The Securities and Exchange Commission is warning brokerages to make sure their compliance departments are involved when building new trading systems.
Speaking at the TradeTech USA conference in New York last week, Duer Meehan, associate director of the Office of Market Oversight in the SEC's Office of Compliance Inspections and Examinations, told attendees "there has been an increase in compliance issues that arise when entities fail to involve compliance in the development process."
The official, who is a former trader and also designed trading systems at Bloomberg, also warned the crowd to involve compliance during the testing phase of any new system, "to ensure that compliance failures are not the result of a lack of inadequate and thorough testing."
When confronted with "compliance failures" by the SEC, Meehan said, firms will often admit to not involving their compliance departments in the development of their systems. They also tell the SEC they did not do too much testing before launching the system. "From a regulatory standpoint," Meehan said, "that raises red flags about a firm's compliance culture."
Meehan would not cite specific examples, but told Traders Magazine: "People roll out a new system. Something goes wrong. And then you find out the regulatory people were not involved. I understand there is pressure on firms to compete, to get things out fast, but they need to slow down."
SEC Warns Industry on Trading Systems Development
Quelle: tradersmagazine.com