July 30, 2020

Thought Leadership

Trade Surveillance: Buy Vs. Build

Best Execution Solutions (“BXS”), pioneers of Best Execution analytics and reporting, has recently experienced a heavy demand for its Trade Surveillance platform. Though the increased interest could be attributed to the recent market volatility, remote working, and the complex trading environment spurred on by Covid-19, BXS began seeing a demand even before the pandemic as ever-increasing regulatory rigor has driven financial firms to implement trade surveillance systems to ensure they comply with regulations and to reduce the risk of fraudulent activity. Some firms have attempted to achieve comprehensive surveillance coverage with proprietorially built systems, though the evolving regulatory environment and increased IT costs in recent years have made it difficult to achieve such goals. As a result,  firms have invariably fallen short of regulators’ expectations who have imposed penalties and fines which has a far-reaching impact on business with reputation loss, suspensions, and revocations of licenses.

Thus the demand for BXS’s Trade Surveillance platform. As firms endeavor to achieve comprehensive surveillance coverage, they have sought out ‘experts’ who can bring together disparate systems so that all data can be evaluated in a centralized repository that goes above and beyond the ‘check the box’ solution. BXS, a premier provider of regulatory reporting such as Rule 605 and 606, and transaction cost analysis, is one such expert. “The advantages of a bespoke solution provided by a third party include the obvious cost savings but also in that regulators tend to scrutinize proprietary in-house systems more so than that of a preferred established vendor”.

When firms factor in the effort it will take to build a system, collect data, and produce accurate alerts, that time-to-market can be lengthy and expensive and wrought with risks. Also, as regulations so often change and evolve, firms using proprietary tools are forced to commit resources to either rebuilding or creating one-off patches that may compromise the overall integrity of their surveillance system. The popularity of the BXS platform can also be attributed to its suitability with clients describing it as ‘user friendly’ and ‘cost effective’.  Therefore, outsourcing to a reputable, experienced third-party vendor such as BXS will ensure you have connectivity to any number of potential sources so that firms can maintain a standard of stability, security, and flexibility within their trade surveillance program.