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The role of trade surveillance in maintaining market integrity – London Business News |



As markets continue to evolve and trading volumes increase, it becomes even more imperative to uphold their integrity. Market integrity is the practice of how financial markets and their participants behave and perform their duties in a manner that is legal, ethical, and in the best interest of investors. Providing market integrity involves several ways, one of which is trade surveillance.

Trade surveillance defines trade surveillance as a concept that outlines the procedures and mechanisms that may be used to monitor trade activities to help identify fraudsters or manipulators. It plays an important role in safeguarding the investors and fairness for all stakeholders in the market. This paper seeks to focus on trade surveillance and its relevance in the current market. It also discusses the issues associated with it and the new developments.

The importance of trade surveillance

Trade surveillance is of significant importance for several reasons. First, it assists in identifying and curbing unlawful activities in the trading market, including insider trading and market manipulation. Such activities can influence the market, mislead investors, and erode public confidence in the financial markets. Trade surveillance is the name given to real-time monitoring and analysis of trading activity that can help detect and report suspicious activities to regulators or other market participants.

Secondly, trade surveillance fosters fairness in financial markets by monitoring the trading activities of all parties. This shows that when market participants are aware that their transactions are being supervised, they cannot deceive others and thus cannot act unethically. This, in turn, creates a better competitive environment since there is a fair distribution of information and chances of competing in the market. Another advantage of transparency is the improvement of market efficiency as prices are closer to the securities’ actual value.

Thirdly, trade surveillance is crucial in ensuring compliance with the regulations set down in the various markets. In particular, financial markets are regulated by the legal rules and regulations that define the rules governing investments and the market as a whole. Trade surveillance systems enable firms to meet these requirements and offer tools that can be used to detect and report trade suspicion. These nonconformities attract severe penalties and undermine firms’ reputations, highlighting the importance of trade surveillance in managing the risks.

Advancements in trade surveillance technology

Due to technological advances, the technology applied to trade surveillance has improved its capability and applicability. The previous trade surveillance methods were based on standard tools and manual monitoring, and the techniques used usually needed to be improved in identifying complex market manipulations. But, with the growth in AI and machine learning, trade surveillance has graduated to a more sophisticated approach to detecting cross-border abuse.

Advancements in automation have led to the development of machine-learning trade surveillance systems capable of scanning large volumes of trading data in real-time to produce alerts for market abuse. Machine learning algorithms can be trained for a certain period to refine their accuracy and minimize the incidence of false alarms while increasing their ability to identify real threats. In the same respect, these advanced systems can also learn about the current market conditions and the changing regulatory standards to help firms maintain compliance and alertness.

One more important innovation in tools for trade surveillance is the use of big data analysis techniques. A vast number of financial data is produced in the financial markets each day in the form of trade orders, execution reports, and relevant market news. The advent of big data analytics also helps trade surveillance systems to perform this task with better efficiency and effectiveness, thereby delivering more insights into the movement of markets and possible risk factors. Market abuse fundamentally threatens financial markets’ integrity; therefore, applying big data can help firms boost their capacity to identify and prevent it.

Challenges in trade surveillance

However, specific issues can be traced even in modern trade surveillance systems. The first one is the ever-emerging complexity of the financial markets. Since the emergence of new financial instruments, trading floors, and participants in the global financial market, monitoring trading activities has become more complex. In an ever-changing trading environment, trade surveillance systems need to be dynamic to support coverage in all areas.

The other issue is that various trading activities generate large volumes of data at a very high speed. There is a constant stream of data in financial markets, and this data comes at speeds that are very challenging for traditional systems to handle in real time. Some of these challenges have been solved by using such technologies as AI and big data analytics; however, the issue of the volume of data remains an issue.

Another challenge with trade surveillance is regulatory divergence. The regulatory requirements vary from country to country, making it difficult for firms working in several markets to have a standardized surveillance system. Companies must operate in this context saturated with regulations without violating or being unaware.


Trade surveillance is an essential component in finance as it helps identify possible infringement of the rules by investors and prevent market abuse. Modern trade surveillance technology, including AI and big data, has boosted its capabilities and efficacy. Nevertheless, certain limitations include the growth of financial markets’ complexity, speed and volumes of trading information, and diversification of regulators’ rules. Nonetheless, trade surveillance is still necessary and valuable in the fight against misconduct and for the safeguarding of investors in financial markets. Therefore, it can be concluded that as financial markets change, develop, and transform, trade surveillance must adapt and progress to maintain the markets’ integrity and ensure that trading conditions are fair.

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