Thomson Reuters Taps b-next for Detection of Market Abuse and Surveillance

A solution announced for systematic surveillance of trading activity to detect market abuse, suspicious trading, price manipulation, and insider trading,

Thomson Reuters As the need to monitor trading flow in financial investments becomes of significant importance in maintaining market integrity, Thomson Reuters has partnered with b-next (b-next holding AG) to use its surveillance solution for capital markets compliance.

The deal is aimed to benefit Thomson Reuters’ clients who can use b-next enhanced features from within the firm’s existing platforms, while setting parameters tailored to their individual compliance needs related to early detection of market abuse and other potentially challenging events that are often elusive to detect.

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According to the official press release, Thomson Reuters’ Accelus Market Surveillance system will integrate b-next’s capability to provide capital markets compliance solutions, and enable compliance managers at both buy-side and sell-side institutions to better meet and monitor this increasing challenge of detecting suspicious trade activity across multiple asset classes and markets, including Foreign Exchange.

Integrates to Eikon Platform, and Thomson Reuters Data

bnextThe surveillance capability from b-next will utilize Thomson Reuters’ market data, news analytics and managed services which provide a complete market abuse monitoring and alert management solution covering a broad range of exchange traded and OTC traded asset classes, as per the press release description. The solution from b-next will sit inside a hosted environment within the Elektron Network.

While the firm’s FX business is handled through its Marketplace segment, the synergy with b-next is being rolled out through its Governance, Risk & Compliance (GRC) segment, and although these are both under the Financial Risk division, they are each different business lines. Nonetheless, the FX related trading will be via the risk side of GRC that will be affected by the new integration, among the other asset classes offered.

Evolution of b-next solutions [source: B-next.com]
Evolution of b-next solutions [source: B-next.com]
Financial markets have become vastly more efficient in the last decade, and the advent of concurrent technology advancements with algorithmic trading for example, or even the simplistic online chat room collusion which had recently been the subject of numerous press media and related investigations into Forex rate manipulation, together have made illicit schemes more sophisticated and thus harder to catch. This also applies to insider trading, and as the scrutiny of best-execution practices surrounding customers’ orders are under global regulatory watch and subject of policy-maker discussions.

Aimed to Benefit Buy-Side/ Sell-Side Clients

These type of market abuse scenarios are exactly the type of events that such surveillance solutions aim to swiftly detect and/or be part of systems aimed to prevent them altogether. Events attributed to errors can also be of importance to either swiftly detect or prevent, as in the case of an algo-gone-wild.

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The way that b-next tries to achieve this detection, is by carrying out intensive calculations comparing tick data for example, against data from a 3rd party such as to determine if any variation was abnormal, in addition to many other methods as each market and asset class would have a different approach.

The solution is more of a front-office one than it is a back-office, as the compliance manager at firms using Thomson Reuters’ platforms will be able to configure their brokerage specific parameters in order to best tweak the CMC system integrated as part of the existing Accelus Surveillance system.

Compliance Efficiencies Evolving with Market, At a Lag

It’s known that technology will often lead the market’s ability to keep up with it, and then regulatory changes will lag further behind market innovations. If these three evolved simultaneously, things would move much faster and smoother, perhaps they will in that manner in the distant future -where as soon as a new technique is invented it is immediately implemented and existing rules adopted in real-time based on some verified process. Until such wishful thinking is made a reality, firms will have to go through the steps involved, and in the case of compliance use in-house and/or solutions by 3rd party vendors such as b-next.

As noted in the official press release, the b-next solution for Thomson Reuters’ clients will benefit from access to the vast amounts of Tick data that Thomson Reuters has across many global exchanges and asset classes.

Martin Porter, Director of Sales, b-next
Martin Porter, Director of Sales, b-next

Commenting in the official press release, Martin Porter, UK Director of b-next said, “Continuous pressure and ever-increasing obligations to regulators require firms to systematically monitor trading activity and report any suspicious trading.”

Mr. Porter added, “The complexity of trading instruments and the global reach of a firm’s trading venues requires a versatile, flexible and efficient solution to monitor all of a firm’s trading activity. Accelus Market Surveillance meets this requirement and we are pleased to have already completed our first joint customer implementation at a major European Bank within weeks of confirming our partnership.”

Thomson Reuters’ global head of Trading Compliance & Disclosures, Miftah Khan, commenting in the official press release said, “Regulatory and compliance issues continue to be a focus of trading operations following a number of high profile rogue trading and insider trading incidents.”

Miftah Khan, global head of Trading Compliance and Disclosures, Thomson Reuters, Financial and Risk
Miftah Khan, global head of Trading Compliance and Disclosures, Thomson Reuters, Financial and Risk

Mr. Khan concluded, “Trading Compliance managers are looking for a more integrated, flexible, cross-asset trade surveillance solution, and Accelus Market Surveillance is uniquely positioned to serve this need given Thomson Reuters’ combination of leading compliance, market data, and managed service capabilities. This solution also extends Thomson Reuters’ already powerful suite of conduct risk management capabilities spanning conflicts compliance, suitability monitoring, compliance training, regulatory tracking and more. Together, this multi-disciplinary approach enables firms to minimize risk and demonstrate a more visible culture of compliance within their organizations.”

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