In 2011, the UK implemented regulation mandating the recording of all mobile communications related to the execution of trades. As of December 21, 2013, firms in the US must comply with similar mobile recording requirements, as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank).
On the 13th of November BT and Truphone invited market participants to hear a panel of leading industry experts discuss their thoughts on Dodd-Frank oral recordkeeping requirements, the implications to traders using mobile devices, and how best to meet compliance with the regulation.

About the Panelists

  • Alex Tabb

    Alex Tabb

    COO, TABB Group

    An expert in the field of business process management, information technology, international affairs and operations management, Alex is TABB Group’s Chief Operations Officer and technology analyst.

  • Rik Turner

    Rik Turner

    Senior Analyst - Ovum

    Rik is a senior analyst on the Financial Services Technology team, focusing primarily on the financial markets area and, in particular, on capital markets infrastructure.

  • Jeffrey Steiner

    Jeffrey Steiner

    Counsel - Gibson, Dunn & Crutcher

    Jeffrey Steiner is counsel in the Washington, DC office of Gibson, Dunn & Crutcher, and is a member of the firm’s Corporate Transactions, Financial Institutions, Public Policy and Securities Regulation and Corporate Governance practice groups.

What are the Dodd-Frank mobile recording requirements?

Jeffrey Steiner: The Dodd-Frank Act created a new regime which requires the recording of oral communications that lead to the execution of commodity interests, which is any swap, future, or option transaction that's covered under the CFTC's regime, as well as any related cash or forward transactions.

Who do the requirements affect?

Jeffrey Steiner: The legislation affects swap dealers and major swap participants as well as intermediaries such as futures commission merchants, introducing brokers, retail foreign exchange dealers, and some commodity trading advisors.

Tell us about mobile recording requirements in the UK.

Rik Turner: The UK introduced a requirement to record all the mobile phone conversations of traders throughout the UK market not just swaps as you have here in the US now but all forms of trading. That came in force in November 2011. The level of preparedness of the firms that were affected by that regulation was pretty low.

What can the U.S. learn from their U.K. counterparts?

Rik Turner: The main learning is that they need to work very closely with their CFTC minders and interlockers to make sure that the regulator is aware that your institution is doing everything to try to comply. Not that you are complying today necessarily but that you are making, you are expending best efforts to actually achieve compliance down the road.

What challenges does mobile recording present?

Alex Tabb: Mobile recording presents a number of challenges for the large financial institutions, mainly around how to implement the actual regulations, which are surrounding trade, capture, and reconstruction. But there's also technological challenges, policy challenges, and personnel challenges. Large institutions tend to have multiple providers, either in the BYOD situation where there is no one single carrier. Or large institutions will have carriers for different national entities. And so for an institution to bring all this information together under one banner and be able to respond in a timely manner to the regulators is a big logistical challenge. There are also policy challenges involved with how do we handle this data, who, what type of information are we going to capture, and how are we going to store this information.

What options exist for meeting these new requirements? (Part 1 of 2)

Alex Tabb: The options that exist for meeting Dodd-Frank Trade Reconstruction requirements—you can either go with an app-based solution, which is…I, as an individual trader, have an app on my phone, I receive a call, I activate the app, and it starts recording. The challenge with that is, with so many different platforms out there, it means an app, you have to have it constantly updating, taking into account all the new, sort of, operating systems and all the new technologies. And you also have to rely on individuals to actually activate the app. I get a call, I forget to activate it, all the sudden a very important call is not in the trade reconstruction calendar. Um, a network solution offers, you know, some positives with that. A network solution, all calls are recorded, but in a BYOD solution what that means is you have to groom all your individuals onto one sort of carrier. And in a BYOD environment, that is very tough.

What options exist for meeting these new requirements? (Part 2 of 2)

Rik Turner: I think overall, that the network-based solution will win out simply because the logistics of managing multiple apps across multiple different operating systems, is just going to be too great.

What steps should compliance officers take in order to best meet compliance?

Jeffrey Steiner: Compliance officers should do a couple things in order to best meet compliance with the oral record keeping requirements. First they should create a policy in which they identify the traders that they need to record. Then flesh out that policy and work through the implementation of the voice recording technology. They should also train their employees so that they know how to use the—so that they know what the regulations state and how to use the oral record keeping and recording devices.

How can mobile recording help companies be compliant? (Part 1 of 2)

Jeffrey Steiner: Mobile recording will allow companies to provide regulators with the information that they request of them. For example, it would allow the regulator to be able to reconstruct a trade and determine what has actually happened.

How can mobile recording help companies be compliant? (Part 2 of 2)

Jeffrey Steiner: Non-compliance with that could result in an enforcement action. It could result in, you know, being viewed unfavorably or uncooperatively with the agency. Of course, agencies like the Commodities Futures Trading Commission, they like cooperation and they like good-faith efforts of you trying to comply, but there's always a risk that yes an enforcement action could come of non- compliance.