communicate instantly.
One concern raised by Albanese is that the software might make it easier for traders to fix prices. He cited recent cases in which chat rooms were used to manipulate benchmark prices.
The letter also suggests that some of Symphony’s functions would allow traders to delete or encrypt incriminating messages, citing marketing material for the company which claims that the software offers “guaranteed data deletion.”
Albanese asks Symphony to provide details of the specific capabilities of the software, and informs them that his office will be pressing banks to specify “how they will ensure that messages created using Symphony products will be retained.”
Joint Wall Street project expected to launch soon
The letter comes just before Symphony is scheduled to unveil the software to key clients such as the Wall Street banks.
Communication between banks has traditionally relied in large part on Bloomberg terminals, which are common but expensive to use. Symphony resulted from a desire to shake up communications between banks and their clients, and the multi-year project is certainly ambitious.
Goldman Sachs was originally responsible for developing the software, before spinning off the project into Symphony to encourage the inclusion of other big Wall Street banks in ownership and operations. By encouraging joint ownership, it is hoped that a critical mass of financial workers will use the new system rather than traditional methods of communication.
Although such an innovation may be welcomed by bankers and traders, there must be adequate assurances that the technology will not facilitate foul play.