News and Media

This Bloomberg article should be a wake-up call if you’re still using Private Messaging to negotiate your trades.

If ‘going digital’ to you means replacing face-to-face meetings and ‘phone calls with private messaging applications like WhatsApp, then you should probably think again. The transition to private messaging apps has been widely embraced by a trading community used to negotiate product deals individually on a one-to-one basis. They are arguably quicker than the equivalent phone calls and are encoded, making them secure, but that’s where the advantages end.

Trading this way is intrinsically inefficient, both from the time it takes to negotiate deals shuttling backwards and forwards between potential trading partners, but also because it restricts the number of potential partners you are exposing the trade to, and without that market transparency, there is no way of actually knowing if optimum price discovery has been achieved, or visibility of market data with which to plan better future strategies.

But almost more important than these innate inefficiencies is the fact that trading this way exposes you to significant risk from a lack of an auditable trail. Private messages cannot be monitored by employers and are often not archived correctly, making compliance incredibly difficult. The consequences of non-compliance for individual firms can be huge; for example, in the US financial services industry, $2 billion worth of fines are expected to be issued to banks by the Securities and Exchange Commission in 2022 in response to poor record keeping of communications on private messaging apps.