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Bloomberg Boosts Messaging Oversight as Change Looms

Updated from 10:36 a.m. ET to include Markit comment and additional information throughout.

NEW YORK (TheStreet) -- Bloomberg said on Tuesday it will centralize compliance tools for its Instant Bloomberg messaging feature in an effort to give the company's banking and asset management customers greater control over the communications their employees make on the popular terminal.

Bloomberg's move comes as regulators around the world investigate large banks for potential manipulation in the setting of short-term interest rates and for potential collusion in foreign exchange markets. Instant messages, a popular means to negotiate prices and execute trades in credit, interest rate and foreign exchange markets, have been at the heart of recent regulatory probes.

Regulators have focused on communications in the context of the London Interbank Offered Rate (LIBOR), and on group chat rooms where traders negotiate foreign exchange prices. In LIBOR probes, investigations have found that some interest rate traders used instant messages to unduly influence the rates their bank would disclose as their short-term borrowing cost. Those communications appear to have allowed some firms to unduly influence the setting of LIBOR, to the benefit of their trading books.

Separately, regulators are investigating FX markets for potential price manipulation by traders in group chat rooms. Some banks such as UBS (UBS) are reported to have prohibited traders from communicating in group chat rooms. Others like Deutsche Bank (DB) and JPMorgan (JPM - Get Report) are reported to be considering similar action, or dispatching senior staff to approve employee participation in group chats.

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Recent quarterly filings show that many of the largest banks in the U.S. are cooperating on LIBOR and FX market probes.

Bloomberg's effort, known as the Bloomberg Compliance Center, is aimed at giving banks greater control and audit ability over traders' instant message and email communications.

The new features will give compliance staff the ability to monitor their employee communications on Bloomberg terminals in real time. It also will create so-called "exception reporting" that will give compliance departments the ability block some communications altogether through keyword restrictions and other parameters.

Presumably, that could give banks a greater ability to enforce Chinese walls internally and with counterparts, while pre-emptively preventing some communications that would raise flags with regulators and law enforcement. Many of the features appear to reinforce compliance functionality already present on the terminal.

The compliance center will also generate chat room participation reports for firms and allow them the ability to search, store and download communications employees make on the Bloomberg terminal for up to five years.

Bloomberg's press release today indicated customers had asked for increased oversight of employee communications on the terminal, which is a stalwart on most large trading desks.

"Recently, there has been discussion around the use of chat rooms, and our clients have expressed interest in more precise and reliable communication-related compliance tools," the company said. "While market participants rely on the security, stability and consistency of the Instant Bloomberg chat service to view securities, share information and engage in trade negotiations, compliance officers want a better way to manage these communications," the firm added.

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