Regulatory requirements are shifting trade surveillance into the front office and sellside firms are investing in supervision projects according to Valerie Bannert-Thurner, global head of sales, risk and surveillance solutions at Nasdaq.
Michael O’Brien, head of product management of Smarts trade Surveillance at Nasdaq, said at a briefing: “There has been a revolution in market surveillance which has shifted from exchanges and regulators to market participants.”
Broker-dealers are benchmarking normal trading patterns for individual stocks or traders. “Our surveillance technology can highlight unusual trading patterns in real-time to broker-dealers either for their own traders or for their clients who use them for direct market access,” added O’Brien.
Bannert-Thurner said at the briefing: “Surveillance is moving from being the responsibility of the head of compliance to the head of trading. It has not previously been at the forefront but half of the firms we speak are working on some kind of front office supervision project.”
Bloomberg reported this month that JP Morgan is testing a surveillance program in the trading business.
Trading surveillance used to be focussed on monitoring equities in lit venues but the MiFID II regulations in Europe is extending coverage to other asset classes as fixed income and foreign exchange, over-the-counter markets, dark pools and internalised flows and requiring cross-asset surveillance.
Nasdaq’s Smarts surveillance technology, which is used by regulators, exchanges and buyside and sellside firms, is also being developed to include more unstructured data such as social media and electronic communications and new currencies such as Bitcoin.
“We are partnering firms in the electronic communications space to develop relationship analytics,” added O’Brien. “They can use metadata to view communication patterns with other individuals to see when they differ from normal behaviour.”
This month technology provider Cinnober, the Stockholm-based technology company, entered into a strategic collaboration with Ancoa’s surveillance platform to its banking customers.
Veronica Augustsson, chief executive of Cinnober, said in a statement: “Ancoa’s ability to integrate non-standardised data sources into their surveillance platform, including electronic and voice communications as well as news and social media sources, are key to the surveillance needs of the banking segment.”
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