The expanded registration requirements under Dodd Frank for firms that once fell under exemptions have resulted in many more firms being compelled to invest in data storage solutions in order to ease the data retrieval process and keep costs down. One such firm is buy side firm Hudson Bay Capital Management, which has recently rolled out Bloomberg Vault, the data giant’s hosted archiving solution. Reference Data Review speaks to Hudson Bay Capital’s general counsel and chief compliance officer Scott Black about the implementation.
“The first issue for us is that we have to register with the Securities and Exchange Commission (SEC) under Dodd Frank, where previously we fell under an exemption,” explains Black of the motivation behind the implementation. “Part of that registration process is that you really have to retain a number of categories of correspondence with your investors. Registered advisors, therefore, generally retain all of their emails, so that was the first step.”
The rollout of the private cloud-based solution was therefore aimed at capturing both Bloomberg email and Hudson Bay Capital’s own corporate electronic communications. “In terms of looking at vendors, we decided we did not want to store anything internally because that would be very burdensome. As the chief compliance officer, the primary internal and external communications that I am concerned with are those sent to and from the trading desk and traders primarily communicate through Bloomberg. It was therefore obvious that we needed a service that was effective at capturing Bloomberg information,” he elaborates.
There were a number of providers out there on the market that Hudson Bay Capital examined during the initial reach out process, but Black indicates that he felt most comfortable with Bloomberg because the vendor has the best handle on its own email product. “On the corporate email side of things, I was happy with the search methodology, which was seamless with the Bloomberg Mail search function,” he continues. “Compliance officers also need to monitor emails, so you then get into what is the most effective way to do that? One way is to set up customised searches and Bloomberg has set up such pre-programmed searches that make this an easy and efficient process.”
Black himself has a fairly good handle on the regulator’s priorities, having served behind enemy lines for a number of years. “I was the senior manager at the SEC’s New York regional office for six years and led some of the investigations into various entities, including hedge funds. As a result, I have a sense of the regulator’s mentality in these investigations and how they view email, which is seen as essential to these investigations,” he explains. Data quality and audit trail have certainly been highlighted as priorities over the last couple of years with regards to market monitoring activities.
Harald Collet, global business manager of Bloomberg Vault, reckons the solution is therefore in keeping with “mega trends” such as these in the market that are affecting the vendor’s client base. “First, they are seeing an increasing number of regulatory requirements related to all of this data, including the impact of Dodd Frank. Second, we are also seeing a whole set of legal requirements and litigation that has focused on electronic discovery and it has been increasingly important to retrieve this information quickly. It has dramatically impacted how companies are looking at how they electronically store information,” he contends.
“Third, what is happening at the same time is that there is more and more information shared and stored within email, instant messaging, files shares, and other applications. So, a lot of corporate systems are groaning under the weight of all of this data,” he continues. This spurred Bloomberg on to develop the solution, which was formally launched last year.
“In 2009 we conducted a comprehensive beta programme, and then we went into full production in 2010 with the Bloomberg Vault service. We have had more than 240 clients adopt the service in the interim, which speaks to the market need and to Bloomberg’s position as a trusted service provider,” he says.
Collet sees it as a natural extension to the vendor’s services being provided as part of the Bloomberg Professional service, which has been archiving its clients’ Bloomberg data since 1997. Currently, the vendor has more than 55 billion messages in its archive and this is continuing to grow at a fast rate: Bloomberg archives up to 200 million messages per day.
Obviously, Bloomberg’s position as one of the main data providers to the financial services industry has granted it a significant advantage over the competition out there in the data archiving space. “There are competitive options out there but the unique thing about Bloomberg is that we run the dominant messaging platform in the financial services industry, and so in terms of storing the Bloomberg messages; we are really not competing with anyone,” says Collet. This position is certainly supported by Hudson Bay Capital’s reasoning around its selection of the Bloomberg Vault solution.
On this note, Black says: “As a Bloomberg Message user we already had functionality to search Bloomberg mail and by switching over to Bloomberg Vault we added in our corporate email search functionality seamlessly.”
Collet notes that one of the benefits of cloud-based archiving for messaging is that you can do some simple configurations to take a copy of all of your communications and stores it in the hosted service. “Typically we can have customers fully up and running in a matter of days,” he says.
As for the metrics of success, Black highlights the cost saving opportunities as a big driver for his firm. “When retrieving information to meet regulatory requirements or for litigation related requests, if you don’t have a good internal system, you often have to bring an outside vendor in to search through the data. This can be a very expensive and time consuming process. Before we implemented Bloomberg, we did not use a formal system to store all of the data and, therefore, we have seen cost savings in this manner,” he elaborates.
“Customers typically see savings resulting from lower software licensing, hardware and storage, IT labour, data centre and consulting for integration costs,” adds Collet.
As for the future, Bloomberg is keeping a close eye on the social media sphere, although Collet will not be pushed into revealing when functionality related to archiving of this data will be made available. “We are carefully looking to address the developments in the social media area – a logical extension for Bloomberg Vault, where we already support mobile technology communications and a wide range of instant messages. It is therefore logical to extend beyond that further down the line,” he says. “Our strategy is to assist our clients with their enterprise archiving and compliance requirements, whatever they may be.
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