trade surveillance

Rules and regulations for all types of trade are complex and ever-evolving. These rules may apply to exports, financial laws, environmental guidelines and taxes, among others. While businesses may adhere to all the rules and regulations, there is always a chance of non-compliance due to mismanagement or human error. This is where trade surveillance plays a key role in monitoring an organisation’s trading activity, weeding out potential risks and touchpoints of abuse.

In the context of financial markets, trade surveillance can be defined as the process of closely monitoring and investigating trading activities of an organisation, which may involve market manipulation or abuse. The fallout of not doing so can result in litigation and criminal charges. It can cost companies millions of dollars, loss of reputation and complete liquidation.

Making Trade Surveillance a Priority

The equity of compliance has risen over the last five years in the financial sector. With the evolution of technology, we live in a much more connected world, and it is easier to track and expose trading fraud. A company’s share price and reputation can diminish in minutes as word gets out. Safeguarding shareholders’ interests and the company’s credibility and durability is being prioritised like never before. It is in the best interests of a business to have a concrete strategy to monitor trading activities and road map for reporting irregularities.

Emergence of CCO

Traditionally, some banks appointed chief compliance officer (CCO) to oversee compliance practices. Today, compliance is considered a vertical in itself, and increasingly more financial institutions are appointing CCOs to safeguard their future. A COO reports to the CEO and apprise members of the board of compliance issues and violations. The role of the CCO is no longer an afterthought, and few decisions or processes pass muster without a CCO’s approval.

Growing Role of Technology

As the importance and scope of compliance expand, technology will likely play a key role in successful trade surveillance. Harnessing the right technology brings in efficiency, innovation and definitive cost advantage. At a basic level, technology helps automate monitoring. But the combination of artificial intelligence (AI) and machine learning (ML) enables the recognition of patterns that could point to manipulative behaviour and sniffs out emerging threats. Behavioural modelling is also playing a role in this transformation. The challenge is to make models increasingly more intuitive and keep pace with newer, more nuanced modes of trading manipulation.

Evolving Surveillance Models

As financial instruments become more diverse, fledgling trading platforms emerge every day and consumer markets expand and become more inclusive, surveillance models must keep pace with these industry shifts. The compliance and surveillance teams must keep evolving their knowledge, technology and understanding of the trading universe. Regular reviews of surveillance models is a best practice. Savvy trading manipulators are likely to keep pace with surveillance systems and always look for ways to beat them.

Keeping Pace with Regulators

Financial regulators are improving their surveillance models to monitor organisations they regulate. Organisations will need to ensure their surveillance models align with the regulator’s requirements. Anomalies should immediately be flagged, and a report sent to the internal compliance team. Once an internal investigation is carried out and suspicious activity identified, a report must be sent to the regulator. Models can be continually evolved so they are more relevant to the requirements of the regulators.

Adopting Strategic Approach to Compliance

Committing to a long-tail approach to compliance is an emerging best practice in the financial markets. Rather than adopting a tactical approach to meet basic regulatory obligations, organisations are looking at compliance as a way to bring more transparency and credibility into their DNA. The trading and compliance teams work closely to create a concrete and holistic strategy for trade surveillance, which aligns with the organisation’s vision and corporate governance. Alternatively, there are companies that specialise in offering end-to-end compliance services, of which trade surveillance is a core vertical. Having a strategic approach helps create a more robust model to beat new market abuse threats.

Leveraging Data to Model Trading Behaviour

While trade surveillance’s primary role is to detect market abuse and manipulative trading patterns, it has additional by-products. Data that emerge are being increasingly leveraged by businesses to understand trader behaviour, both in general and in-depth. The analysis of these data has great value and creates an opportunity for businesses to understand the pulse of a trader. It can improve its product offerings based on these findings. This approach can also shape trader behaviour to imbibe best practices. Trend analysis is a major by-product of this journey.


As the world becomes more technologically connected, newer market threats will continue to arise. By investing in trade surveillance, organisations can build a robust, invincible, impenetrable ecosystem cushioned from internal and external threats that can compromise their business and long-term goals.