Be Careful What You Wish For

I've been among many who have, rather publicly, been surprised at how slowly regulators have gotten to grips with overseeing the financial markets. Surely, if their role is to provide oversight, they should be in a position to do that? It's not an easy issue to solve, of course─while some firms may be able to trade faster than the blink of an eye, actually monitoring the sheer level of activity is a difficult task at best, even for the firms engaging in it.

This was a running theme at the first day of WBR's Compliance Pro: Capital Markets event in London last week. Compliance figures from buy- and sell-side firms all congregated to talk around issues such as surveillance at the point of high-frequency trading and other areas, and regulators gave presentations on their efforts, as well as taking questions from the audience.

One such relatively innocuous question asked an IOSCO representative how they're handling the data involved, and whether they're beefing up their quant count to cope with what they're seeing in the market. The answer itself, while slightly provocative, was true enough─regulators will regulate according to need. If you want them to oversee the market at a minute level, the representative said, they will do that. They will hire data analysts, quant coders and industry experts, but the cost will be passed on to "society", or more accurately, the financial industry that pays a tithe to regulators.

For participants, they said, it's a case of being careful what you wish for. Regulators can ‘tool up', as it were, but it will be expensive. With regards regulation, also, the representative said that regulation will become stricter the more that participants stretch the rules, and sympathy for cost can be discounted─regulation is there to be complied with, they said, and their priority is ensuring that markets are safe. They don't care how many dollars and cents it takes to get there.

Strong and hard words, then, for hard times. Food for thought.

They will hire data analysts, quant coders and industry experts, but the cost will be passed on to "society", or more accurately, the financial industry that pays a tithe to regulators.

On another note, there's only 48 hours left to nominate yourself for the sell side's premier third-party vendor awards, the inaugural Sell-Side Technology Awards. The ceremony will be held on April 23, 2013 in New York, and interest, so far, has surpassed all of our expectations. If you haven't done so then I strongly encourage you to enter soon.

More details can be found at the SST Awards website here, or you can get in touch with us if you require more information.

UPDATE: The original version of this story said that there was one week left for nominations. That is not the case, the awards deadline is on Wednesday.