Market Surveillance

What Is Market Surveillance?

Market surveillance is the prevention and investigation of abusive, manipulative or unlawful trading rehearses in the securities markets. Market surveillance assists with guaranteeing orderly markets, where purchasers and venders will take part since they feel certain about the fairness and precision of transactions. Without market surveillance, a market could become disorderly, which would deter investment and repress economic growth. Market surveillance can be given by the private sector and the public sector.

Market Surveillance Explained

Numerous participants in the private sector participate in market surveillance. For instance, Nasdaq, Inc. offers a market surveillance product called SMARTS that helps individual exchanges as well as regulatory agencies and brokers in monitoring trading activities across various markets and asset classes. Inside its own exchange, the CME Group runs a market surveillance team to recognize, monitor and survey trader positions and transactions. Third-party suppliers of software platforms and analytics like IBM (Surveillance Insight for Financial Services) and Thomson Reuters (Accelus Market Surveillance — presently Connected Risk from Refinitiv) aid the customization and set-up of far reaching surveillance abilities for other major exchanges like NYSE Euronext.

For one more layer of oversight, at the government level, elements, for example, the Securities and Exchange Commission's (SEC) Division of Enforcement give broad market surveillance to assist with upholding securities laws and safeguard investors against fraud. More engaged government organizations, for example, the Commodity Futures Trading Commission (CFTC), give market surveillance to specific sections of the market (for instance, the futures market). Private, self-regulatory organizations like the National Futures Association (NFA) additionally conduct market surveillance.

Not Fail-Safe

Clearly in spite of sophisticated market surveillance systems criminal behavior happens — now and again, however routinely. Even simple insider trading schemes are perpetrated. Much of the time, the long arm of the law right away or eventually finds those committing fraud, yet the inquiry remains how unlawful trades had the option to happen in any case. Rogue traders like Societe Generale's Jerome Kerviel or JPMorgan's "London Whale" some way or another figure out how to lose billions at their trading work areas before their schemes are stopped. Different traders in charge of setting LIBOR pulled off controlling the rate for personal gains before they were uncovered. Market surveillance won't ever be 100% safeguard for however long there are resolved individuals who can track down openings in the system. Additionally, as strategies to avoid trading regulations develop more sophisticated, both internal and outer system software engineers and implementers must figure out how to keep up with all of the moves.