Type to search

Articles Archive

Regtech Q&A

Mark Davies is Co-Founder and CEO of S3, a compliance and trade analytics software company. 

Mark Davies, S3

What has it been like leading S3 through COVID-19?

As a software company, it has actually been fairly easy for us. Everybody’s on a VPN [Virtual Private Network] all the time anyway. Obviously we miss the personal interaction, but from a development standpoint, it has been very successful.

On the sales and customer service side, we had expected to see a bit of a slowdown, but we’ve actually had a substantial increase in customer inquiries. This probably has to do with the fact that customers are online more, just as we are. Many people in the New York area, for example, who had an hour or two-hour commute, are working and focused. And there is also a reduction in meetings and other office distractions.

Are you planning a return to the office anytime soon?

No. Not yet.

I don’t know how high the risk is for our employees, or any one employee. But certainly, by putting us all back together in a physical room, if one person gets COVID then it would likely be transmitted. So the idea of going into closed quarters seems like it’s an unnecessary risk right now, accompanied by a not-necessarily-substantial benefit. We’re not manufacturing widgets, we’re a software company; the risk of going back to the office is there, but the benefit doesn’t seem to be there. So we’ll see what the future holds.

What is the latest in S3’s product development?

We are developing a new industry service offering called All-in-One Compliance Solutions.

There are a number of different vendors in the marketplace, offering a number of different compliance solutions around surveillance, best execution, CAT reporting, etc. We got our start in best execution in the Rule 606 phase, where there were several other similar niche players.  And because we have experience dealing with large datasets, we recognize that many of these products and solutions can be integrated into a unified package, to reduce cost and complexity while maintaining quality.

S3 has become known as the premier solution in the industry. We are the best solution out there for a number of different products. We’re not always cheapest, but we are consistently the best. And for clients who are looking for the premier compliance solution where problems are addressed and everything is handled by a single vendor, our solution is appealing.

What’s the latest on SEC Rule 606?

So last week [week of July 27] we hit two major deadlines. The first was the Q2 606(a), which we had a lot of questions about after Q1 606(a). Those questions were answered with the release of Q2 606(a). Then there was also the deadline for the 606(b)(3) look-through piece, which went live as a ‘soft live’. Unlike the 606(a), which is published online, 606(b)(3) is an on-demand report. It was the deadline for delivering those, and since last week we’ve seen an uptick in requests for those 606(b)(3)s.

We’ve been pleased to see that the buy side has started asking for those reports so that they can then support their clients. And I think we’re going to see more demand for those 606(b) reports over the next few months, and with that we’ll have new questions and new information coming from buy-side firms who are trying to understand them. It’s good to see that’s coming to fruition.

What else is coming up that’s important, say for the rest of this year and into 2021?

We’re working on a few things at S3 that we’re going to be launching soon. One is the 606(a) analysis tool, which basically allows for firms to compare their 606s, really to compare all of the industry’s 606(a). This is so they can start putting together patterns and identifying where overflow is going, how much firms are paying for order flow, what firms are receiving what flow, etc. It’s a complete analysis that really provides a complete understanding of what’s going on there, which is the intent of the rule in the first place.

The other big piece that we’re coming out with, is the launch of our after-hours, pre-market hours or extended hours best execution product. This basically allows firms to make sure that they are complying with their best execution obligation during the extended periods, where there have been a couple of high-profile fines and notifications. So our clients will soon be able to be compliant with their best ex obligations in after-hours or pre-market trading.

HEADER PHOTO CREDIT: Alpha Stock Images – http://alphastockimages.com/