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OCC Takes Action Over US Tier-One Bank’s Lapses in Trade Surveillance Program

The Office of the Comptroller of the Currency (OCC)

The recent regulatory action from the Office of the Comptroller of the Currency (OCC) shows the critical importance of trade surveillance in maintaining market integrity. A tier-one bank has been fined $250 million by the Office of the Comptroller of the Currency (OCC) for significant lapses in its trade surveillance program. These deficiencies, identified from at least 2019 to 2023, have highlighted the bank's failure to adequately govern trading venues and ensure sufficient data controls—key components for effective surveillance.

This latest action indicates a shift in regulatory scrutiny towards ensuring comprehensive oversight of trading activities, beyond the focus on off-channel communications that dominated regulatory agendas in recent years. The fine results from the bank's inability to monitor a vast array of trading activities, highlighting the necessity for stringent surveillance mechanisms to observe employee and client behaviors within the financial markets.

The OCC's findings reveal that the tier-one bank failed to have surveillance in place over billions of trading activity instances across more than 30 global trading venues: a lapse attributed to inadequate governance and insufficient data controls. In response, the bank is now mandated to implement several corrective measures, including securing OCC approval before adding new trading venues and engaging an independent third party to evaluate its trade surveillance program comprehensively.

This development is a stark reminder of the imperative for financial institutions to bolster their surveillance capabilities. It underscores the regulators' commitment to enforcing stringent compliance standards and mitigating risks within the financial ecosystem, thereby safeguarding market integrity.

The OCC consent order serves as a critical reminder for all regulated financial institutions about the importance of maintaining a comprehensive and effective trade surveillance system. It highlights the need for:

Enhanced Governance: Institutions must ensure that they have robust governance mechanisms over all trading platforms and venues they operate in or are active on.

Data Integrity and Coverage: Adequate data controls and comprehensive coverage of all trading venues are non-negotiable to meet regulatory obligations and ensure market integrity.

Continuous Improvement: The dynamic nature of financial markets demands continuous evaluation and enhancement of surveillance programs to adapt to new challenges and regulatory expectations.


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