Lack of market surveillance systems “significant problem” says IOSCO report
The absence of market surveillance tools in many jurisdictions and regions is “potentially one of the more significant problems facing the markets in light of technological developments, such as the rapid speed of trade execution and increase in order volume”, says the International Organization Of Securities Commissions in its final report on surveillance.
Technological Challenges to Effective Market Surveillance: Issues and Regulatory Tools, provides an overview of current market surveillance regimes and identifies the main challenges that technological developments pose to these regimes. It also makes final recommendations to help market authorities develop the regulatory tools for addressing these challenges,
“An effective surveillance regime is needed to ensure that trading in a given market is fair and orderly, and that market authorities have the ability to detect or uncover market abuse,” IOSCO says. “But in recent years, technological developments in securities markets render it increasingly difficult to achieve these goals.”
The recommendations focus particularly on improving surveillance capabilities on a cross-market and cross-asset basis and the data collected for surveillance purposes making more useful to market authorities.
To help market authorities achieve the two goals of an effective surveillance regime, the report considers new regulatory tools for dealing with the challenges they face, including audit trail or surveillance data that allows the reconstruction of trades and order books; a single reporting point for transactions within a jurisdiction; and unique entity identifiers.
“Current surveillance techniques, including the collection, storage and accessibility of data, may need to be enhanced to capture in a timely manner all of the information necessary to monitor efficiently and effectively trading activity that occurs in the current highly automated and dispersed markets,” it concludes.