Harvey Spencer Associates, Inc. Launches New Study to Ascertain How Automation Can Reduce DODD-FRANK Compliance Discovery Costs for Swaps and Derivatives

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$Billion software opportunity to improve compliance through application of voice capture to financial trading records.

Harvey Spencer Associates, Inc today announced the launch of a new multi-client study to identify opportunities for the use of voice recognition technologies to reduce the costs associated with compliance discovery of trading records in the banking and financial services industries.

The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (commonly referred to as Dodd-Frank) is designed to bring comprehensive regulation of the swaps and derivatives marketplaces for the first time, and now is in the final ruling stage. Managed by the Commodity Futures Trade Commission (CFTC), Futures Traders will be subject to robust oversight.

The regulations require major financial trading institutions to establish policies and procedures to monitor each trader to prevent the occurrence of ‘unauthorized risk’. Dodd-Frank: “Requires futures commission merchants consisting of certain introducing brokers, retail foreign exchange dealers, and certain other registrants who are members of designated contract markets as swap execution facilities, to record all oral communication provided or received concerning quotes, solicitations, bids, offers, instructions, trading and prices that lead to the execution of a transaction in a commodity interest whether communicated by telephone, voicemail, mobile device or other digital or electronic media and to keep those records for one year”.* The records have to be readily available for research and compliance, and regulatory requests are expected to be met expeditiously, which generally means within 24 hours. Each affected entity must comply with the oral communication records requirement no later than December 31, 2013.

An individual trader may be involved in hundreds of calls a day, dealing with ten to a hundred different counter-parties. Current voice recognition technologies do not have the ability to meet the discovery requirements because of the many complexities in the recordings. The CFTC, charged with managing Dodd-Frank, estimates that requiring a compliance specialist ($155.96/hr*) to listen to recordings to comply with a regulatory request will vary significantly, depending on the number and length of oral communications that must be reviewed, and could cost up to $779,800* per event.

According to Harvey Spencer, the well-regarded capture software market analyst: “The technological state of voice recognition is similar to that of OCR (Optical Character Recognition) 10 years ago. Voice recognition software currently works very well for command and control and it works reasonably well for converting voice to text. We believe that correctly configured Voice Recognition, combined with other software tools, can improve the efficiencies of identifying voice transactional records and thus significantly reduce the cost of Dodd-Frank compliance.”

The HSA study will provide an understanding of the potential software needs to capitalize on this opportunity. It will include analysis of workflows, highlighting time savings and cost savings. Elements will include an assessment of the value associated with identification of people; words; phrases; and conversations. Market acceptance will be measured, along with market segment sizing, and respondent feedback on concept value. The study will provide an assessment of the business opportunity.

For more information on the HSA Dodd-Frank discovery multi-client study and how to participate, please contact mike.spang(at)hsassocs(dot)com.

About Harvey Spencer Associates, Inc (HSA):
Since 1989, the New York based HSA (web: http://www.hsassocs.com - US tel: +1-631-368-8393) has specialized in analyzing the market for information capture technologies – software that extracts meaningful, usable transactional information from structured and unstructured inputs. Our services, anchored by a series of annual, comprehensive, world-wide market reports, include Market Analysis; Technology Planning Assistance; Product Positioning; Product Management; Client Sponsored Research; and Strategic Planning Services. For more information, please contact: jim(dot)everett(at)hsassocs(dot)com.

*Federal Register / Vol. 77, No. 246 / Friday, December 21, 2012 / Rules and Regulations

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