Trade Surveillance
Trade surveillance is the systematic monitoring and analysis of trading activity to detect potential market manipulation, insider trading, and other violations of trading rules and regulations. It combines real-time monitoring, pattern recognition, and historical analysis to maintain market integrity and meet regulatory requirements.
Core components of trade surveillance
Trade surveillance systems continuously monitor multiple data streams to detect suspicious trading patterns and potential violations. Key components include:
Market data monitoring
- Real-time analysis of order flow
- Price and volume anomaly detection
- Cross-market surveillance across multiple venues
- Pattern recognition for manipulative practices
Order analysis
- Order-to-trade ratio monitoring
- Order book impact analysis
- Order flow reconstruction for investigation
- Detection of layering and spoofing
Alert generation and management
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.
Key surveillance patterns
Modern trade surveillance systems monitor for various forms of market manipulation:
Price manipulation
- Detecting artificial price movements
- Monitoring for quote stuffing
- Identifying wash trades
- Analysis of market impact cost
Trading behavior analysis
- Unusual trading patterns
- Correlation with news events
- Position limit monitoring
- Trade execution quality analysis
Real-time monitoring requirements
Effective trade surveillance demands high-performance infrastructure:
Data processing capabilities
- Real-time data ingestion of market data
- Processing of multiple asset classes
- Historical data analysis
- Pattern matching across time series
Performance considerations
- Low-latency alert generation
- Scalable processing architecture
- High availability requirements
- Data retention compliance
Regulatory framework
Trade surveillance operates within a complex regulatory environment:
Key regulations
- Market manipulation rules
- MiFID II requirements
- Rule 15c3-5 compliance
- Best execution obligations
Reporting requirements
- Suspicious activity reporting
- Regulatory audit trails
- Investigation documentation
- Compliance reporting
Trade surveillance continues to evolve with market structure changes and technological advances, requiring systems to adapt to new patterns of manipulation and regulatory requirements while maintaining high performance and accuracy.