What we do · Audit defense
The audit letter is on the desk.
Answer it from evidence.
Exchange and vendor audits are rising in frequency, scope, and lookback, and several counterparties now audit from both directions at once. Paraxis has defended 40+ exchange and vendor audits in the last decade: readiness before the letter, a controlled response after it, and a settlement built on the entitlement record.
The enforcement climate
Why the letters keep coming.
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Enforcement is a revenue line
Market data vendor, stock exchange, and index audit activity jumped an estimated 40% in 2025. Audits are no longer an occasional compliance exercise; they are a monetized program with dedicated staff, third-party audit firms, and recovery targets.
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Audits come from two directions
Exchanges enforce market data policies (NYSE, Nasdaq, Cboe, CME, ICE) and vendors enforce license terms (Bloomberg, LSEG, S&P, MSCI, FactSet). Several names sit in both columns: ICE and LSEG run exchanges and sell data, and they audit on both fronts, sometimes in the same year.
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The lookback reaches back further than your records
Five-plus-year lookbacks are now standard. The evidence that decides the finding is historical: who was entitled to what, on which system, under which contract version. Firms that cannot produce that record inherit the auditor’s assumptions, and the auditor does not assume in your favor.
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The AI dimension
Unlicensed data powering AI tools is the newest discovery target. Inference workloads, agent tools, and machine-consumer distribution open licensing categories most contracts never contemplated. Vendors are deploying AI to detect unlicensed use; the defense file has to answer for machines as well as people.
The methodology
Four phases. Before, during, and after the letter.
- 01
Pre-audit readiness
The cheapest audit is the one you are ready for before the letter arrives. We build the entitlement inventory, reconcile it against actual usage, and surface discrepancies before a vendor auditor finds them.
- Complete entitlement inventory at user, terminal, and API level
- Usage reconciliation against contract terms and declared counts
- Discrepancy detection and remediation ahead of vendor contact
- AI use-case exposure (inference, agent tools, machine-consumer distribution) surfaced ahead of vendor discovery
- Standing audit-defense file maintained as a current artifact, not a fire drill
- 02
Audit response management
When the letter lands, we run the response. One point of contact, a controlled information flow, and a timeline the firm sets rather than accepts. Nothing leaves the building unreviewed.
- Scope challenge: the audit covers what the contract says it covers
- Single controlled channel for auditor requests and responses
- Data-production review before anything is handed over
- Timeline management that protects the operating calendar
- 03
Defense and counter-claim
Findings are positions, not verdicts. We answer them with entitlement evidence, usage data, and contract language, and we bring the counter-claims most firms never realize they hold.
- Finding-by-finding rebuttal built on the entitlement record
- Contract language read against the claim, including audit, redistribution, and assignment clauses
- Counter-claim analysis: over-billing, service failures, and mischarged categories
- Settlement negotiation, including folding legacy disputes into the next renewal
- 04
Prevention
The finding you settle twice was never defended, only postponed. We remediate the root cause, stand up the controls, and hand back a file that makes the next audit start from evidence.
- Root-cause remediation of the practices behind the findings
- Policy and procedure development for ongoing compliance
- Monitoring cadence so drift is caught internally first
- Documentation that survives staff turnover
What the work produces
The record decides the outcome.
- 40+
Audits defended
Exchange and vendor audits defended in the last decade, across both sides of the enforcement table.
- Contained
Liability exposure
Findings answered from the entitlement record and settled as commercial negotiations, not assessed penalties.
- Standing
Defense file
An audit-defense file maintained as a current artifact. The next letter is answered from evidence on hand, not a six-week scramble.
- Fewer
Repeat findings
Root causes remediated and controls documented, so the same finding does not fund the auditor twice.
Who holds the letter
Three seats feel an audit. We work for all three.
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Head of Market Data / Operations
Runs the response. Owns the entitlement systems, the usage data, and the vendor relationship that has to survive the audit. We supply the evidence structure, the vendor playbook, and the second chair.
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Head of Compliance / CRO
Owns the audit risk itself: the exposure number, the regulatory adjacency, and the board question that follows both. We give the risk owner a defensible file and a documented process, so the answer to “how bad is it” is a number with evidence behind it.
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CFO / Head of Finance
Funds whatever the audit concludes. A defended audit is the difference between a negotiated commercial outcome and an assessed one. We keep the CFO briefed in settlement terms, not entitlement jargon.