Global Compliance Survey 2024: More Regulation Leads to More Investment

Regulatory compliance in financial markets has been in the spotlight throughout the year as scrutiny across the world increases. The operational impacts are now coming into focus as entities across the capital markets spectrum adapt to this enhanced regulatory scope, shifting how organizations are structuring, maturing and investing in their compliance function.

To learn more about these dynamics and trends, Nasdaq surveyed 100+ buy-side, sell-side and market operators for its ninth annual Global Compliance Survey. The key takeaway is that regulatory growth is forcing companies to act by gaining new technology capabilities, investing in data staff and strengthening infrastructure.

Regulatory agenda drives compliance response

The global increase in regulatory scrutiny has tightened the focus on everything from manipulative activities to data controls and processes, with ever higher standards being imposed across the scope of financial markets and the operations of participants and financial market infrastructures.

Overall, 27% of respondents said increased regulatory scrutiny was the biggest driver of compliance process changes in the last 12 months. That share is higher when considering the past 24 months (39%) and demonstrates that regulatory reforms are still top of mind for financial institutions.

However, technology is quickly becoming as important a consideration for decision-makers and leaders. About a quarter of respondents said the influx of data sources was their biggest driver of the last 12 months, while slightly fewer (22%) cited the incorporation of new technologies for operational efficiency.

Looking ahead, while the same share of respondents (27%) foresees regulatory change as the biggest driver, 35% said emerging technologies would become the center of compliance changes. That’s a remarkable shift, given just 9% cited emerging technologies as the main driver of the last 12 months.

More budget to tackle risk management

These responses line up with what we learned over the entirety of the survey, which is that firms are increasingly looking at data science, AI and other technologies to make them more efficient and effective in the face of a shifting global regulatory landscape. What this ultimately means is that firms must strengthen their compliance programs through technology, hiring and resources – thus, more investment and budget.

More than 40% of respondents said their compliance program budgets saw an increase in the last 12 months. The expectation is for continued resources, with nearly half of respondents projecting a budget increase in the coming 12 months.

Where are respondents investing? Primary areas include surveillance technology, additional staff, communications monitoring and workflow optimization. At a deeper level, investment is being directed toward investigative and discovery tools, regulatory reporting tools, fraud detection and holistic integration.

One consistent theme is data and the ever-increasing capacity firms seek to source, organize, analyze and store. This echoes the impact of Big Data in the early 2010s, as financial firms structure their compliance functions to be more data centric.

Compliance hiring shifts toward data science

Hiring trends are also shifting in the wake of the focus on data science and emerging technologies. In the prior 24 months, firms had been largely focused on making executive-level hires to buttress and lead compliance programs. This may have helped compliance gain and retain its place at the table, with a strong majority of respondents either agreeing or strongly agreeing that compliance is an active and prominent stakeholder in the business.

Now, survey respondents are in the market for data science staff (13% of respondents actively looking to add) and technology staff (12%). This shift indicates a growing recognition among organizations of the critical role that advanced technology and sophisticated data analysis plays in strengthening modern compliance systems and controls.

Attracting, developing and retaining technologist talent will be critical to the future of the compliance function both in helping it overcome key challenges while also ushering in emerging technologies. For a third of respondents, understanding and implementing technology capabilities was their biggest compliance-related concern for the coming year. Another major challenge hiring could help address is false positives, where advanced data processing and AI can be used to improve the quality of alerts flagged up by automated systems.

Weaving a more secure financial fabric

The evolving compliance landscape underscores the critical role of technology in modern financial firms. As regulations become more intricate and data-centric, the ability to understand, implement, and leverage technological advancements is paramount for effective compliance. The survey reveals a notable shift in focus from traditional compliance concerns, such as reputation management, to more specific challenges like reducing false positives, managing vast data volumes, and ensuring robust cross-product surveillance.

As we look to the year ahead, technology will be sure to play a central role in expanding compliance capabilities and helping firms to scale through data tools, cloud enablement, granular controls and more. As a committed party to the safe, secure working of global markets, Nasdaq Financial Technology is helping participants and operators future-proof with leading surveillance and regulatory reporting solutions.

Download the survey to get the full insights and read more about Nasdaq Financial Technology here.