Find the risk. Manage it swiftly and decisively. Stay ahead of the regulators.

Major global jurisdictions have rules for market participants about the prohibition of fraud and manipulation, order and trade handling, market access controls, licensing requirements, supervisory control systems, manning, and limit order display.

For example, the European Union and United Kingdom both have Market Abuse Regulations (MAR), which cover market manipulation, insider dealing, and surveillance responsibilities.

Inadequate or poorly calibrated trade surveillance systems can lead to regulatory inquiries and fines. Regulators also will issue enforcement actions for insufficient review of surveillance output, poor training, and a lack of documentation.

Trade surveillance also helps institutions detect and deter market abuse that could lead to expensive civil and criminal liability.

Validus Trade Surveillance has a full suite of alerts and procedures for trading firms, exchanges, and intermediaries. 

Here are a few of the market manipulation types that have a Validus alert:

Spoofing is a form of market manipulation in which a trader submits a bid or offer in a security or commodity on an exchange or other trading platform with the intent to cancel the bid or offer before it can be executed.

Layering is like spoofing but with multiple submitted bids or offers at different levels of the order book on an exchange or other trading platform with the intent to cancel the bids or offers before they can be executed.

Both spoofing and layering give a misleading view of supply or demand to artificially move the price to benefit the opposite side execution.

Flashing is the practice of submitting and quickly canceling an order, typically of large size, intended to send a misleading signal to the market.

Front running is when proprietary trading accounts or employee accounts send orders in the moments before customer
orders in the same instruments.

Insider trading is when a person trades based on material non-public information to reap a profit or avoid a loss.

Momentum ignition is a series of orders that contributed to a spike in the short-term price of security. Ultimately, the trader seeks profits from this artificial increase in price and will exit out of the larger position at a better price.

Wash trading is when a firm, account, or client appears to be on the same side of a trade with no change of beneficial ownership. Similarly, a wash cross trade is when two or more accounts appear to be on either side of multiple trades resulting in no change of beneficial ownership.

Eventus conducts ongoing research about global financial regulations and engages directly with regulators and market participants. We then feed that research into Validus and work directly with our clients to ensure our software is tailored to their changing needs.

For example, the UK Financial Conduct Authority’s (FCA) Market Watch notices give ongoing guidance about the implementation of proper trade surveillance systems. Market Watch 73 highlighted the FCA’s focus on spread betting and Contracts for Difference (CFD’s) as well as ensuring firms have appropriate risk assessments that allow for the capturing and reporting of market abuse.