Reconsider Instant Messaging in Finance

EXECUTIVE SUMMARY CONTENTS Now is the time for the finance industry to reconsider instant messaging (IM) and see it as Executive Summary 1 a tool to put efficiency and revenue back at the forefront of their communication. The Challenge 2

Many firms have a policy prohibiting using IM as Anatomy of a Multivendor IM System 4 a collaboration and sales tool despite potential losses in efficiencies and opportunities. Risks & Costs of Multivendor IM 6 Systems w, complexity, and above all compliance risk are often cited as the reasons firms avoid using The Messaging Solution for Finance 7 IM. However, recent industry innovations can eliminate or dramatically reduce these concerns. The Global Relay Message Advantage 8

This white paper outlines the challenges around Primary Benefits to the Finance 9 adopting IM, and then details how Global Industry Relay’s compliant IM service overcomes all previous barriers. Conclusion 10

THE CHALLENGE

The finance industry has always embraced • MARKET DATA PROVIDERS: technologies that improve the transactional Marketed specifically via market data platforms. speed of business. Fast, reliable, and secure Bloomberg® and Thomson Reuters, the communication is essential for collaborating with largest players in this category, offer expensive coworkers or counterparties. messaging systems tied to their market data terminal. Since its inception in the 1990s, instant messaging has provided many industries with a platform for Over the years, closed communities rapid, convenient, real-time communication that representing the major asset classes and surpasses email. markets formed around these instant messaging systems Within the finance industry, three types of IM systems are commonly used: • ENTERPRISE COLLABORATION: For the enterprise, but not specifically for • PUBLIC IM: finance, these systems include Slack, Microsoft Also known as consumer messaging, systems Teams, IBM Sametime, and Cisco Jabber. such as AIM, Yahoo!, MSN (now discontinued), LinkedIn, and Twitter have been used among financial firms. However, with the increased popularity of enterprise collaboration systems, fewer and fewer firms depend on public IM.

Cost, reliability, complexity, and above all compliance risk are often cited as “ the reasons firms avoid using” IM.

Despite its utility, many financial firms have a • Most IM systems lack counterparty policy against the use of IM because of a number authentication, making it impossible to validate of limitations and risks: that counterparties are who they claim `to be

COST • The cost of many IM systems can prohibit firms Consumer messaging systems do not offer the from putting all employees on them reliability, security, or compliance functionality that firms require. Market data providers and enterprise collaboration systems are typically COMPLIANCE more reliable, but also lack integrated compliance Today, financial firms are expected to comply and security features and are expensive. with long-established regulations such as those of the SEC, FINRA, CFTC, GDPR, and FCA, as For example, if a sell-side firm wants to talk to a well as newly enacted rules like the EU Markets in buy-side firm via the Bloomberg community, it has Financial Instruments Directive II (MiFID II). to pay hefty monthly fees per employee for this type of terminal access. Regulators are levying increasingly exorbitant fines throughout the industry in an effort to create Many enterprise collaboration systems also greater trade transparency, prevent market abuse, charge considerable monthly fees to provide and protect investor interest. firms with a copy of their IM communications for regulatory supervision. In addition, there are costs Legacy IM systems were never designed to have to 3rd party proxy, archiving, e-Discovery, audit, their communications captured to the standards and supervision tools. required to satisfy U.S., UK, and/or European recordkeeping and supervision regulations. COMMUNITY For various reasons – cost, security, vendor, Consequently, to address this design deficit, an technical limitations – different IM systems have IM system must “bolt-on” features to capture been adopted over time. As a result of using its data and make it available to regulatory disparate systems, financial communities are supervisors, resulting in a complex and risky unable to engage in crossindustry collaboration. multivendor IM system.

For example, Microsoft Teams, IBM Sametime, In this scenario, firms must pay for their IM data and Cisco Jabber are typically restricted to to be delivered to an archiving vendor; however, internal communications, making external there is inherent risk of data fidelity loss in both communication difficult. the capture and delivery processes involved, particularly with public IM and enterprise Cross-industry collaboration is additionally collaboration systems. limited because:

• Public IM lacks a community directory to find others

ANATOMY OF A MULTIVENDOR IM SYSTEM

A typical multivendor IM system consists of the Converting IM conversations to a standard following four components: suitable for regulatory supervision requires sophisticated conversion tools that ensure all 1. IM CLIENT: conversation data and metadata is properly IM systems provide real-time, text-based processed and converted into messages in message exchange, but do not offer the an archive. compliance functionality that financial firms require. IM systems can be grouped into these A comprehensive reconciliation methodology major categories: is also required to ensure the quality, accuracy, › Public IM and completeness of all archived data. › Market data providers › Enterprise collaboration Few IM vendors possess this sophistication.

