Mention “Nasdaq” and New York’s tech-led stock exchange immediately springs to mind, but for Valerie Bannert-Thurner the name embodies far more than one market.
Nasdaq SMARTS has been the industry benchmark for trade surveillance, supervision and compliance for over 20 years. We recognize the need for holistic surveillance capabilities that are increasingly being demanded by regulators. By partnering with Digital Reasoning we are at the forefront of efforts to help safeguard the integrity of our customers and the financial markets. Together, Nasdaq SMARTS and Digital Reasoning are delivering full transparency across the entire trade lifecycle while working to reveal the intent behind specific actions and identifying suspicious activities that may have otherwise gone undetected.
Besides operating its eponymous exchange business, Nasdaq is also the leading provider of technology used to protect the integrity of marketplaces around the globe. Valerie heads the team that sells and maintains this technology to customers worldwide.
Over two decades, Nasdaq has built a reputation as the gold standard for solutions that enable the detection, documentation and investigation of market abuse. Serving 40 marketplaces, 11 regulators and 100 market participants in 65 countries, the company is aware of the awesome responsibility it holds for protecting the operations and reputation of its customers and the stability of a system that affects millions of people.
In what became a market disrupting sequence of financial scandals, from fixing of the Libor, to the “London Whale”, and rigging of the forex markets – the worst consequences of market abuse were exposed to a public already angered by the damage caused by the global financial crisis. Determined to rebuild the industry’s credibility, regulators reacted by tightening directives and heightening their expectations of compliance organizations.
Examiners eventually found evidence of widespread industry misconduct through the analysis of emails and chats from across the financial services industry. Unfortunately several warnings had been missed or went unheeded at the time. The implication was that concerning signals within trading data were not always clear enough to warrant decisive action.
To some extent, this problem was already understood. Regulators and the financial services industry had sought to mitigate the limitations of analyzing trading data alone by deploying lexicon search tools to identify language indicative of market abuse. But limitations in search based technologies allowed individuals to avoid detection by avoiding commonly known search terms. Meanwhile, legitimate messages would also generate a fog of false alerts that wasted time and resources. Nevertheless, in the absence of a better solution, lexicon searches had become an accepted practice throughout the industry.
Nasdaq refused to accept the status quo. Determined to maintain their reputation as the industry leader in surveillance solutions, the team behind its award-winning SMARTS solution resolved to find a better way to detect divulging language in related trader communications and achieve a holistic analysis where a trader’s intentions as well as actions could be monitored and understood.
Nasdaq discovered Digital Reasoning and Synthesys, our award winning cognitive computing platform. Synthesys had delivered impressive results to institutions including UBS, Goldman Sachs, Point 72 and many others with documented outcomes such as a 250% increase in detection acuity, 50% reduction in false positives, and a quadrupling in efficiency making it feasible to extend electronic communications surveillance to 100% of employees.
In February 2016, our organizations partnered and found a way to fight against financial crime by announcing a global alliance to deliver next generation, holistic markets surveillance capabilities.
“The notion of white collar crime as victimless doesn’t stand scrutiny in the light of horrifying scandals that have racked up losses and fines for banks, destroyed jobs, and put the stability of the world’s financial system in jeopardy,” argues Valerie. “Working with Digital Reasoning, we found a way to help safeguard the integrity of our customers and the financial markets.”
The new approach has set the benchmark for the next generation of surveillance technology, but Valerie believes the impact will be even more pervasive. “Holistic surveillance means corrupt traders will know they are likely to be caught, dissuading them from committing crimes and, potentially, taking them out of the industry,” she explains. “I know banks are working hard to restore their honor and I’m proud that we can help them achieve this."