Compliance Service Migrates to Cloud

Terry Flanagan

The costs and complexity associated with compliance is causing broker-dealers and their service providers to migrate to cloud-based platforms.

Jordan & Jordan (J&J) Execution Compliance & Surveillance (ECS) service is now running on Nasdaq OMX FinQloud, a secure, cloud computing platform designed for the financial services sector and powered by Amazon Web Services (AWS). J&J’s ECS is an application used by broker-dealers to measure the effectiveness of their trading programs and execution strategies in meeting best execution obligations and rules.

The ECS migration to FinQloud provides J&J the ability to easily expand the application’s analysis potential in a cost-efficient manner without sacrificing speed or reliability.

“Our service is dependent on detailed analytical technology that looks at client trading data and network data (trades and quotes),” said Michael O’Conor, director of Jordan & Jordan’s ECS.

ECS works with clients to improve their order management and order routing processes, and increase the cost effectiveness of their U.S, equity trading operations. With a focus on regulatory compliance requirements and trade reporting, ECS assists broker dealers in meeting the challenges associated with Reg NMS, Best Execution, OATS and ACT.

“We are in the business of providing intelligent services to clients, so the need to transfer, store and access data led us to partner with FinQloud,” O’Conor said. “Reg NMS, the order protection rule, Reg SHO, limit up/limit down– all these rules have specific compliance requirements for broker-dealers. Our service helps clients better manage the cost of demonstrating proactive surveillance.”

Compliance technology spending is likely to grow by 35% from 2012 to 2015, with hosted solutions persisting as the preferred deployment option, according to Aite Group. Challenges in the compliance marketplace mostly surround the problem of obtaining quality data and maintaining a dynamic platform.

Volume trends across asset classes and trading strategies have also added to the focus on increasingly sophisticated compliance technology, rendering a need for effective and flexible automation, Aite Group said in a report.

ECS will use FinQloud to reduce the costs associated with traditional, dedicated infrastructure deployment. As a service operated within FinQloud, ECS will enable customers to analyze their stored trade data without maintenance costs associated with daily data transfers.

FinQloud, which was launched by Nasdaq in 2012, provides management and storage of financial data that helps market participants streamline operations and meet regulatory compliance requirements without making costly capital expenditures for their underlying infrastructure.

Nasdaq OMX currently provides two services on FinQloud: Regulatory Records Retention (R3) and Self Service Reporting (SSR). R3 provide broker-dealers with a storage and retrieval tool to help meet U.S. Securities and Exchange Commission Rule 17a-4 record retention obligations. SSR enables broker-dealers to perform fast, on-demand analysis and reporting on their stored trade data.

“Since March, we have grown from one client using R3 to 19 today,” said Julia Sears, assistant vice president of FinQloud at Nasdaq OMX.

In February 2013, J&J completed an independent assessment of FinQloud’s R3 data storage service which confirmed that it provides broker-dealers with the tools to meet the record keeping requirements of SEC Rule 17a-4(f) and CFTC Regulation 1.31(b).

The encryption key management system is housed in private Nasdaq data centers before directly connecting to AWS.

“FinQloud is powered by AWS cloud computing data centers, and any financial data from member firms passes through our encryption key management system,” said Nasdaq spokesman Rob Madden. “However, we do not have plans to run our trading operations on any cloud platforms (i.e. AWS) as the moment. We continue to offer co-lo services and run our matching engine at the Nasdaq data center.”

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