Financial data giants Bloomberg and Thomson Reuters have taken significant steps to calm banks’ heightened concerns around financial traders misusing instant messaging.
In a week when JP Morgan has become the latest bank to ban instant messages in multi-dealer chat rooms, chief risk and chief information officers across the industry have looked to their trading platform providers to help with the challenge.
Both Bloomberg and Thomson Reuters have now publicly addressed the centralisation of their reporting tools. This is aimed at allowing compliance officers to monitor all instant message chats among traders, and to be alerted to problem behaviours and keywords.
Bloomberg and Thomson Reuters provide the majority of desktop terminals used by traders, and Bloomberg terminals alone carry up to 20 million instant messages and 200 million e-mails every day. The changes being brought about by those companies can be seen as an effort to demonstrate that instant messaging is controllable and safe.
Instant messaging has become a major problem as traders in various banks were exposed evading standard controls, allegedly to discuss manipulating interbank Libor and currency exchange rates. Libor underpins over $350 trillion in derivatives, and $5 trillion in currencies are traded daily on the global Forex markets.
What Bloomberg has introduced
Yesterday, in response to the concerns among banks, Bloomberg announced the launch of a new Compliance Centre.
This will be a centralized repository of all of the company’s compliance tools around administration, monitoring, search and retention capabilities, in an attempt to give managers a real-time, clear view of communications.
In a blog, Bloomberg notes that its Instant Bloomberg chat service already offered these instant message monitoring tools, but they have been put together in response to compliance officers asking for “a better way to manage these communications”.
The data company said it is also stepping up its reporting capabilities and permission tools for administrators.
Thomson Reuters’ actions
Meanwhile, Thomson Reuters has recently taken its own steps. Less than a month ago, David Craig, president of the financial and risk business at the company, reminded customers that the company’s Eikon platform “has always supported” the controls that banks need over instant messaging.
He notes that Thomson Reuters’ instant messaging service Eikon Messenger only allows chat rooms to be created by managers with specific authorisation, and it comes along with a “ full compliance suite”. Using the software, compliance officers are provided with rapid alerts of messages containing questionable or risky terms.
Many of the concerns around trader conversations have focused on the anonymity of those individuals in certain online forums. Craig says that instant messaging identities on its platform are “based on names and entities of the individuals”.
Earlier this week, Bloomberg’s head of products Ben Macdonald was quoted in the Financial Times as saying that the reputation of instant messaging was in danger, and there were risks of regulators imposing tough restrictions. He added that he was “worried about regulators going down roads that aren’t good for the industry”.
But Craig at Thomson Reuters doubts that steps will be taken: “In reality, I think the chance of the financial industry moving back to just voice or e-mail communications is fairly remote.”
“Blaming the tool for the behaviour of those using it will not solve the issue,” he added.
The JP Morgan chain reaction
Whatever regulators do, the data companies and their bank customers are concerned. This week, as JP Morgan announced its ban on multi-dealer chat rooms, the company’s investment banking heads Mike Cavanagh and Daniel Pinto wrote in a memo to staff, shown to the FT: “Your e-mails, chats, and instant messages with clients or JP Morgan Chase colleagues are expected to be professional. Please refrain from using exaggerated or inappropriate language and avoid generalizations or sarcasm that could be misunderstood at a later date.”
Deutsche Bank DB -0.95% has also announced a ban, and other banks including Citigroup C -0.1%, Barclays and UBS are reportedly planning a similar move.
Mobile phones remain a danger
Financial technology experts have told Forbes that there is still a problem around instant messaging security controls. And, even if that is solved, trader mobile phones remain an area far out of the control of many banks (see here for more expert reaction).