Market Surveillance Systems
Market surveillance systems are specialized software platforms that monitor trading activity in real-time to detect market manipulation, enforce regulatory compliance, and maintain market integrity. These systems analyze patterns across multiple markets, asset classes, and trading venues to identify suspicious behavior and potential violations of trading rules.
Core functions of market surveillance systems
Modern market surveillance systems combine real-time market data processing with sophisticated pattern recognition to monitor trading activity. Their primary functions include:
- Detecting market manipulation like spoofing and quote stuffing
- Monitoring compliance with regulatory technical standards
- Analyzing order flow for suspicious patterns
- Tracking cross-market surveillance activity
- Generating alerts for potential violations
Architecture and components
The system architecture typically includes:
- Data ingestion layer for processing multiple market data feed handlers
- Pattern detection engines using advanced analytics
- Alert management and case tracking systems
- Historical data storage for investigation and reporting
- Integration with regulatory reporting automation systems
Next generation time-series database
QuestDB is an open-source time-series database optimized for market and heavy industry data. Built from scratch in Java and C++, it offers high-throughput ingestion and fast SQL queries with time-series extensions.
Real-time monitoring capabilities
Modern surveillance systems leverage real-time data ingestion to provide immediate detection capabilities:
- Processing full depth market by order data
- Monitoring order lifecycle events
- Tracking trade execution quality
- Analyzing order book imbalance patterns
Market manipulation detection
Surveillance systems employ sophisticated algorithms to detect various forms of market manipulation:
- Layering and spoofing detection
- Wash trading identification
- Market dominance monitoring
- Front running detection
- Price manipulation surveillance
Regulatory compliance and reporting
These systems play a crucial role in maintaining compliance with various regulations:
- MiFID II transaction reporting
- Rule 611 (Order Protection Rule) compliance
- Market manipulation prohibitions
- Best execution requirements
- Audit trail maintenance
Performance considerations
Market surveillance systems must process massive amounts of data with minimal latency:
- High-throughput time-synchronized data streams
- Complex pattern matching across multiple venues
- Real-time alert generation
- Historical data analysis capabilities
- Scalable processing architecture
The effectiveness of market surveillance systems depends on their ability to process and analyze trading activity in real-time while maintaining comprehensive historical records for investigation and reporting purposes.