Mark Harris, head of compliance with Renaissance Group, tells The Banker how he boosted the group's compliance capability, and installed a new trading surveillance system in its investment banking operations.
When Mark Harris joined Renaissance Group as head of compliance in March 2010 following almost a decade with Lehman Brothers, it was with a mandate from CEO Stephen Jennings to build a “first-class compliance team” across the financial services conglomerate.
This was a particular priority for Renaissance Capital, the group’s investment banking arm, which needed to keep up with rapidly changing regulatory demands in both its domestic and international operations.
Mr Jennings put the right resources behind these efforts, too, says Mr Harris. “It was probably the big selling point for me [in joining the firm]; the investment it was prepared to make in the compliance function and in the tools to allow us to do our job properly and sensibly.”
Trading surveillance
A crucial part of this function for RenCap was the monitoring and surveillance systems for the bank’s global equity trading operations, says Mr Harris, particularly in light of the European Securities Markets Authority recommendations on automated trading, which cover real-time surveillance and pre-trade risk checks. “It’s the number one focus for us, because it is a regulatory requirement across all developed markets, and strong market surveillance capability is something which demonstrates our commitment to integrity across markets where we operate,” he says
As part of his expansion of RenCap’s compliance team, Mr Harris hired personnel to evaluate the current technical and human resources devoted to the bank’s surveillance function, and develop it further. The team quickly concluded that the existing operations did not cut it in today’s markets, however. “The technology solution which we inherited had been there for about three years before I joined,” he says. “It may have been suitable then, but our view and assessment was that now, in terms of the way the firm was set up, and in terms of the actual technology, it was not.”
Buying in
Deciding to buy, rather than build a replacement, RenCap then embarked upon the search for a new system. But the requirements were detailed; the new technology had to be fast and adaptable, in terms of both technology and pricing, says Mr Harris. “RenCap prides itself on being different to the bulge bracket firms, by virtue of being smaller and more dynamic, we can set up business in a new location very quickly – and have done so over the past four years – so we need a system that could be responsive not just to our regulatory obligations but also to our changing business strategy,” he says.
The selection process was lengthy, he adds. “We looked at a lot of market vendors. In all honesty, a lot of them are pretty similar and it’s hard to distinguish them.” RenCap eventually selected a trading surveillance system from Redkite which monitors and analyses activities within the bank’s global equity trading operations, identifying suspicious transactions and flagging the tell-tale signs of market manipulation or abuse.
Crucially, the system worked with both the existing and the planned platform and was flexible from a price point of view, so allowed for future business development. In fact, Mr Harris says, it actually cut the total cost of ownership compared with the existing system. Inkeeping with RenCap’s need for speed, it was also quick to install and went live just six weeks after the contract was signed.
Now, he says, the bank is ahead of its peers – both in the emerging market space, but in some cases elsewhere too – and ready for any regulatory demands that come its way, including Russian insider dealing regulations which have a big monitoring and surveillance component. “I think that during the course of 2012, we’ll be ahead of anything our regulators look to implement… I’d absolutely be confident that we are ahead of anything our competitors are doing, too, because we’re bringing international standards to frontier markets where we’re a big player.”
