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'Holistic Approach' Suggested for Audit Trail, 'Naked Access' Controls
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November 1, 2010
Tom Steinert-Threlkeld
A supplier of risk management technology Monday called for federal regulators to take a 'holistic approach' to the creation of a consolidated audit trail of securities transactions and the establishment of controls on so-called 'naked access' to markets.
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FTEN, which is marketing technology that it contends can solve both issues, said it expected the Securities and Exchange Commission could save billions of dollars almost "immediately, because you are addressing both issues at the same time,'' said Gary LaFever, the company's chief development officer.
In its consolidated audit trail proposal, the SEC is attempting to create a single master database of price, share and other details on orders and transactions in U.S. securities markets. In its action on 'naked access,' the SEC is expected to ban the practice of brokers supplying their market participant identifier codes to unregistered entities who in turn send orders directly onto markets electronically, without the orders going through risk controls in advance.
The SEC is set to take up the 'naked access' ban at an open meeting Wednesday.
Also Wednesday, FTEN is set to sponsor and its CEO, Ted Myerson, moderate a roundtable in NewYork City on the creation of a consolidated audit trail, at a meeting of the Capital Markets Consortium.
When it first made its audit trail proposal, the SEC said the initiative could cost $6 billion in the first year and $4.1 billion each year thereafter.
LaFever said Monday he believed FTEN's RiskXposure Secure Data Cloud technology could create a "golden copy" of all orders and transactions, naked or otherwise, and keep track of both details of the transactions and the risk controls applied.
In so doing, he saw "no reason" a single system applied to both SEC initiatives could not be created that, at the outside, would cost any more than $1 billion. And serve both purposes.
He said he was "not sure if (RiskExposure technology) is better" than other systems that could serve the dual purposes. "But no one else is doing it,'' he said.
The RiskXposure Secure Data Cloud technology "currently provides real-time risk management and surveillance for up to 17 billion executed shares of U.S. equities and $150 billion in risk calculations per day," FTEN said.
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