Shortlisting Trade Surveillance Solutions

Executive Summary

Market abuse surveillance requirements vary significantly by type of market participant, applicable regulations, and the trading strategies employed. To assist with trade surveillance vendor selections, this report details the leading market surveillance providers – as well as additional obligations they are capable of assisting with, including: e-communications monitoring, voice surveillance, trade reconstruction requirements, and best execution reporting. This report also highlights novel ways in which solutions are improving alerting methodologies, as well as providing additional business insights for the market participants they serve. Readers are encouraged to use this report in order to quickly create a shortlist of the vendors suited for further consideration.

Even with Nasdaq SMARTS and NICE Actimize together owning over half of the US$284mn spend on trade and order surveillance software, new entrants are aggressively vying for business. While the market will likely experience further consolidation in the next 12-18 months, new solutions are pushing the quality of surveillance forward across the board. Established solutions have, in several cases, adopted innovative approaches that were first introduced by newcomers to better target alerts, understand trader behavior, surface business insights, meet broader regulatory obligations, and automate investigations.

Looking at the field of solutions addressing trade and order surveillance requirements, there are only a few that produce alerts across both trade and communications data, including NICE Actimize, Bloomberg, and Behavox, and to a more limited extent Software AG, Scila, b-next, Trapets, and Irisium. At this stage only NICE Actimize and Behavox produce alerts for voice communications alongside trade and e-communications surveillance.

Because the expansion of recent regulations, including the Market Abuse Directive (MAD) and the Markets in Financial Instruments Directive (MiFID II), has increased the buy side’s trade surveillance and reporting obligations, several vendors have specifically marketed themselves to asset managers and hedge funds. ACA Technology, RIMES Technologies, Behavox, NICE Actimize, TradingHub, and Sybenetix (purchased by Nasdaq SMARTS in the summer of 2017), have all made a concerted push to win buy side clients transitioning away from reliance on their brokers and manual processes for market abuse and insider trading surveillance.

A few young firms like Aquis Surveillance and Bay Street Tech have positioned themselves to support the surveillance needs of exchanges, a group currently served predominantly by Nasdaq SMARTS and Scila.

Other solutions have made inroads in specific geographies. b-next has been a leader in Germany for well over two decades. Neurensic (recently purchased by Trading Technologies), Trillium, and ACA Technology have thus far focused their attention primarily on the United States. In Asia, the Technancial Company provides competition to market leader Nasdaq SMARTS. Scandinavia is served by a host of local players, including Scila, Trapets, and Itiviti.

In addition to on-premise and hosted deployment options, a few vendors also offer surveillance BPO. Trapets, Aquis, and ACA Technology both offer to stand as the first line of defense investigating alerts for market participants who are too small to hire a full-time compliance officer, or who need to augment their existing team.

Across the entire trade and order surveillance solution landscape, variety rules. When selecting a solution to install, augment, or replace current surveillance approaches, firms will need to be sure that they appropriately shortlist the vendors best positioned to meet their needs. In this report, Opimas provides mapping tools and vendor profiles to help the reader quickly identify the solutions that most warrant further investigation.

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