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(Repeats story first published on April 16, text unchanged)
* "Traderspeak" incomprehensible to most people
* Firms developing software to detect dubious activity
* Programme can scan billions of communications
By Jamie McGeever
LONDON, April 16 (Reuters) - "What's your interest in Billand Ben in the pick?"
While most people wouldn't understand the question, this iscommon vernacular for London currency traders active in thedaily 4 o'clock "fixing" of global reference exchange rates.
A basic translation of that particular line of Cockneyrhyming slang, originating in London's working class East End,would run something like: "Are you a buyer or a seller ofdollar/yen at the daily benchmark rate-setting fix?"
The wisecracking, rhyme-based language that can make a"whistle" mean a suit (from "whistle and flute") or a "Barnet"mean hair (from "Barnet Fair") has been used by traders in theCity of London for decades. But can a computer crack the code?
Financial regulators are now trying to translate suchexchanges into plain English as they investigate whether dealershave colluded to rig benchmark foreign exchange rates used toprice trillions of dollars' worth of deals.
Britain's financial watchdog, the Financial ConductAuthority (FCA), has 50-60 staff dedicated to the foreignexchange investigation, some of whom are former marketparticipants who are helping to decode the traderspeak.
Banks now want to go one step further, and are looking atacquiring "Big Brother" technology that can spot and preventinappropriate communication or fraudulent activity rather thanpiecing together evidence afterwards.
"There is a huge market for this right now," said Sang Lee,founding partner at Aite Group, an independent research andadvisory firm focused on business, technology and regulatoryissues in Boston.
Lee said the focus is on software that can monitor andunderstand the language traders speak in their electronic chats,instant messaging and emails, and alert the bank to potentiallyinappropriate communications or nefarious activity.
"For at least 12 months now, this has been one of the majorfocus areas for both market participants and the technologycompanies," he said.
Traders at banks and other financial institutions oftencommunicate with each other via third-party chatrooms includingthose offered by Bloomberg LP and Thomson Reuters Corp., parent of the Reuters news agency.
The world's biggest banks, Britain's FCA, the Bank ofEngland and the U.S. Department of Justice are among thosetrawling through countless chatroom transcripts for evidence ofquestionable activity as part of a global investigation into themarket.
Online communications featured prominently in a separatefive-year inquiry into manipulation of an interest rate known asthe London interbank offered rate, or Libor. So far 10 banks andbrokerages have been fined a total of $6 billion in penalties,and charges have been brought against 13 individuals.
RELATIONSHIP FORENSICS
One of the technology companies that has gained from banks'increased vigilance is Digital Reasoning, based outsideNashville in the U.S. state of Tennessee.
Digital Reasoning's software can scan up to billions ofcommunications from thousands of traders, spotting languagepatterns and raising a red flag to potentially dubious activity.
Rob Metcalf, the company's president and chief operatingofficer, told Reuters there has been a sharp increase ininterest for this software from banks over the last six months,just as the global investigation has taken off.
"The big banks will drive this, and regulators areinterested too. It will be a 'base-line' capability across majorbanks in two years," he said.
Metcalf says his firm is in "active conversation" with 10-20of the world's leading financial institutions, particularly U.S.and European firms.
Reuters contacted UBS, Deutsche Bank AG, Credit Suisse AG, JP Morgan,Citigroup, Royal Bank of Scotland and Barclays to see whether they were buying such technology. Noneof the banks commented for this report.
Banks have been active in moving towards more sophisticatedanalytics across all forms of electronic communications over thelast year, said Michael O'Brien, head of sales for SMARTS Brokermarket surveillance platform, part of NASDAQ OMX.
One area they are looking at is "relationship forensics",tracking traders' communications with each other to spotpatterns that point to a close working relationship. These couldinclude behaviour such as always copying a particular person onemails, or if someone always responds to a message or emailwithin a couple of minutes.
That's because any dubious activity between two or morepeople is bound to be carried out by those who have a closerelationship with each other, O'Brien said.
O'Brien estimates that 10-20 percent of a big investmentbank's compliance operation is geared towards trading analysisand the detection of - and protection against - market abuse andtrading related risk.
Banks are looking for software that is able not only todetect language patterns in traders' electronic communications,but to match that up with patterns detected across other media,such as social media profiles, Aite Group's Lee said.
"It's a huge challenge," said Lee, noting that the $5.3trillion a day over-the-counter currency market operates 24hours a day across all time zones and remains virtuallyunregulated.
Thomson Reuters runs one of the two dominant global currencytrading platforms, along with ICAP Plc-owned EBS.
So far, more than 30 traders at many of the world's biggestbanks have been placed on leave, suspended or fired as theglobal investigation has gathered momentum over the last sixmonths. Even the Bank of England has suspended an employee.
No individual or institution has been accused of anywrongdoing. (Editing by Carmel Crimmins and David Stamp)
