A new report from Aite Group discusses the global disparity between the data and technology available to trading firms and the data and technology available to regulators. It examines some of the activities currently under way to close that gap, and considers how trading technology initiatives should be leveraged to provide effective market oversight. Based on Aite Group interviews with technology providers, regulators, and exchange operators, the report provides an overview of the global state of market surveillance capabilities.
As the capital markets continue to fragment, regulators lose more of their ability to effectively monitor trading markets. New regulatory proposals in various markets are attempting to bring more transparency to trading conducted outside the tape. While regulators’ ultimate goal is to increase transparency, this will be difficult given the myriad systems used by exchanges and trading firms worldwide, and the lack of standardization across markets.
Market surveillance capabilities today are grossly inadequate for the task at hand, says Adam Honor, research director with Aite Group and author of this report. Given institutional electronic trading behavior, Aite Group believes that a more concerted and consistent effort is the only way to effectively monitor markets. This effort should include an agreement among regulatory bodies to share data across multiple agencies and geographies, and the standardization of a unique identifier associated with registered entities to create consistency on beneficial owner and client mnemonics. Regulators also need to mimic the technology infrastructure of their most advanced members.
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