2. IM GATEWAY: 4. RECORDKEEPING AND COMPLIANCE An IM gateway extracts messages from the IM PLATFORM (“ARCHIVE”): system and delivers them to a database. Unlike IM systems and IM gateways, archives are not commoditized products. Archives Simply routing messages to a database will not capture, store, and preserve messages, satisfy regulatory requirements because: where they can be searched on, supervised, and retrieved for use by business functions › Messages must be captured and preserved for including: a specified retention term. › Compliance supervision › Messages must be searchable and retrievable. › Audit, litigation, and investigation › Duplicate copies must be stored in separate › Infosec locations to protect against destruction or loss. › GDPR › Human resources As a result, firms require an archive. Firms conduct a long and comprehensive due 3. DATA CONVERTER: diligence process before selecting an archiving Conversations contained within an IM system service provider. There are numerous archiving must be stored in some manner (often a service providers, but very few specialize in database) and converted into a format suitable compliance archiving for the finance industry. for recordkeeping in an archive. Conversion may be performed by the IM system vendor, who sends conversations in an email format to an archiving vendor; otherwise, a third party or archiving vendor can perform the conversion.

MULTIVENDOR INTERACTION How multivendor components interact varies depending on the vendor, but they generally work as follows:

CONSUMER IM COMPLIANCE

IM Client Proxy Server Data Conversion Archive

Vendor 1 Vendor 2 Vendor 3 Vendor 4

Having no infrastructure to support regulatory supervision, the IM system must rely on a Proxy Server from another vendor to capture IM conversations and route them to a database.

A third vendor captures the proxy database information and constructs messages that can be archived with a fourth vendor.

MARKET DATA PROVIDER IM COMPLIANCE

IM Client IM Log Files Data Conversion Archive

Vendor 1 Vendor 2 Vendor 3

Most market data systems make XML log files of conversations available for a separate vendor who downloads the XML log files and constructs messages that can be archived by a third vendor.

ENTERPRISE COLLABORATION IM COMPLIANCE

IM Client API Data Conversion Archive

Data Conversion (email)

Vendor 2 Vendor 3

Vendor 1

Many enterprise collaboration systems make IM conversations available to customers via Application Programming Interface (API) or by sending them pre-converted messages. Depending on the method used, a separate vendor downloads the data via API and constructs messages that can be archived with a third vendor.

RISKS & COSTS OF MULTIVENDOR IM SYSTEMS

COMPATIBILITY The biggest risk with a multivendor IM system is a Therefore, only limited IM information may be small change in any of its components can lead to provided, which can be insufficient to accurately data loss and regulatory compliance issues. reconstruct conversations between counterparties.

When working in tandem to capture IM EXPENSE conversations, even the smallest change to one Firms implementing a multivendor IM system vendor’s solution can break the multivendor often deal with the unenviable situation of limited IM system’s interdependence and the entire functionality and soaring costs. processing chain, e.g. when a component in a multivendor system is updated or upgraded. Purchasing, implementing, deploying, and managing separate products from different This break can necessitate emergency upgrades to vendors is expensive and complicated. restore the capture of communications; however, there still may be periods when IM communications Each component uses proprietary technology are not captured, creating a compliance ‘gap’ that with distinct operating and service requirements, can result in regulatory fines. incurring ongoing cost.

QUALITY Additionally, there are ongoing maintenance and The completeness and accuracy of information in upgrade costs to ensure the components work the log files – particularly in the case of enterprise with each other and to prevent failures in the collaboration systems – cannot be verified as these overall solution. platforms were not purpose-built to satisfy the requirements of financial regulators.

The biggest risk with a multivendor IM system is a small change in any of its components can lead to data loss and “ regulatory compliance issues. ” Copyright © 1999 – 2020 Global Relay. All Rights Reserved. 6 Reconsider Instant Messaging In Finance

THE MESSAGING SOLUTION FOR FINANCE

Global Relay Message consolidates all components Global Relay Message is a messaging platform of a typical multivendor IM system into a single, purpose-built to meet the communication, unified platform, eliminating the risk of data loss collaboration, and compliance needs of the finance and potential compliance issues. sector and other heavily regulated industries.

True collaboration within and between financial firms requires a platform that is easily available, affordable, and able to satisfy the reliability, security, and compliance requirements of the finance industry.

Global Relay Message Clients Global Relay Message Converter Global Relay Archive & Supervision Tools

Global Relay

Using its industry-leading services, Global Relay develops, hosts, and supports all components of this service, ensuring the accuracy, completeness, and quality of all IM conversations.

THE GLOBAL RELAY MESSAGE ADVANTAGE

INTEGRATED ARCHIVING & SUPERVISION ID FOR LIFE Global Relay facilitates intuitive searching and Global Relay Message will issue a distinct and rapid message retrieval, all while providing a full permanent ID to each individual and company. complement of supervision, eDiscovery, analytics, and legal hold tools to help ensure firms adhere This ensures all communications conducted by an to SEC, FINRA, FCA, and other regulatory individual on behalf of their employer is properly agency rules. identified.

