Financial Policy Enforcement

Financial Policy Enforcement

Can your company react quickly to sudden changes in market conditions?

A lot has been said about ability of an enterprise to quickly react to ever-changing market conditions. The financial meltdown of 2008-2009 and the ensuing crisis of confidence, resulted in a normally sedate government body, the Securities and Exchange Commission (SEC), reacting to criticism by mandating a number of compliance changes that were sudden, forceful, and therefore quite impactful on one sector of the economy – investment banks, brokers and dealers. This impact was mostly apparent when SEC banned short selling of a number of financial stocks (SECURITIES EXCHANGE ACT OF 1934 RELEASE NO. 34-58592 / September 18, 2008).

Let’s review a common process to respond to such regulation. The ban itself does not list the securities that are included in the mandate, but instead it indicates the Standard Industrial Classification SIC codes. So a selection of the stock symbols and flagging of these symbols in the trading system will be required by the complying firm. Then there is an effective period. But this is not the end of it – only the beginning of a process that can take valuable time and impede productivity. There are orders left in the system that must be cancelled since they are no longer allowed. Customers must be notified, documents filed, new processes learned and so forth. Most of these processes require significant intervention into normal business processes which is time consuming and costly.

An alternative approach would be to utilize policy driven services, enterprise integration with the existing trading system to enact new business rules, communicate with customers about these changes, and monitor and manage the impact of these changes on all involved stakeholders. This futuristic scenario was the basis of the requirement of the policy management application that was done for an investment bank in anticipation of a mandate similar to the one from the SEC.

We had no time to waste and utilized OASIS XACML standards to define and manage policies. An intuitive user interface allowed investment professionals to quickly sort through the myriad of stock exchanges, sectors, and tickers to define the subjects of every rule. The period of effectiveness for every rule is as simple as a click of the calendar – no complex terminology, no convoluted source code, no large technology teams. All rules were created and tested by subject matter experts within a few days of enactment. Time was better spent on validation of accuracy instead of manual coding of something that will be gone in a few months and has no business value. The cost savings have gone way beyond the resources, since everything is clearly documented, verifiable and compliant with government requirements.

A showcase of this creative and effective solution can now be viewed at our web site and is driven by the leading security standards, compliance processes, and integration capabilities.