Trader surveillance is complex and challenging for global banks. But rising regulatory oversight and growing market abuse have made it a strategic imperative. A new report from EY and Chartis Research outlines how banks and other financial institutions can help meet regulatory requirements through more effective trader surveillance.
Trader surveillance: what it is and why it matters
Trader surveillance is the investigation of organizational activities for indications of market abuse. This includes:
- Detection of market manipulation, insider dealing and the misuse or disclosure of material non-public information
- Monitoring and analysis of trading and market activity and other relevant data, such as e-comms, voice and profit and loss information
Banks are more focused on trade surveillance because:
- Regulators are pushing financial institutions to expand surveillance to more asset classes and trading venues
- Trade surveillance costs are rising: the industry will invest $758 million in it in 2017, and fines are reaching into the tens of billions of dollars
Key findings from the EY-Chartis research
The ABCD of effective trader surveillance
More advanced and effective analytics – including integrated monitoring of communications and trading activity – for better quality alerts across data types, asset classes and trades.
More effective and flexible workflow engines and robotic process automation (RPA), to draw more information from more trading venues and asset classes, reduce the investigative workload and improve drill-down capabilities and metadata analysis
Trader surveillance systems that work within robust governance frameworks and the three lines of defense to reinforce a culture of compliance – with quantifiable information about front-office traders’ behavior as part of a conduct risk framework
Integration, validation, cleansing and standardization, to make certain that the data financial institutions feed into systems is accurate, auditable and validated across sources
The need for effective trade surveillance systems is becoming more pressing – both to more efficiently meet regulatory requirements and to more effectively manage risk.
Partner, EY Fraud Investigation & Dispute Services and Financial Crime Market Abuse and Trader Surveillance Solution Leader