Regulation & compliance | Market surveillance
“The surveillance infrastructure at most fi rms supports separate instruments; the challenge is to combine that and do true market abuse surveillance across all trading activity.” Martin Porter, b-next
manipulation, nor erroneous orders,” he says. A typical trading fi rm in the current environment has many IT demands but no money, says Hildyard. As a result they are looking for more effi cient ways to approach issues such as surveillance. “Point solutions that deal with individual issues such as money laundering or insider trading are rigid and infl exible. Firms want to deal with all these issues via a single, extensible platform that requires a single interface.” Veronica Augustsson, chief executive of Cinnober agrees that fi rms are looking to expand their solutions. “At a technical level, exchanges and market participants have the same needs in surveillance – a real-time feed and the ability to confi gure alerts. Regulators and exchanges tend to want hosted solutions while banks prefer solutions that can be accessed in the cloud,” she says. “When it comes to trade surveillance at banks, they increasingly want to include AML capabilities.” Monitoring activity across multiple instruments and venues can be challenging for some fi rms, says Martin Porter, business development director at b-next. “The surveillance infrastructure at most fi rms supports separate instruments; the challenge is to combine that and do true market abuse surveillance across all trading activity.” A big debate in the industry at present is how
Best Execution | Spring 2013
to address the ever-increasing speed of trading. “If you analyse every order that is being sent to the market, you risk slowing down that trading activity. HFT is all about getting into and out of the market as fast as possible, so when do you execute pattern trading analysis?” asks Porter. Another discussion is centred on cross-venue surveillance. BATS Chi-X’s Hemsley says there is a potential confl ict of interest in how to tackle this issue. “Solutions that are sometimes put forward require a leap of faith about who assumes the cost. There are also confl icts of interest if trading venues are asked to provide confi dential customer data to a competitor; that’s not appropriate,” he says. Such an issue could be addressed via a central surveillance utility. This would require a consolidated tape or audit trail. “Building this would be diffi cult, but not as diffi cult as it might have been a few years ago. Technology is moving on apace and there is a willingness to use technology to tackle the issue,” says Bryok’s Leegood. Leegood likens a surveillance utility to Interpol,
where policing is taken away from local forces in some circumstances. “This will move the issue away from parochialism and defensiveness in individual markets. Surveillance is a cost to be borne and there is no competitive advantage in it. Why not share the cost with others?” ■
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