Is your firm violating exchange audit trail regulations?

Blogs / by: Chris Haworth / February 04,2022

How certain are you that your company is compliant with CFTC and Exchange “Audit Trail Requirements”? Some firms would ascribe a fairly high degree of confidence. Our data shows this confidence is mis-placed.

BornTec’s analysis shows that utilizing typical industry practices, there will be missing, invalid or corrupted data much of the time. 

These audit trail regulations are primarily prescribed under CFTC 17 CFR § 1.35 and 38, CME 536.B.2, ICE Futures US 27.12A and others. Individual penalties can be significant.

BornTec’s audit trails module in Crosscheck expertly mitigates the core issues that managing audit trails poses for clearing members – retrieval/production of data, validation of data and verifying completeness.

Without Crosscheck, audit trail compliance is a manual and disorganized process:

  • Retrieval/production of data requires resources from the member to manually comb through numerous folders, files, and logs looking for the exact data the exchange requested. This was often a fool’s errand, as the requisite data was commonly  incomplete, or missing altogether. In most cases, it took weeks to gather the data, filter it, send it to the exchange, and then hope they do not issue a fine. In some cases, significant fines were issued for lack of a timely response.
  • Validation of data is generally limited to spot checks at best
  • Checking for completeness of data is usually limited to whether or not files exist. This is insufficient to ensure that the file data is complete or in the required format.

Crosscheck solves this problem by ensuring complete and validated data in an automated way.  The audit trail data is compiled in a normalized schema and is accessible for users to query via a GUI.  Exports can be made in the exchange requisite format.  Users are provided confidence in their audit trail data. What previously took weeks, can now be accomplished in minutes.  

Having actionable knowledge of your data ahead of an audit can go a long way in mitigating your firm’s reputational risk.