NEW YORK May 22 An industry-funded watchdog is beefing up its aging technology as it takes on broader oversight of U.S. stock trading and seeks to manage both a new surveillance program and data-collection system that will usher in an era of big data on Wall Street.
The Financial Industry Regulatory Authority is preparing to build the initial phases of a mammoth broker data-collection system in 2015 known as the Comprehensive Automated Risk Data System, or CARDS, pending approval from the U.S. Securities and Exchange Commission.
FINRA also is one of 10 bidders to run the consolidated audit trail, or CAT, an industry-wide order-tracking system that will replace an existing FINRA system. The SEC ordered the CAT after it took months for regulators to reconstruct trading during the "flash crash" in May 2010.
The number of people employed by FINRA in technology has grown to about 1,100 from several hundred a few years ago as the regulator won surveillance responsibilities away from the stock exchanges and related efforts, said Steven Randich, chief information officer at the agency.
The jump in FINRA's technology staffing comes after major glitches that roiled trading on Wall Street, including the bungled Facebook IPO and the sale of brokerage Knight Capital after a trading loss of more than $460 million - both in 2012 - and a three-hour trading halt on Nasdaq last year.
FINRA was not to blame for the incidents, but they put technology front and center on Wall Street. The CAT is likely to be the second-biggest data center after the National Security Agency.
Chairman and Chief Executive Officer Richard Ketchum said FINRA has increased its technology staff the past three to four years, both through new hires and converting contractors to full-time employees.
"We have completely overhauled our technology side," he told reporters on Tuesday at FINRA's annual conference in Washington.
FINRA has been overhauling its tech team by aggressively hiring people with expertise in cloud computing and managing systems that store and process massive amounts of data, he said.
Ketchum pointed to the hiring a year ago of Randich, who formerly worked at Citigroup Inc and Nasdaq OMX Group.
Randich acknowledged on Wednesday that FINRA's technology has not been ideal. Technology was outsourced in the past, which did not allow FINRA to control and manage it well, he said.
"It was a bad idea, and we suffered the consequences, which is why we brought it in," Randich said on the sidelines of an Inside Market Data conference in New York.
Randich said the scale and capacity of FINRA's existing technology was constrained. It was also hampered because the regulator interacted with securities firms as silos, or isolated cases, which Randich expects to change.
"I'm trying to consolidate all of that, so that the firms are dealing with FINRA in a much more automated (way), less paper, less forms and more automatic transmissions," he said. (Reporting by Herbert Lash and Suzanne Barlyn; Editing by Jan Paschal)