Europe Tackles Trade Risk08.26.2011
With MiFID II and the Markets Abuse Directive review in the pipeline, and following the European Securities and Markets Authority’s recent consultation paper calling for further regulation around pre- and post-trade risk, market surveillance is high on the market’s agenda.
“The current MiFID regulation has led to a large number of new trading strategies entering the marketplace,” Justin Amos, CEO at Redkite Financial Markets, told Markets Media. “This has meant that more comprehensive measures need to be put in place to check the disparate types of trading flow.”
To a large degree, ESMA is coordinating its efforts with the EC in regards to pre- and post-trade risk, market abuse monitoring and market surveillance.
“The recent consultation paper is a classic example of ESMA coordinating efforts around market surveillance and market abuse detection,” said Amos. “In this, it looks at the necessity to monitor, in real-time, trading activity to detect market abuse.”
Technology can help firms to ensure that trading systems or algorithms is compatible with the firm’s obligations under MiFID as well as national laws.
“As the markets become more technical in their execution capabilities, the more surveillance technology needs to evolve,” Amos said. “Market participants all need to make sure they have the appropriate solutions in place, including connectivity, market data and intelligent, adaptive surveillance that evolve with the changing trading landscape and ensure regulatory compliance.”
Redkite’s flagship product, Redeye, provides a customizable surveillance solution with a suite of agent alerts for the ultimate combination of flexibility and rapid time to market. “A recent large client chose Redkite’s hosted solution and was able to go live from after signing the contract in under seven weeks,” Amos said. “The solution enabled them to monitor in real-time their order flow, and also adapt the Abuse detection agent to suit their needs.”