With financial regulators growing increasingly stringent in their supervision of industry firms, standards surrounding the frequency and granularity of reporting have risen. Trade surveillance data is no exception. Major regulators are getting better and better at determining whether reported data is complete and consistent – and they will not hesitate to take disciplinary action to address discrepancies. Currently, FINRA requires firms to have policies and procedures in place to identify and review transactions that may violate the Securities Exchange Act or SEC rules.
Given this growing level of scrutiny, completing reports via periodic sampling is no longer good enough. To remain compliant, market participants must have a robust, fully automated trade surveillance system in place – one that can parse through enormous transaction volumes and conduct rigorous reviews to address potential instances of improper trading behaviors.
For a critical function like trade surveillance, data accuracy and completeness should be a top priority, but at many firms today, it’s often considered an afterthought. n-Tier’s trade surveillance capabilities – part of our Compliance Workbench – offer an integrated solution, operating hand-in-hand with our data accuracy and completeness platform. We provide a robust set of tools to ensure compliance teams are meeting and exceeding even the most complex regulatory requirements, with no in-house development required.
Our trade surveillance capabilities were recently highlighted in Chartis’ 2023 RiskTech Quadrant for Trade Surveillance Equity Solutions as a “Best of Breed” offering. Our distinctive, data-driven approach to surveillance empowers our clients to be proactive in monitoring, identifying and flagging manipulative trading activity across a wide range of asset classes. As a holistic, all-in-one compliance solution, n-Tier’s long history of providing reporting solutions for major regulations including CAT, LOPR and EBS gives us a unique perspective – these reports involve the same datasets used by regulators to run their surveillance outputs. With these pre-established reconciliation capabilities, we provide a tried-and-true framework for complete and accurate data.
The behaviors that our surveillance capabilities currently monitor for include:
- Trade Through
- Reg SHO No Locate
- Reg SHO Alternative Uptick
- Price Disimprovement
- Timeliness
- IPO Pre-Market Buy Orders
- Late On-Close Order (MOC/LOC) Cancels
- Low-Volume Concentration
- Marking the Open
- Marking the Close
- Wash Trades
- Front Running News
- Spoofing/Layering
- Momentum Ignition
Another unique aspect of n-Tier’s surveillance offering is our cross-report analytical capabilities. We look across various regulatory reports – such as for CAT and Rule 605 – as well as underlying transaction inputs to ensure data accuracy in both reporting and surveillance. We also look across different asset types and related instruments to identify any and all potential instances of market abuse or manipulation – a critical capability. For example, a firm could manipulate the price of a stock to benefit an options position. Likewise, in cases of insider training, a trader could have information about one stock and trade another in the same sector in hopes that the price will move in the same way. Most RegTech providers aren’t equipped to provide these cross-report capabilities, making our offering uniquely comprehensive.
“n-Tier has demonstrated a unique data-first approach to trade surveillance, focusing on building out scale while retaining a light technology footprint,” said Phil Mackenzie, Research Principal at Chartis. “In our research, we viewed the company’s cloud deployments, rules-based data management and deep regulatory knowledge as key differentiators for its solution.”
As Chartis details in its “Trade Surveillance Solutions for Equities 2023: Market and Vendor Landscape” report, most trade surveillance solutions on the market today attempt to strike a balance between high-speed performance and complex, granular data. n-Tier’s architecture enables us to deliver both – and to do so in a cost-effective manner as a combined offering. For our clients, the ability to both manage regulatory reporting and conduct trade surveillance for even the most complex data paths from a single platform is invaluable, as it reduces the likelihood of inconsistencies, streamlines compliance and ultimately helps to foster trust among their own clients.
Interested in getting started with our trade surveillance solution? Reach out today.