Travis Schwab, CEO of Eventus: Finance Professional Comments on Regulatory Compliance Challenges Industry Faces

We recently caught up with Travis Schwab, Founder and CEO of Eventus – a global provider of multi-asset class trade surveillance, algo monitoring, and risk control solutions.

According to the firm, Travis has a deep background in capital markets and over 25 years of experience in chief executive, compliance, and financial technology roles.

With the various regulatory, compliance and fragmentation challenges impacting firms worldwide, we decided to discuss how firms can make trade surveillance work for them to combat these and other challenges.

Travis Schwab from Eventus touched on how compliance teams can stay ahead of risk while remaining compliant amid the ever-evolving regulatory landscape. He commented on how trade surveillance technology can free up analysts’ time to focus on actionable alerts rather than false positives, thus driving overall efficiencies.

He explained how technology can help compliance teams that are struggling with increasing data volumes paired with market volatility.

Our conversation with Travis is shared below.

Crowdfund Insider: What are the biggest issues the financial industry faces regarding regulatory compliance?

Travis Schwab: The financial industry faces both an increasingly stringent regulatory environment and is coping with monitoring high volumes of data to manage risk. Market players are often active across several geographies and jurisdictions, with different regulatory compliance requirements being enforced by different agencies with varying agendas and demands. Compliance teams are dealing with increasing data volumes, market volatility and the need to stay on top of rapidly evolving regulatory changes.

Regulatory scrutiny is a serious, important issue. Firms are getting fined and individual employees, especially CCOs, are subject to personal liability, including criminal charges. In this industry, the stakes are high to get this right.

Crowdfund Insider: How are compliance teams most effectively managing risk and compliance amid the ever-evolving regulatory landscape?

Travis Schwab: The starting point is a culture of compliance at the top of the organization. The most effective compliance teams leverage that culture and show how compliance is an everyday part of the company’s workflow and an enabler, not a bottleneck or a mere checklist.

Next, successful compliance leaders remain connected to their regulatory network and seek out expert insight. This allows them to have foresight into shifting dynamics. Staying ahead of risk is about doing several things: conducting periodic risk assessments, understanding the gaps in your compliance program, and building out a rapid-response plan to market volatility and regulatory enforcement.

These successful leaders also think a lot about technology and how their compliance teams are using it. Many have inherited internal builds or legacy RegTech software that was a good fit years ago but is not keeping pace. Suddenly, they have to reexamine their tech because something happens in their business that they must react to, like opening a new business line or an acquisition. This is a time to really understand their compliance software’s total cost of ownership and pain points and plan for the future.

Crowdfund Insider: What are the main challenges faced by compliance teams dealing with increasing data volumes, and how is technology assisting them?

Travis Schwab: Compliance teams are flooded with false positives, which prevents their analysts from focusing on the alerts that really need attention. With growing data volumes and more market and regulatory complexity, technology must be at the heart of any solution to this.

Compliance technology should empower teams to discover the most actionable alerts and spend their time investigating them with advanced analytic tools and reporting. Today, surveillance software must operate at scale and be flexible enough for teams to adjust and show their continued responsiveness to market conditions. Flexibility means bringing the right technology to the specific problem at hand.

To alleviate the burden of false positives, the technology should capture more data–not less–and then add the right mix of automations based on human expertise, machine learning, and procedures. The end result is more time to focus on the most actionable alerts. The key is matching technology with human experts. If a compliance team is still complaining about false positives, it’s time to reassess how technology can help them more.

In addition to the pure amount of volume, the ability to seamlessly ingest and process data in any format is still a stumbling block to upgrading basic surveillance infrastructure. This should be table stakes by now, and there are ways to solve for this.

Crowdfund Insider: How does trade surveillance technology help firms overcome those challenges and why is that increasingly important?

Travis Schwab: Trade surveillance plays an essential role in detecting market manipulation and disorderly trading, upholding supervisory requirements, and identifying market risk, such as with algo monitoring and risk controls. This is a serious responsibility and very important for the future of a given financial institution and the markets as a whole.

For compliance teams, they need to do all that and address regulatory requirements in an efficient way. They need control over how their technology works for them. What becomes increasingly important, then, is technology that comes with continuous improvement, customization, and predictable delivery. All that should be backed by a software team that collaborates with and listens to users–the compliance professionals charged with getting it right.

Crowdfund Insider: How are compliance teams leveraging insights gained from trade surveillance to make informed decisions beyond just regulatory compliance?

Travis Schwab: In addition to remaining compliant from a regulatory perspective, firms can leverage insights to ensure they can establish and maintain proper risk controls for their firms and clients, particularly in a dynamic and fragmented landscape. Compliance teams care about position concentration, excessive messaging, duplication of orders, and clearly erroneous events, for example. Setting the right risk controls helps to protect trading desks and acts as a check to confirm that pre-trade risk systems are working properly. Auditors can use trade surveillance reports on order and trade data lifecycles, as well as reports on how proficiently the surveillance team has resolved triggered alerts, to ensure efficiencies across their teams.

Crowdfund Insider: What are some developments in trade surveillance technology that compliance teams can leverage?

Travis Schwab: There are exciting advancements that come with continuous improvements and R&D. Legacy trade surveillance tools often lack the flexibility needed to respond quickly to new regulatory standards, as seen in some enforcement cases. A recent industry report by Acuiti found that 60% of surveyed compliance leaders had recently invested or are considering investing in trade surveillance technology in the coming months. This indicates that the need to upgrade is top of mind for many.

Compliance teams now have more options with advancements like machine learning with explainability, automations, advanced algo monitoring, and customizations. In recent years, cross-product monitoring has been a focus as financial market participants trade across a number of products and jurisdictions more frequently.

Diving deeper, technologies like Robotic Process Automation (RPA), machine learning and procedural automation help with anomaly detection and pattern matching and are designed to escalate the most actionable alerts. RPAs allow compliance teams to customize their trade surveillance programs by incorporating client-specific logic, including asset classes, regions, instruments, and account groups. This reduces manual investigations and frees up resources.

Crowdfund Insider: How is technology evolving to assist compliance teams in identifying and addressing potential market manipulation more effectively?

Travis Schwab: Compliance technology works best when it empowers trained professionals committed to their craft. We’re seeing a positive commitment from players across the financial world to take a serious approach to compliance and the technology needed to manage compliance well.

Having built-in procedures shaped by clients is step one. Needed next is customization and transparency to empower compliance teams to mold the procedures to their needs and emerging manipulative trading patterns. Advanced analysis–like visualizations–help analysts investigate alerts. Finally, powerful reporting allows compliance teams to validate the sum total of their surveillance program, look for patterns and practices, and communicate their findings to internal stakeholders and, when appropriate, to regulators.

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