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UK: Market Watch 68 Advises Firms to Know Their Traders Using Capture, Record and Surveillance Techniques

UK: Market Watch 68 Advises Firms to Know Their Traders Using Capture, Record and Surveillance Techniques

On 16 November 2021, the UK FCA released Market Watch 68, a newsletter focusing on and revisiting the topic of order and trade capture. As far back as Market Watch 48 in June 2015, there have been concerns surrounding the effectiveness and integrity of data used for market surveillance with consideration for firms to design their surveillance programmes based on a detailed assessment of market abuse risk on a per-asset-class, per-business-line and per-trading-desk basis. Market Watch 68 details this ongoing concern, particularly within the fixed income and rates markets, where there has been an increase in market access channels via web-based portals offered by organised trading facilities (OTFs) /multilateral trading facilities (MTFs). The FCA has observed that programmatic access to these web portals is not readily available, creating the potential for gaps in surveillance due to firms not being able to accurately capture the full order lifecycle. It has also recognised that firms will face challenges in meeting the requirements of Article 25(1) with respect to UK MiFIR order-handling and record-keeping requirements.

In response to these observations, the FCA is asking firms to take appropriate steps to identify any potential gaps or unmonitored order flow with a detailed risk assessment and requesting that the operators of the OTFs/MTFs look at ways to help users address these gaps.

ViP: The increasing number of web-based portals and the rapid pace at which they are onboarded can make it challenging for IT teams to stay on top of the book of work, particularly where legacy trade surveillance platforms require strict data conformance or “one way only” of data mapping across multiple asset classes and venues. Having the right mix of technology to transform trading data into identifiable risks enables a flexible transformation layer that not only speaks the language of each trading platform, but also easily translates to a common language necessary for effective behaviour detection, trade reconstruction and anomaly detection.

Our Validus platform is extremely flexible to handle and transform the multitude of data formats that exist for order, trade and RFQ data across equities, fixed income, futures, options, FX, commodities and crypto. It can operate in real time and/or T+1, on-premise or in the cloud. Validus scales to handle billions of messages a day in real time. We offer more than 200 configurable, adaptable procedures that cover transaction monitoring and trade surveillance needs, provide a fully developed Python integration for customization and handle cross-market surveillance natively. Our automation functionality and machine-learning capabilities are critical in escalating only the most actionable alerts, minimizing the amount of false positives, and our statistics capabilities create bespoke analytics for anomaly detection.

 

About Eventus Systems

Eventus Systems is a leading global provider of multi-asset class trade surveillance and market risk solutions. Its powerful, award-winning Validus platform is easy to deploy, customize and operate across equities, options, futures, foreign exchange (FX), fixed income and digital asset markets. Validus is proven in the most complex, high-volume and real-time environments of tier-1 banks, broker-dealers, futures commission merchants (FCMs), proprietary trading groups, market centers, buy-side institutions, energy and commodity trading firms, and regulators. The company’s rapidly growing client base relies on Validus and Eventus’ responsive support and product development teams to overcome its most pressing regulatory challenges. For more, visit www.eventussystems.com.