What if: Capital Markets in the 2021 era of the Coronapocalypse

This is a humoristic feature, for a more informative piece on how to best prepare for the monitoring crisis, read this post by Eran. Given the unexpected volatility and ripple effect on the world markets as a result of this pandemic, it spurred us to consider what life might be like one year from now in the era of the ‘Coronapocalypse’. We predict that there will be challenges with surveilling and reporting market abuse when everyone is working from home beyond the confines of regulated and supervised communication channels. What will happen when the government is distracted with its focus on the health of its people – and is no longer paying close attention to monitoring instances of market fraud?

The Coronapocalypse may be the subject of an overly active imagination. Parts of the scenario are certainly exaggerated, whereas others reflect a potential reality.

A new world order

It’s Spring 2021. We are in the era of the Coronapocalypse. Governments are no longer reporting on the number of new cases of COVID-19 or resulting deaths in a destined-to-fail attempt to quell anxiety.

The markets have been in turmoil for the past year. Market volatility has been both unpredictable and unprecedented. Armed guards surround hand sanitizer and bleach manufacturing and packaging facilities 24/7. Numerous attempts have been made on the lives of the executives, owners, and purveyors of these critical supplies. Cafés and market squares, once-bustling centers for commerce, are now silent, standing as abandoned markers of a life that once was. Food and sanitary supplies are rationed, delivered to only those who can afford to pay the ransom rates affixed to the precious goods.

There is a new world order. People are trading gold for Purell, Clorox wipes and toilet paper. In the streets, gangs clash with the National Guard as rivals battle to control new territories. Gang mentality, reminiscent of the mafia manipulation and control witnessed a century ago, has emerged as the new normal.

Trading is wounded

Market analysts, like everyone else, are working from home. The financial institutions that once greeted throngs of people in suits with briefcases are now mothballed vestiges of a timeless industry that has morphed into one with a questionable future. As COVID-19 rages on, with a new form, COVID-20, recently detected in New York City, the apocalyptic fallout from Coronavirus has sidelined critical government resources and practices, shifting them away from monitoring market abuse to protecting public safety.

World trade continues, but it is fractured and limping. Secondary markets, including stock exchanges like the London Stock Exchange, New York Stock Exchange, and Nasdaq now only trade two days per week. Trade volumes are significantly down; investors are tightly clenching the shares and bonds that they own, devalued though they are. And the transactions that are posting are no longer subject to the same levels of scrutiny and market abuse surveillance that they once were, even six months ago.

Electronic communications have crippled existing infrastructure

The volume of eComms has exceeded the capacity of the existing global infrastructure. A year ago, 2.5 billion emails were sent each second, worldwide, totaling 75 trillion annually. Prior to the unwelcome appearance of Coronavirus, aka COVID-19, SMS texts hovered around 250 thousand per second and 7 trillion per year. Once the world topped 5 billion emails and 500 thousand SMS texts per second, existing telecoms infrastructure became maxed out.

With lines maxed out, corporate VPNs no longer supported, brokers are no longer communicating on controlled and secure lines. Many market surveillance systems, designed to operate within the confines of the financial institutions that once lorded over the threat of illegal transactions, have become inoperable. Some policies are no longer enforceable, neutered by the migration of trade activity from controlled channels to unmonitored, private residential channels. Trades are now routinely being conducted on the dark web and through personal eComms channels like WhatsApp and the newcomer, ShhhApp. The latter debuted towards the end of 2020, offering full anonymity to all who exchange messages on the illicit platform.

New eComms platforms escape existing surveillance schemas

Burner phones are no longer available as a commodity like they once were. Today, ShhhApp offers its users the temporal magic of Snapchat combined with the secrecy and untraceability of a burner phone. Account numbers are scrubbed the moment they are created. Market abuse can happen without consequence. How do you police something you can’t trace?

Coordinated efforts to design new or update existing monitoring surveillance software are not possible in the Coronapocalypse. Survival itself is at stake – government law and order are so stretched that illicit trades, insider trading, spoofing, layering and other forms of market abuse are no longer a national priority. Without the ability to monitor e-Comms, world trade regulators cannot police the misconduct of the bad actors who are spurred to take advantage of the situation during these dark times.

Where do we go from here?

Refocusing now on today’s reality, financial institutions will be sharply challenged in the months ahead. The markets may continue to be volatile for some time, employees will become ill and shift from working in the office to working from home. Those who are healthy might encounter personal and economical struggles that might cause them to consider acts that they might not have considered before the crisis. Employees will now be moving away from monitored channels and start to communicate with employees on less monitored channels, managing eComms on insecure channels and trying to enforce policies never intended for application beyond the designed reach of corporate surveillance systems will confer added pressure to a system already teeter-tottering precariously on the edge. Brokerage houses, government entities, and even telecommunication providers may wish to begin considering provisioning for operations in a world where trades are no longer conducted from within the walls of regulated spaces and where all ranks of the organization are considered a risk. Increasingly, the world will need in-place systems and new ways of monitoring for possible market abuse scenarios enabled by the proliferation of eComms channels and migration of work from the bank or office into the home.

While we can’t predict the future, nor do we root for an apocalyptic era of trade, we can and are planning for it. Rest assured; our experts are designing future-proof strategies to ensure that your investment today in our eComms surveillance is one of the most robust solutions currently available on the market.

Stay safe. Wash your hands. Cover your mouth. Be kind to your neighbors. And may this scourge upon our planet today end swiftly so that the era of the Coronapocalypse never comes to pass.