The REGTECH Book

Market Surveillance 2020

By Murad Baig

Global Chief Innovation Officer, Netsol Technologies, Inc

The high speed of electronic trading, an explosion in trading volumes, the cross-asset range of traded products, and proliferation of different types of trading venues pose significant challenges for the regulators to maintain market integrity. With all this complexity, market abuse patterns have also become difficult to identify and detect. Banks are spending millions of euros in fines for market abuse violations. In response to this complex landscape, European regulators have been hard at work. They have created rules for surveillance of exchanges with a view to detecting suspicious patterns of trade behaviour and increasing market transparency.

This chapter looks at the ramifications of these rules on the design of market analysis platforms (MAPs), and how disruptive technologies can be combined to regulate the digital ecosystem of structured and unstructured data.

Fifty Billion Events

The Financial Industry Regulatory Authority (FINRA) monitors approximately 50 billion market events a day – including stock orders, modifications, cancellations, and trades – to detect violations of its rules.

The robust MAP requires regulators to ‘collate live data’ (market feeds, proprietary data, cross-asset and cross-market orders and trades, social feeds) across tens of billions of market events; ‘analyse’ (filter, detect, and alert violation of trading rules to provide reports and alerts); ...