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Sell-Side Desires Variety in its Surveillance Offerings

This is the second feature in a sponsored content series from S3

Traders Magazine Online News, December 3, 2018

John D'Antona Jr.

The sell-side wants change in the options currently open to them when it comes to trade surveillance.

Market surveillance has been one of the newer catch phrases to hit the financial and equities marketplace. Being on the lookout and able to snuff out nefarious or problematic trading behavior before it occurs and preventing adverse price selection or worse is forefront on the minds of the sell-side and the institutional trading clients they service.

Interest and demand in trade surveillance and monitoring technology has significantly grown recently due to regulatory pressures, operational changes and technological advancements. In particular, regulations such as MiFID and MAR have driven implementation and have played a significant role in the adoption of trade surveillance technology.

Increasing trade automation and market structure is providing fertile ground to a broad spectrum of abusive behaviors and compliance obligations. This has set the stage for increasing regulatory oversight where the burden of proof rests with market participants (the sell-side or brokers) to demonstrate control over their trading. Trade surveillance solutions can address these issues by conducting examinations of order flow supporting end-to-end breach detection, alert workflow management, market data and historical replay activities.

Mark Davies

According to a recent Nasdaq whitepaper, the bourse noted firms must monitor trading on an ever-expanding number of markets and require visibility across multiple venues and asset classes with a pool of data that is growing at a dramatic rate. As regulatory authorities continue to raise the stakes, having systematic controls and surveillance procedures in place is critical.

Historically, there have been only a handful of market surveillance products such as SMARTS from Nasdaq and Trillium. According to market sources, both these systems raise market concerns as one comes from an exchange and the other a proprietary trading firm this raises questions about their independence and neutrality. When it comes to SMARTS, some traders told Traders Magazine that the product focuses more on non-US clients, exchanges and larger customers, leaving smaller firms underserved. As for Trillium, one person explained that having a prop shop that trades for itself monitoring the market raises issues with data collection, usage and storage.

So, what is a broker to do?

Enter S3, an independent firm that is looking to court the sell side and help them provide better service and analytics to the buy-side. Sounds like a win-win, right?

S3 recently launched its Trade Surveillance Suite, a system designed to assist compliance and trading professionals identify market manipulation. With this expansion away from its core execution analytics offering, the firm looks to offer customers a single solution to address all of their compliance needs.

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