Global Relay Message is integrated with the TEXT FOR GLOBAL RELAY MESSAGE industry leader in enterprise-class archiving Customers frequently send text messages over technology: Global Relay Archive. All unsecure, non-compliant SMS/text services. communication generated within Global Relay Against company policy, financial representatives Message is automatically captured, indexed, and are obligated to respond to them or risk losing the stored in a secure, tamperproof cloud repository. customers’ business.

GLOBAL DIRECTORY Text for Global Relay Message solves this issue The success of all finance professionals depends by providing financial representatives with a on their ability to quickly locate and communicate compliant SMS/text feature to communicate on with colleagues, partners, and peers. their customers’ terms, leveraging integrated compliance, audit, eDiscovery, analytics, and Through the Global Directory, users can easily find supervision tools. contacts within their own firm and at other firms.

Users can continually build and customize their contact lists, helping seed a global IM community of finance industry professionals.

Global Relay Message consolidates all components of a typical multivendor IM “system into a single, unified platform.”

PRIMARY BENEFITS TO THE FINANCE INDUSTRY

COLLABORATION Global Relay Message facilitates collaboration trail is attached to every message, recording among users, both within individual firms and exactly who saw it, when it was sent/received, and across the industry. Through the Global Directory, when it was accessed/reviewed in the Archive. financial professionals can quickly locate This provides complete and accurate message colleagues and start a conversation. reconciliation, with irrefutable evidence of each message’s lifecycle. Users can conduct private business confidentially on a 1:1 or small-group basis. MOBILITY Global Relay Message offers full feature parity Alternatively, conversations can be opened to between devices anytime, anywhere. Users can encourage collaboration within a team or with seamlessly transition from web to desktop to industry experts across a mobile devices. Begin a conversation on Global user community. Relay Message for Desktop and finish it on Global Relay Message for iOS or Android. COST REDUCTION The finance industry is facing margin compression, Global Relay Message guarantees the delivery of consolidation, and an overall need to reduce all messages – even those sent offline – which are operating expenses. Compared with in-house backed by sent/read receipts. multivendor IM implementations, Global Relay Message provides firms with dramatically reduced SECURITY cost of ownership. Through Global Relay Message, client-facing teams can confidently answer questions, collaborate on As an integrated, single-vendor, cloud-based issues, communicate business instructions, and solution, Global Relay Message requires no share sensitive information that cannot be securely onsite hardware installation. All hardware and transmitted via email. infrastructure reside in Global Relay’s mirrored data centers – with Global Relay assuming all the To ensure secure client connection and costs to operate, maintain, and secure them. communication, Global Relay Message combines a secure and private network, end-to-end message COMPLIANCE encryption, and counterparty authentication. Global Relay provides access to a complete set of monitoring, supervision, recordkeeping, More specifically, Global Relay Message is hosted eDiscovery, and analytics tools for Global Relay in Global Relay’s private cloud, housed in SOC Message data. These tools help demonstrate that 2-audited data centers. all communication adheres to SEC, FINRA, CFTC, GDPR, MiFID II, and other regulations regarding Message supports secure login via a Global Relay data retention and supervision. account password, and it encrypts all messages while in-transit and in Global Relay Archive. User Every message from every conversation is securely identities are verified by customer directory stored in Global Relay Archive. A complete audit services integrated with the Global Directory.

CONCLUSION ABOUT GLOBAL RELAY

Global Relay Message, an integrated and 20 YEARS IN THE CLOUD compliant messaging solution, eliminates many Global Relay operates at the intersection of of the concerns firms have in adopting instant two of the biggest technology trends today: messaging as a communication, collaboration, cloud and big data. Global Relay manages and marketing tool. petabytes of mission-critical data for some of the world’s largest and most influential The benefits that Global Relay Message provides organizations, including 22 of the top 25 – cost, compliance, security, reliability – together global banks. From seven offices across with its ability to help drive efficiency and the world, Global Relay delivers its services productivity within organizations necessitate a to over 20,000 customers, with a focus on reconsideration of IM’s use in finance today. government, financial services, and other highly regulated industries.

In 1999, Global Relay developed one of the first cloud computing services to address the growing need to manage corporate email. Since then, as organizations have adopted new methods of communication, as data volumes have grown exponentially, and as regulatory and corporate recordkeeping and supervision requirements have become increasingly strict, Global Relay has continued to innovate to help its customers manage, control, and profit from their data.

For more information on Global Relay Message:

• Visit globalrelay.com

• Call +1.866.484.6630

• Email [email protected]

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