Algo Trading Controls and Governance – Working Group Q3 22.9.2022 Minutes

Objective:  The Algorithmic Trading Controls Working Group is holding three sessions to discuss various aspects of algorithmic trading. The outcome will be the delivery of a whitepaper in the early part of 2023. These are the minutes for the second of the three sessions. 

Assessing Time and Cost of RSCA 

  • There are implications of where the funding is drawn to conduct the Risk Controls Self Assessment (RCSA). If drawn from the change-the-bank (CTB) budget, the implication is that RCSA is seen as a project. However, if it is drawn from the run-the-bank (RTB) budget, then it is seen as an operational exercise with a baked in cost. 
  • All banks who commented on this point said that the funding for conducting the RSCA came from a RTB budget. 
  • One bank is transitioning the ownership of the tooling to conduct RCSA from the first line of defence to the second line. 
  • The RSCA process can take as much as six months so that each of the areas can contribute their respective parts of the process. 

Frequency of the RCSA 

  • The frequency of undertaking the RCSA is always annual with several of the banks also undertaking the assessment on a quarterly basis. 
  • For those that do the assessment quarterly, the Q4 assessment is a ‘deep dive’ that uses the quarterly assessment as a baseline to assess any changes. 
  • Quarterly assessments help banks address any identified issues more dynamically. 
  • One bank commented that it has built an application for the RSCA application, specifically. The application is deliberately easy to use to encourage more buy-in and ownership from the business and ensure they complete the process. 
  • The Q4 assessment is the material RCSA that is submitted to regulators. The first line and business controls group populate the RCSA. Any material risk is reported to the business head to ensure consistency. 

Extracting Business Value From RSCA 

  • In the past, self-assessments were seen as tick-in-the-box exercises, and one bank commented that it still is. 
  • Rather than extracting business value from a new process, one bank commented that it is leveraging existing processes to incorporate RCSA requirements. 
  • Echoing this point, another bank commented that financial, regulatory and operational risk are all already embedded within its risk assessments. 
  • There is a crossover in the demands of the annual RTS 6 self-assessment and the RSCA. So, some factors gathered on an ongoing basis for the RTS 6 self-assessment can feed into the RCSA. 
  • Most banks will have their RCSA process, but when it comes to specifically to Algo Trading an adjustment to this process may be needed because the way risks are assessed may be different to risk assessment of other types of trading. 

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