Are compliance concerns delaying banks from offering iPhone trading to Institutional Clients?


While many banks talk of providing trading via the iPhone or other mobile devices to institutional clients, so far very few have done so.

In the non-professional (retail) market, most spread betting firms and retail brokers already offer quite sophisticated mobile trading solutions.

So, what’s stopping the banks from offering similar solutions to their top tier institutional clients?

Major banks have well defined e-commerce strategies for their single dealer platform (SDPs) across various client segments – combining pre-trade, trade and post trade offerings to meet specific segment requirements. Yet many seem unclear exactly what to deliver to those same segments using mobile devices.

At a minimum, all would agree that a basic mobile offering should deliver streaming rates, real-time position updates, charts and relevant research/trade ideas, with intuitive navigation.

But it’s in the area of trading and placing/managing and editing orders that there seems to be some level of uncertainty about what is required. In fact, many banks seem unclear whether their clients would be allowed to trade using mobile devices.

Internal compliance issues are cited by many firms for the slow introduction of trading via mobiles, especially since use of mobile devices within dealing floors is banned by banks due to concerns around insider dealing, and the lack of auditability of their use. Although, from an audit trail perspective, screen-based trading via a mobile device would deliver the same audit trail as if using a desktop/laptop application, so the compliance concerns seem unclear.

Actually, lack of internal controls, rather than lack of auditability is probably a greater risk to firms. As was clearly demonstrated by the news this week (Drunk oil trader banned and fined)  that an authorised employee for a major oil trading firm, carried out unauthorised trading on his laptop – all fully audited, and no doubt fully compliant with the firms procedures. Although one suspects that inadequate internal risk management (and not a lack of auditability), meant that these trades were not picked up fast enough, leading to the firm losing £6m – a years profits.

But, perhaps that’s all going to change.

Earlier this year the SFA released a discussion document regarding removing the mobile phone exemption, and if adopted, would require banks to record activity by bank issued mobile phones (covering voice, text and IM chat traffic) – this would effectively open the door for use of mobiles within trading rooms.

We saw banks resist the adoption of instant messenger (IM) for trading until the compliance requirements were made clear and they could deploy suitable technology to record IM conversations.

It will be interesting to see whether the moves by the FSA will result in widespread implementation of screen based mobile trading for institutional clients.

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