Originally published on John Lothian
Trade surveillance firms are grappling with two major trends: data governance and artificial intelligence adoption, according to Travis Schwab, CEO of Eventus, a leading trade surveillance firm. In a video interview with John Lothian News at FIA’s EXPO 2024 in Chicago last week, Schwab emphasized the critical importance of complete data sets in surveillance systems, noting that regulators have imposed severe penalties for deficiencies.
“They’ve fined large firms multiple billion dollars, existential level fines for not having complete sets of data in their trade surveillance systems,” Schwab said. He also highlighted the growing interest in AI across the industry, but cautioned against hasty implementation. “We’ve been very deliberate about our use of these technologies since we started,” he said, stressing the need for explainable AI in compliance contexts. “We cannot put our clients in a position to where they can’t explain what happened at the machine six months ago,” he added. Eventus is adapting its systems to meet evolving regulatory demands and business needs, Schwab said. He emphasized the importance of flexibility in surveillance platforms to address changing market conditions and regulatory requirements. “You have to have a platform that has the nimbleness and flexibility to either add new procedures, add new asset classes, add different ways of looking at the data, add data governance controls, whatever that is that’s being driven either by the business or by regulators,” Schwab said. He contrasted this approach with older, inflexible systems, noting, “You had kind of these monolithic systems that were hard to parameterize, hard to calibrate that just does not keep up with the environment.” Schwab emphasized the critical capabilities needed for effective trade surveillance and market risk monitoring systems. “You really have to have the infrastructure to make sure that the data that is happening around your business is all getting into your trade surveillance system,” Schwab said. He warned that failing to do so could put companies “in the crosshairs of the regulators.” The upcoming EU crypto regulation, MiCA, is expected to drive adoption of trade surveillance in the crypto sector. Schwab explained, “You have firms that are going to be proactive in adopting MiCA because they want to expand the asset class.” Looking ahead, Schwab predicted that artificial intelligence would significantly impact the industry. He outlined how AI could enhance self-service capabilities, enabling clients to operate more efficiently. “How do we enable our clients to run faster than what we can?” Schwab asked rhetorically, suggesting AI could help clients “write their own procedures to test, to sandbox better, to QA their system better, to parameterize and calibrate their system better.” However, Schwab cautioned that while AI presents exciting opportunities, it must be implemented “safely” and in a “deliberate and appropriate way based off your business.” What trends are you seeing in crypto venue adoption of trade surveillance solutions? Are you on the same page as your clients with AI? How are you adapting trade surveillance due to shifts in regulatory enforcement? How will the upcoming EU crypto regulation affect the market? What capabilities are important for trade surveillance and market risk monitoring systems? What technologies will be coming next year?
00:00:00 – Introduction and Trends in Trade Surveillance
00:00:49 – Regulatory Demand and Business Cases in Crypto
00:01:34 – AI in Trade Surveillance
00:02:37 – AI in Workflow Management
00:03:11 – Adapting Trade Surveillance to Regulatory Shifts
00:04:12 – Impact of EU Crypto Regulation
00:05:10 – Important Capabilities for Trade Surveillance and Market Risk Monitoring Systems
00:05:53 – Future Technologies in Trade Surveillance