Big banks have been paying out billions in fines in the wake of the financial crisis, in part thanks to unchecked behaviour in chat rooms exposing them to prosecutors and investigators.
RBS suffered the embarrassment of seeing their employees’ digital discussions of illegal rate rigging publicized.
A new messaging system promises to help big banks and other financial services firms rein in communications online.
It’s called Symphony, and it’s backed by some of the biggest investment banks on Wall Street.
An alternative to Bloomberg
Another reason these banks have funded the creation of Symphony is that they are eager to replace the system they are currently using: Bloomberg LP’s messaging product.
Some on Wall Street are distrustful of Bloomberg LP’s terminals and are eager to move sensitive discussions onto more neutral ground. In 2013, Mark DeCambre broke the news that Goldman Sachs met Bloomberg management to iron out their differences regarding snooping. DeCambre reported Goldman’s gripe with Bloomberg centered on reporting staff tracking bank employees’ use of their terminals.
Big banks once worried about Bloomberg reporters tracking their staff through their terminal log-ins. Others worry about Bloomberg’s data sharing policies once they’re contacted by investigators. Goldman Sachs is in the process of moving to Symphony for its messaging and JP Morgan is rolling out Symphony in phases, sources said.
“Bloomberg controls all of your data and can respond to subpoenas for bank communications,” one banker explained.
Bloomberg declined to comment.
Encrypted messages under surveillance
With Symphony, the company’s chats are encrypted and no one but the client can unlock it. That’s a big difference between Symphony’s and Bloomberg’s product.
Encryption keys are only known by the clients and not by Symphony and deletion policies are established by the users. The company advertises it can “guarantee that data deletion is permanent” at its website.
Some in the financial services community have expressed reservations about Symphony’s data-deletion policy.
“If it’s acting like a ‘virtual shredder’ then it’s a problem,” said Kevin McPartland, a principal with Greenwich Associates. “If it’s intended to mask something; that’s concerning.”
However, Symphony is structured in a way that isn’t aimed at obfuscating information from investigators as much as it is looking to provide compliance solutions.
The messaging tool provides an active surveillance feature that lets compliance pros monitor chats by keyword — even going as far as to eliminate certain keywords from discussions. So if a trader tried to break the law discussing LIBOR or interest rates and keywords had been established to prevent them from using those words, they are headed off at the proverbial pass.
To be certain, Symphony’s service can’t put a dent in Bloomberg’s data business. But taking client eyeballs off the terminal screen is potentially a very lucrative business and Bloomberg’s chat function is cherished by long-time users.
Goldman Sachs, Bank of America Merrill Lynch, Citigroup, Credit Suisse, Deutsche Bank, Jefferies, Wells Fargo and Morgan Stanley are among more than a dozen Symphony investors that have poured more than $US60 million into the company leading up to its launch. There are still more financial services firms that have supported the communication platform through its development.
We can’t reveal details from Symphony’s product demo, but this is the video the company has online promoting the messaging product.
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