3 Factors Changing The Scope Of Capital Markets Compliance

3 Factors Changing The Scope Of Capital Markets Compliance

3 Factors Changing The Scope Of Capital Markets Compliance by firm58

As technology sparks more complexity and versatility in the capital markets, new avenues for unethical and illegal trading practices continue to emerge, while political pressure on Wall Street increases in the wake of the 2008 crisis. Broker dealers’ Chief Compliance Officers (CCOs) are coming under increased scrutiny, and for the first time new regulatory proposals threaten to hold them personally accountable for illegal trading activity at their firms.

Over the last two decades, capital markets compliance has evolved from reacting to simple discrete events in a floor-centric world, to addressing intricate, multiasset, multi-event scenarios in a electronic high-speed, high frequency trading environment. This new paradigm introduces challenges (and opportunities) around big data—and the pressure to search for patterns in a constantly shifting landscape—as well as firms’ overall cultural values.

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Compliance teams no longer enjoy the benefit of a small pool of compliance concerns, and must simultaneously juggle a variety of competing issues, including:



Securing digital platforms is a recurring problem, and one that will only become more critical as virtually all business processes are or will soon be digitized.

Data Transparency

Firms don’t always collect the right data, and even when they do, broker dealers need to aggregate the data in specific ways in order to be able to parse that information to derive meaning. Mid-market broker dealers generally can’t recruit dedicated teams of analysts, but strategic software investments can make the difference between simply retaining and acting on order/execution data.


Institutional culture is a major theme influencing the SEC and FINRA’s recent exam priorities; broker dealers must structure incentives and penalties to encourage responsible trading activity. This doesn’t necessarily mean trying to keep up with the largest market players in terms of technology, but firms do need to work within their capabilities. Compliance blunders are often costly, and preventative investments easily outweigh punitive fees. In fact, FINRA estimates that since 2010 broker dealers have sunk $300 billion into compliance costs as a result of “cultural failures”.

Broker dealers’ reputation and success will hinge on their ability to adjust to new industry regulations–through both simple changes and more comprehensive reforms–in the coming months and years. The largest firms with resources to