A trade surveillance system is used to monitor and analyze trading activities within the financial sector. The system helps detect insider trading, data manipulation, and other such types of non-compliance activities. The system plays an important role in the maintenance of market integrity and builds investor confidence. It works by scanning data and market behavior and then identifies and highlights suspicious patterns. It uses different technologies to track these patterns and flag such activities. These flagged activities are then reviewed by the investigation team.
Trade surveillance system finds a mandatory usage in brokerage firms, asset management companies and investment banks. Traditionally, the system was manual and majorly relied on post-trade analysis. However, with the inclusion of technology, the system relies on real-time monitoring and behavioral analytics to process the data and flag the suspicious activities. Further, surveillance not only involves monitoring trade, but it also monitors communication, which helps detect insider information leaks.
Trends driving adoption of trade surveillance system
Surge in market abuse, manipulation, and insider trading, boosts the requirement of trade surveillance system within the financial institutions. In addition, the government also has strict regulations about maintaining the market integrity, and if not followed, the firm is fined. This boosts the need for surveillance systems, which helps flag suspicious activities. Further, developments in technology, such as integration of machine learning and artificial intelligence, help track real-time trade patterns. Natural language processing is also being used by the firms to study data and find any relevance of insider trading.
A surge in cryptocurrencies is anticipated to be opportunistic for the adoption of trade surveillance system as these systems help monitor decentralized exchanges. Integration of blockchain also fosters the demand for these systems in financial institutions. There is an increase in high-frequency trading (HFT) in the financial sector. This boosts the requirement of algorithmic strategies. Thus, manipulative activities are masked in these complex trading activities, which boosts the need for enhanced surveillance tools that detect suspicious activities using real-time tracking. These enhanced surveillance systems can also detect multi-asset, cross-border malicious activities and raise the flag. Furthermore, usage of cloud to offer cost efficiency and speed in trade surveillance is projected to be opportunistic for the growth of the sector in the upcoming years.
How trade surveillance supports compliance and risk management
Trade surveillance systems are majorly being adopted across different financial firms. These systems help detect market abuse, spoofing, layering, and others by analyzing data and identifying suspicious trading patterns. These patterns are then flagged for further investigation. These systems are also used in communications surveillance, where they monitor emails, voice calls, and social media communication to detect sharing of financial insider information. Regulatory reporting is another application of trade surveillance, wherein the process of reporting suspicious transactions to regulatory bodies is automated to ensure timely reporting of the activity.
Trade surveillance systems also help test algorithms, which, in turn, help to prevent manipulative behavior. These systems also identify irregular trading behavior at its early stage. This helps mitigate financial risk before escalation.
Protecting markets with intelligent trade surveillance
Trade surveillance systems are integrated with machine learning and artificial intelligence to track real-time fraudulent activities. These systems, thus, help reduce false positives by identifying complex manipulation schemes. In addition, trade surveillance systems are also integrated with natural language processing, which helps analyze unstructured communication, in the form of chats, voice message, mails, and others, and identif the misuse of confidential financial information.
Trade surveillance systems help track fraudulent activities in digital assets and cryptocurrencies by monitoring blockchain transactions and decentralized finance platforms. The system monitors transaction flow, wallet activity, and on-chain behavior and helps detect manipulative behavior. Introduction and adoption of cloud surveillance platforms enable flexible and real-time processing of financial data. These cloud platforms are cost-effective as well. These advancements in trade surveillance systems help track fraudulent activities in real time.
Closing thoughts
Trade surveillance systems play an important role to maintain transparency, detect fraud, and ensure adherence to ethical standards. These systems witness an increase in adoption owing to developments in the trading environment. These systems are capable of mitigating potential market abuse. They track diverse data in real time and deliver logs accurately to mitigate financial loss. They also automatically flag these malicious activities to the regulatory bodies. Thus, the trade surveillance system industry landscape is poised to experience growth in the upcoming years.
To get more insights into the latest advancements in trade surveillance system, contact our industry specialists today! For any further queries, you can also chat with them directly.
Short Description
A trade surveillance system is a platform adopted by financial institutions to detect potential market abuse and report the same to the regulatory bodies. These systems use AI and ML to track data in real time and report any fraudulent activity, thus mitigating risk. The sector is posed to witness growth owing to developments in technology along with rise in fraudulent trade activities.
No comments:
Post a Comment