Don't Want To Get On Compliance's Watch List? Consider Not Going On Endlessly About How Ravenous You Are Or How They're Expecting You At Chipotle; One "God Damn It I'm Starving" Or "Need Burrito In Mouth, Stat" Should Suffice


Too much talk of your "lunch date with a vat of guac" will come back to haunt you. firms are tapping a cottage industry of software companies that use complex algorithms to monitor traders' calls and emails—looking for catchphrases as well as changes in tone—to try to detect signs that traders may be colluding or placing unauthorized bets. The hot list of phrases ranges from the obvious to the obscure: "nuclear waste" and "take it offline" are potential red flags, according to Chase Information Technology Services Ltd., a small British technology company. But so, too, are any repeated phrases that have nothing to do with the job. In other words, traders better have a good reason for mentioning their lunch plans more than once. "End of the world" could, too, as could "on ice." Chase IT says its software can search for unusual phrases and help detect when staff are having affairs. The software, called Intelligent Voice, also measures levels of stress in traders' voices, which can be cross-checked with their electronic messenger traffic for any wrongdoing. The software even accounts for cultural ambiguities. For instance, Britons tend to interrupt their colleagues in midconversation only when they are highly stressed, says Nigel Cannings, technical director at Chase IT. This "isn't so much the case with Italians," he adds...

To develop its voice-analyzing algorithm, Chase IT used 100,000 hours of trading conversations and instant-messenger transcripts. Once installed in a bank, the algorithm develops a voice fingerprint of any person calling in to or out of the trading floor. It also turns the voice into text and scans for code words by looking for unusual word combinations. Besides repetition of phrases with no obvious connection to the job, other signs of misconduct could be a trader unexpectedly speaking in a foreign language. This information is presented to compliance officers in the form of diagrams showing who is talking to whom and graphs that show stress levels across the trading floor. Alerts can be emailed or the charts refreshed on a daily basis.

Banks Listen In To Trader Talk [wSJ]


The Feds Are Struggling To Understand Why Mathew Martoma Won't Just Turn On Steve Cohen Already, God Damn It

"We have been remarkably successful in convincing persons to cooperate with the government, and provide evidence to us, and in court of law," SEC director of enforcement Robert Khuzami said during a press conference the day the government went public with its charges of insider trading against former SAC Capital employee Mathew Martoma. To the untrained ear, Khuzami probably appeared to be speaking to no one in particular, just sending a general message to any would-be criminals out there that once the government got to their co-conspirators, it'd be all over. No one wants to do time, and everybody flips. To those who've been following Operations Perfect Hedge, though, and have watched the Feds' relentless pursuit of Steven A. Cohen,  it was obvious they were sending a clear message to the Big Guy: "We got ya boy, and ya goin' down." And since its track record of getting people to turn on their colleagues and in some cases, their best friends (see: Noah Freeman/Donald Longueuil, and these guys, and these guys, and this guy) really has been "remarkably successful," and since Martoma has a wife and two young kids and his whole life ahead of him, Khuzami and Co. probably assumed they had this one in the bag. But not so.