Trade Surveillance in Focus
Trade Surveillance Solutions Increasing in Levels of Configurability
- EU regulations are placing a greater burden of proof on financial firms to demonstrate control over their trading activity, creating new levels of demand for next-generation trade surveillance systems
- As a result, buyside and sellside trade surveillance systems must now be more adaptable in terms of flexibility and configurability
- Vendor providers are increasingly moving towards the use of hosted – or cloud-based – trade surveillance systems.
LONDON – 05 June 2017 – GreySpark Partners, a leading global capital markets consulting firm, has published a new report comparing and contrasting a series of functional capabilities offered by leading providers of trade surveillance systems. The report – Buyer’s Guide: Trade Surveillance Systems – analyses the ways in which technology vendors are responding to regulations-driven user demand for greater degrees of configurable alerting and the flexibility to analyse ever-larger data sets via a hosted or cloud-based platform.
The implementation of the EU’s revised Market Abuse Regulation combined with the bloc’s Directive on Criminal Sanctions for Market Abuse, which are both collectively known as MAD II, in the latter half of 2016, meant that there is now a renewed focus on the internal monitoring of trades by financial institutions to identify and investigate potential trading rule violations.
In assessing the functionality of the trade surveillance systems surveyed in this buyer’s guide, GreySpark observes that the current trend among vendors is to increase the configurability of their alerting and the customisation of the user interface. There is a growing trend for solutions to be hosted by a vendor rather than deployed on-premises, such that financial firms are afforded all the advantages of cloud technology – including enhanced scalability, performance, reliability and disaster recovery capabilities.
The report presents a review of the capabilities of six third-party technology vendor products – including those of eflow, Fidessa, First Derivatives, LiquidMetrix, OneMarketData and Sybenetix.
Rachel Lindstrom, GreySpark senior consultant, said: “In-house developed systems are not able to take advantage of the specialised expertise of third-party vendors or automatically rely on the certainty that the system is updated to take account of periodic regulatory and technological evolutions.”
Steven Johnston, GreySpark managing consultant, said: “To detect and identify trading rule violations within trading strategies that involve trades in multiple trading venues, financial institutions must employ trade surveillance technology that can provide such analysis and deliver a single unified view of this landscape.”
Exec notes growing interest in cross-market and cross-product surveillance.
A dynamic, proactive approach is needed to continuously improve surveillance.
Some material changes have come out of ESMA’s review of algorithmic trading.
Technology has enhanced capabilities of surveilling larger and more disparate data sets.
There are weaknesses in the surveillance of market abuse in wholesale commodity and energy market trading.